- At least 485 airplanes have been idled this year
- Qatar Airways, posted an all-time high loss of $1.9 billion for fiscal 2020
- IATA warned that the airline industry will plough through $77 billion in cash in the second half of this year
While more than 40 commercial airliners have already collapsed this year due to the COVID-19 pandemic lockdown, some aviation officials warn more bankruptcies are looming.
Concerned with fears of a second wave of COVID-19 infections around the world, the CEO of Qatar Airways said things will get grimmer for the airline industry.
“The worst is not behind [us],” Akbar Al Baker told CNBC. “There will soon be other bailouts in Europe, there will be other collapses around the world. Because of the second wave, I think it is … even more severe than in the first wave.”
Data travel company Cirium said that not only have 43 commercial airlines gone out of business this year, at least 485 airplanes have been idled.
Al Baker further warned that in response to the ongoing crisis the aviation industry will likely restructure, thereby creating monopolies for some carriers that survive.
“I think that there will be more reduction in capacity, which in a way is also not good for the traveling public because then it will give a monopolistic situation to certain airlines that exactly wanted this to happen,” he said.
Al Baker’s own carrier, Qatar Airways, posted an all-time high loss of $1.9 billion for fiscal 2020 – not only due to virus-related restrictions but also due to the ongoing blockade on Qatar by various Mideast states led by Saudi Arabia. (In June 2017, Saudi Arabia, the United Arab Emirates, Bahrain and Egypt cut off diplomatic and trade ties with Qatar, because it was perceived to have close ties to Iran and alleged it supports regional terrorism)
“Our losses will continue because every single airline in the world will continue to lose money because there [will be] no more passengers to carry,” Al Baker said: “Or [maybe] there [will be] big numbers of passengers to carry… but the traffic is one way because most of the countries have kept their airports closed.”
Indeed, the International Air Transport Association, or IATA, recently warned that the airline industry will plough through $77 billion in cash in the second half of this year, then burn through $5 billion to $6 billion each month in 2021.
The Qatari CEO condemned airports and governments that have barred passengers from certain countries or imposed 14-day quarantines on arrivals.
“Okay if you don’t want to import people, but people want to leave the country, so they should be allowed to do so,” he said. “That is not happening. You know, this notion of creating bubbles is really, in my opinion, a nonsense.”
Al Baker was referring to “travel bubbles” formed by some governments that will only allow the entry of airline passengers from certain countries.
For example, Japan recently approved a travel bubble with five Asian countries — Cambodia, Laos, Malaysia, Myanmar and Taiwan — joining Thailand and Vietnam.
Al Baker urged national governments to save their airlines. Qatar Airways itself received a $2 billion bailout from its owner, the Qatari government.
“Airlines need to be supported by their governments for the time being, if they want their airlines to survive,” he said. “Every country in the world depends on their national carrier to serve the economic interests of the country. So it is absolutely important that governments stand with the airlines.”
IATA further warned it does not expect to see air travel recover to pre-pandemic levels until 2024.
“I think that if this pandemic spreads further into the near future, that the recovery could be even beyond 2024,” Al Baker said. ”I don’t think it’ll be 10 years, but it will certainly be between three and five years.”
For now, a flood of state aid has saved various airlines in the world, including Air France-KLM, which received funds from the French and Dutch governments.
Rob Morris, global head of consultancy at Cirium, stated: “If there is any silver lining in all of this, it is that things were so bad that governments had no option but to support.”
But Morris also worries about more airline collapses.
“Many airline failures typically occur in the final few months of the year,” he told CNBC. “I would typically characterize that airlines spend summers building ‘war chests’ so that they can survive winters. With demand recovery in most regions stalled and airlines still struggling with revenue generation and cash outflow, we expect to see more failures in the final quarter of 2020 and first quarter of 2021 at least.”
But Brendan Sobie, an independent analyst at Sobie Aviation, is not quite as pessimistic.
“I still don’t expect mass bankruptcies [among airlines],” Sobie said. “The number of bankruptcies and collapses should be manageable and also spread out over a relatively long period of time.”
According to IATA, governments around the world have given $160 billion in support to airlines this year. But that may not be enough.
“We are grateful for this support, which is aimed at ensuring that the air transport industry remains viable and ready to reconnect the economies and support millions of jobs in travel and tourism,” said Alexandre de Juniac, IATA’s director general and CEO.
“But the crisis is deeper and longer than any of us could have imagined. And the initial support programs are running out. Today we must ring the alarm bell again. If these support programs are not replaced or extended, the consequences for an already hobbled industry will be dire.”