Darker days ahead for airlines across the globe

Even if air traffic increases, paying the debts will be a challenge and airlines might have to increase fares

Representative photo: iStock

Bitten harshly by the pandemic that forced people to abort their travel plans even after the flight restrictions were lifted, the aviation industry is perhaps looking at darker days ahead, with several airlines realising the bitter truth slowly with year coming to an end.

Burning their existing resources over initial few months of the outbreak, airlines anticipated a recovery in the year-end. But that seems unlikely. According to the Bloomberg‘s index of the world airline stocks, an 18% improvement in August was the best so far in 20 years.

According to Bloomberg, low-cost airline EasyJet Plc is in talks with the British government for a second-time state support. It had earlier received $775 million state-guaranteed loan earlier this year.

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After the Philippines government had refused to take over the troubled airline Cebu Air Inc, the carrier had been raising $500 million in bonds and preferred shares.

Malaysia’s AirAsia Ground Bhd has stopped funding for AirAsia India Ltd, added the report. The state-run Malaysian Airlines Bhd is in talks with creditors over restructuring, and it said as per the country’s aviation regulator, one of the Malaysian airlines may fail by year-end.

The future doesn’t look brighter even in the US where an initial bailout bill was passed by the Congress in March. With the funds now drying up, prospects of a second round of state intervention doesn’t look very promising, given the recent developments.

Several airlines had resorted to drastic cost-cutting with massive layoffs, cutting salaries of workers and reducing routes. They had so far banked upon their existing balances and help from the respective governments, but with those drying up, the future now seems bleak.

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The report said quoting a recent analysis by the International Air Transport Association that airlines had spent around $51 billion in the June quarter and they’ll spend $77 billion more in the next six months. That’s 80% of the $162 billion bailout they’d received, it said.

It also asserted that the airlines won’t return to pre-COVID traffic levels until 2024. Even if it does, paying the massive debts incurred this year will be a challenge and airlines might have to increase fares, driving away passengers at a time they’re supposed to be lured to avail their services.