current event update: thursday, june 4th

By Eric Liu

Since February, a total of 17 airlines worldwide have filed for bankruptcy, covering all continents. More airlines are still struggling to maintain business by saving money and reducing operations.

It is difficult for aviation companies to protect themselves in this unprecedented crisis - no matter for the giants or the small airlines. On May 27, a report by the International Air Transport Association (IATA) showed that by the end of 2020, the global aviation industry debt will be about $550 billion, an increase of $120 billion from the beginning of the year. According to the agency's statistics, the scale of financial assistance that governments have promised to provide to airlines has reached $123 billion. However, not all airlines were able to wait for government funding. Even if the government agrees to help, it may not be a free lunch. In the tug of war with the government, airlines need to consider whether they can accept some harsh terms, such as losing some control, giving up part of the aviation market share, or carrying more debt.

In the context of weak global economic performance and fierce industry competition, the global aviation industry is already in trouble since 2019. Some even called it the fastest bankruptcy year in global aviation history. A number of airlines such as Indian Airline Jet Airways, British Thomas Cook Group, Avianca Brasil S.A., and French Aigle Azur all went bankrupt. 
 
The “Black Swan” of the global epidemic in 2020 has made the industry even worse. At the beginning of February, European airlines went bankrupt or liquidated. On February 11, Air Italy, the second-largest airline in Italy, decided to suspend operations and liquidate. Two days later, Turkish airline AtlasGlobal suspended operations and filed for bankruptcy.

Less than a month later, the UK’s largest regional airline, Flybe Airlines, declared bankruptcy takeover procedures. On April 6, the Swedish regional airline Braathens Regional Airlines announced that the demand has dropped sharply, and the company has to apply for bankruptcy and reorganization due to difficulties in operating the company. Two days later, Germanwings, a low-cost airline and subsidiary of Lufthansa, permanently closed. Norwegian Air Shuttle also stated that its four subsidiaries in Sweden and Denmark had filed for bankruptcy. On April 22, Luftfahrtgesellschaft Walter, a German regional airline, declared bankruptcy.

The pause button of the European airline industry was pressed due to the coronavirus and the industry has been hit destructively. The American airlines also couldn’t escape from the wave of bankruptcy. 

In mid-March, US regional airline Trans States Airlines announced that it would suspend operations on April 1st, becoming the first US airline to suspend operations during the coronavirus crisis. Other Airlines like Compass Airlines, RavnAir Group, and more also applied for bankruptcy protection.

Source: BusinessInsider, BBC