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Airlines around the world will go bankrupt next month without government bailouts, warns report

Many airlines will go bankrupt by the end of May unless governments rescue them, warned the Centre for Aviation.

The Australia-based research firm that specializes in the aviation and travel industry said that many airlines are already technically bankrupt, which means that they have started to default, partially or entirely, on their corporate bonds or bank loans as “cash reserves are running down quickly”.

Major US airlines already show signs of trouble. United Airlines (UAL) reported a$2.1bn first-quarter loss, prompted by a 17% drop in its revenues as a result of the coronavirus health emergency.

Meanwhile, Atlanta-based Delta Airlines (DAL) posted $534m net loss in the first three months of the year on Wednesday, its first quarterly loss in more than five years. American Airlines will release its quarterly report on Friday.

So far this year, airline stocks in the US including American, Delta, United, JetBlue, and Alaska Air have lost more than 55% of their value, while the US Global Jets ETF (JETS), which tracks 15 different US-based airlines, has also lost a similar percentage, reflecting the severe deterioration of the industry’s economics.

JETS etf stock chart

Informa Markets aviation research unit said that government-supported Chinese airlines were the most likely survivors of the economic downturn, along with major US airlines that “have the lobbying power to access government subsidies”. The European Union also has a number of government-backed airlines that will probably get significant financial assistance to withstand the economic slowdown caused by the spread of the virus.

Founded in 1990, the Centre for Aviation has become a trusted source of information for the aviation and travel industry, providing relevant market and economic research for companies, investors, and regulators. The firm is a member of the Aviation Week Network and it is own by the London-based business intelligence firm Informa (INF).

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Alejandro Arrieche

Alejandro is a financial writer with 7 years of experience in financial management and financial analysis. He writes technical content about economics, finance, investments, and real estate and have also assisted financial businesses in building their digital marketing strategy. His favorite topics are value investing and financial analysis.