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Due to the impact of Covid19, the airline industry is bleeding money as we speak. As a result, governments are imposing restrictions on citizens’ movement and are taking additional precautions as we speak. The travel and service industry is bearing the brunt head on. If this new report by Bloomberg rings true, we could well see many airlines around the world go bankrupt as early as May this year.

Airlines going Bankrupt

Sydney based CAPA Centre for Aviation warned that major airlines around the world could go bankrupt in a couple of months if they don’t secure some sort of government assistance. Here’s what CAPA’s assessment was, as reported by Bloomberg:

Many airlines have probably been driven into technical bankruptcy or substantially breached debt covenants already. Carriers are depleting cash reserves quickly because their planes are grounded and those that aren’t are flying more than half empty.

You can read the full report here. Major US carriers have already issued signals about moving in this direction and asking government for assistance. CNBC reports how this is already on the table and airlines are in touch with government officials regarding the same.

Airlines for America, which represents carriers including Delta, United,American and Southwest, recommended passenger carriers immediately receive up to $25 billion in grants to compensate for reduced liquidity and in the medium term $25 billion in low- or zero-interest loans.

The Pundit’s Mantra

This promises to unfold in a very tricky manner. On one hand, the average person is hurting. Clearly, for most people, it’s about meeting the next expense or utility bill as they all huddle together as this pandemic unfolds. On the other hand, any government assistance to big business will be seen with a great degree of skepticism by many. They’d also argue that when times are good, airlines do stock buybacks and hardly pass on the benefits to consumers.

Add to that, the fact that this is an election year is only going to lead to the amplification of rhetoric, irrespective of which side of the argument you stand on.

What do you think about this request for assistance? Do you think airlines need government assistance during this time? Let us know in the comments section.


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