Major airlines collapse in the wake of the pandemic

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The corona virus has a major impact on the airline industry and the traveling public in general. It all started with cancellations of flights across the board as countries imposed travel restrictions.

In early March Lufthansa Group announced that it would cut capacity by 50%. By the end of May the Group operated only at 1% literally suspending operations and heading to an uncertain future. The German government, however, came in to the rescue and agreed to a €9 billion (over 10 billion dollars) bailout deal becoming the largest stakeholder in the company. The Lufthansa Group consist of Air Dolmiti, Austrian Airlines, Brussels Airlines, Eurowings, and Swiss Air.

Airlines would have faced certain bankruptcy and demise had they not being helped either by their respective governments or private investors. At the end of May the flagship carrier of Thailand, Thai Airways reported it’d undergo a complete restructure overseen by a local bankruptcy court with permission by the Thai government. Prior to the pandemic Thai Airways already suffered from financial difficulties and seeking a loan of $1.8 billion.

The British aviation industry got shuttered to the core as Britain got hit by the ongoing pandemic. An internal memo that surfaced in mid-March outlined how British Airways fights for survival. It suggested the possibility that many employees of the company may soon be looking for a new job. Alex Cruz, Chairman and CEO of British Airways said in a statement, “We can no longer sustain our current level of employment and jobs will be lost – perhaps for a short term, perhaps for a longer term.”

British Airways along with EasyJet, Wizz Air, and Ryanair are some of the airline companies that benefited from lifesaving financial injections. However, the situation with British Airways (BA) is more complicated. BA is owned by IAG – and IAG biggest shareholder is Qatar Airways. And Qatar Airways in turn is owned by the government of Qatar. However, the £343 million ($435 million) bailout loan that British Airways took is now paid with taxpayers money.

Alitalia, Italy’s major carrier got 3 billion euros ($3.4 billion) from the Italian government in an effort to keep it afloat. The carrier, however, has a history of failing to turn a profit. In 2017 Alitalia filed for bankruptcy.

Going bankrupt

Not all airlines were as lucky as Lufthansa or British Airways. Colombian airline Avianca filed for bankruptcy in the second week of May leaving a lot of its loyal customers in disbelieve. Avianca is the second oldest airline in the world, and also the first major airline that could not overcome this difficult time. Due to the pandemic over 80% of Avianca income melted. The airline had no choice but to give up.

Due to economic problems attributed to the impact of the COVID-19 pandemic on aviation LATAM, considered the largest airline in Latin America with subsidiaries in Argentina, Brazil, Colombia, Ecuador, Paraguay, and Peru filed for Chapter 11 bankruptcy in the United States on May 26.

The corona virus crisis pushed many smaller and regional airlines into the verge of collapse. Even though the major financial injection by a Virgin Atlantic-led alliance last summer the UK regional airline Flybe declared bankruptcy on March 5.

The pandemic did not spare Trans State Airlines which discontinued operations on April 1. Trans State is a regional airline based in the state of Missouri (US) which flies for the major US carrier United Airlines under the United Express brand. Compass Airlines is another regional carrier that flies for American Airlines under the American Eagle brand shut down in April.

Who’d think that Virgin Australia would also not going to make this time around? On April 21 the airline filed for bankruptcy after the the requested help from the Australian government was denied.

Because of the unprecedented travel demand dropping to a world record of zero airlines stopped flying some types of wide body jets that are no longer economically justified; aging aircraft planned for near future retirement are partially or indefinitely grounded.

Wide body jets unusable

The hardest hit aircraft type among the wide bodies is the Airbus A380. The type has already lost its positions among airlines to newer, more fuel efficient twin engine aircraft. The A380 has become more expensive to operate and impossible to fill to profitable passenger capacity. At the beginning of the pandemic some airlines grounded the type. However, as the pandemic extended into months of travel demand being simply non-existing the airlines rushed to retire the type in an effort to diminish their losses. The Emirates, Qantas, British Airways, Air France, and Etihad either partly or completely removed the A380 from their fleet.

The traveling industry cautiously tries to recover moving forward in a post pandemic environment as many countries around the world still have travel restrictions to various degrees. For airlines this summer holiday season may be the most difficult yet to come.

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Ian Powers is a travel blogger and nature enthusiast. Ian has over 20 years of aviation travel experience.

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