Not only is the current COVID-19 virus affecting the lives of the tens of thousands of global citizens that it infects and sickens, but the subsequent economic downturn is gravely affecting countless individuals who would have otherwise been “unaffected” by this disease.
The market is plummeting, many non-essential businesses are ordered to close down, schools have locked their doors, and hundreds of thousands of Americans have been laid off or put on temporary leave. How will citizens survive the economic pitfalls of this nationwide health pandemic? Only time will tell. Our Las Vegas bankruptcy attorneys explain how one industry is feeling the hit.
Domestic Airlines Have Drastically Cut Back Flights Amid Virus Spread
Small businesses and families aren’t the only ones suffering from the recent economic downturn and strict restrictions put in place as a result of the COVID-19 scare; big corporations, such as hotels, casinos, and airlines are feeling the sting of the “halt” to regular life and normal operations.
In fact, all three major U.S. Airlines, United, American, and Delta, have cut back drastically on their flights, due to travel bans and the general terror that citizens are feeling regarding traveling during this time.
Airline Bankruptcies May Be on the Horizon
“Airlines are in free fall,” Helane Becker wrote. Becker is an analyst who expects airline bankruptcies in the coming months; she mentioned Norwegian Air Shuttle as one such example.
The International Air Transport Association said that airlines will need emergency measures to get through this crisis and urged governments to consider extending lines of credit, easing taxes, and reducing infrastructure costs to the industry.
Most World Airlines Will Be Bankrupt by May Without Intervention
In addition to Norwegian Air, another struggling airline is Virgin Atlantic, which is 49% owned by Delta. Virgin will be reducing its flights 80% a day by March 26th, and the company’s employees will be forced to take 8 weeks of unpaid leave over the next three months. Ryanair is grounding the majority of its fleet over the next week. Spirit Airlines’ stock is down 45% at the time of this article, making it one of the U.S. airlines hit the hardest during this pandemic. American Airline’s stock is falling not too far behind. And the downward trend continues with all of the familiar and unfamiliar airlines; bottom line: the forecast is grim.
Some analysts and investors believe major airlines will go bankrupt unless the White House is willing to step in and help the industry. According to CAPA Centre for Aviation, most airlines in the world will be bankrupt by the end of May without intervention. CAPA stated that “Coordinated government and industry action is needed now if catastrophe is to be avoided.”
Government Aid Is Likely Needed to Slow the Impact
U.S. airlines are asking the government for over $50 billion, which includes direct aid as well as loan guarantees. This bailout would be nearly three times as large as the post 9/11 airline bailout. President Trump has indicated his wish to help the airlines during this crisis since their declining numbers weren’t their fault, and the industry is largely affected by recent travel bans.
The question that follows is, then: which airlines will the government prioritize to help? Analyst Daniel Roeska said that world governments (such as those in Europe) will need to consider which airlines play a vital function in the economy. Such airlines may not be the budget airlines, but rather the longtime “legacy” carriers.