'Worse than 9/11': Coronavirus threatens global airline industry

Many of the world's airlines now face possible bankruptcy due to the Covid-19 shutdown of the industry

Airports are to become even emptier as countries close borders, suspend flights.

Fears of massive bankruptcies and calls for emergency bailouts swept global airlines Tuesday as a top US official warned the coronavirus crisis threatens the industry even more than the 11 September attacks, which saw US airspace shut down entirely.

"This is worse than 9/11 for the airline industry - they are ground to a halt," US Treasury Secretary Steven Mnuchin said.

In the United States, airlines sought $50bn in help from the government as the White House prepared a reportedly $850bn plan to support the entire economy. Industry officials, however said most airlines face burning through their cash reserves in three months or less. And airlines warned that vital air cargo could be impacted by the shutdown of 185,000 passenger flights around the world.

"Most airlines in the world will be bankrupt" by the end of May, Market intelligence firm CAPA warned.

"If the crisis will continue at that intensity, it's clear we will see a consolidation," Alexandre de Juniac, director general and CEO of the International Air Transport Association, said in Geneva.

In Europe, for example, the Italian government moved to take over insolvent Alitalia while Sweden and Denmark offered €275m euros in guarantees to help prop up Scandinavian carrier SAS.

"At a time like this, a flag carrier gives the government more leeway," said Italian Deputy Economy Minister Laura Castelli in response to government's decision over Alitalia. "We all saw the difficulties our compatriots faced in returning to Italy. Our decision stems from this."

Still, even with the takeover, the plan was to furlough 4,000 of Alitalia's 11,000 employees. And in the meantime, even more airlines slashed flights worldwide today as millions of passengers cancelled travel to self-quarantine and countries blocked arrivals to stem the spread of the COVID-19 infection.

Belgium-based Brussels Airlines, a Lufthansa subsidiary which operates 48 aircraft, for istance, suspended all flights for at least a month on Tuesday. Lufthansa has already cut back flights by 90%. In Australia, Qantas also slashed international capacity by 90%, as the government required that anyone arriving from abroad needs to isolate themselves for 14 days to be sure they are not carrying the virus.

In Russia, Alexander Neradko, head of the federal agency Rosaviation, said their airlines, hit beginning in February with the shutdown of flights to China, the original epicenter of the virus, were also in trouble.

"There is a rising risk of bankruptcies by airlines that are in a tough financial situation," Neradko said.

"The government is actively discussing how to support airlines," said Kremlin spokesperson Dmitry Peskov.

 As a result, Brian Pearce, economist of IATA, told AFP their early March estimate of $113bn in losses to the global industry now looks very low.

"Seventy-five percent of the airlines we have looked at have less than three months of cash to pay their fixed costs," Pearce said. Such numbers put aviation in perhaps the top position of industries requiring a bailout, like banks in the 2008 financial crisis.

"Connectivity is crucial," stressed the IATA's de Juniac.

"The world will get through this crisis," he added. "And when it does it will need a functioning air transport sector. Without financial relief that is not guaranteed."

Airports too said they were under threat. The Airports Council International Europe said they were bracing for a "near total collapse" of traffic, wiping out earnings while they hold high fixed costs. ACI Europe president Jost Lammers thus called in a letter to the European Union Tuesday for urgent financial support.

"This funding needs to be available under similar conditions as those that will be considered for airlines," Lammers wrote.

More on this subject: Coronavirus

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