As airlines begin to make plans to ramp services back up again, you’d be forgiven for thinking that the hard part is over. However, in the last few days alone, two airline chiefs have joined the call of Boeing’s CEO in saying there will be more casualties. Emirates President Sir Tim Clark and Wizz Air CEO Jozsef Varadi confirm the thoughts of Boeing’s David Calhoun that we’ll lose more airlines before this is over.
Emirates President says ‘there will be more’
While many airlines are already ramping up operations, the general consensus is we’re not out of the woods yet. Despite huge bailouts and some airline collapses already, there’s a big mountain to climb before every player can breathe a sigh of relief.
Last month, CEO of Boeing, David Calhoun, predicted that a big US carrier would fail before the industry was fully out of trouble. Although he came under fire for his prediction, he’s now been joined by one of the biggest names in aviation in his stance.
In a webinar hosted by Aviation Week, President of Emirates Sir Tim Clark was clear on his opinion of the outcome for some airlines. He said,
“I have to tell you there will be casualties. We’re not free of this. By the end of the year, there will be more casualties.
“People will not, even with the equity injections, with the bailouts etc., they’re still going to be in trouble, so expect some more.”
European airlines alone have or will be bailed out to the tune of an estimated €30bn ($33.7bn). Over in the US, $25bn has been allocated to the aviation portion of the CARES Act. However, Clark doesn’t think this is enough. He said,
“If [the crisis] carries on, all the bailouts that everybody received will be gone … if it goes on for another two or three months, they could in need another set of bailouts.”
Few governments anywhere in the world would be willing or able to stick their hands in their pockets for another set of bailouts of the level we’ve already seen. With the downturn in travel demand predicted to persist for at least three more years, Clark is on the money with that notion for sure.
Not just the airlines
While there is a strong focus on the situation with airlines, Clark was quick to point out that other parts of the aerospace sector are suffering too. Boeing and Airbus have both slowed production, in preparation for a couple of thin years in terms of aircraft orders.
However, Clark spoke about the challenges facing another sector of aviation – the leasing industry. Lessors are among the biggest aircraft owners on the planet and are crucial to airlines for fleet renewal and capacity moves. Clark said,
“They’re all facing pretty grim times … if it continues, you’re going to see more casualties in those areas. The lessors are going to face areas where airlines are either on the point of going out of business or having to cut back so much just to survive, aircraft are getting handed back. The ability of those carriers that have orders that are due to be delivered in this financial year, possibly even next financial year, will be much reduced.
“I would prepare myself if I was a lessor.”
Wizz Air CEO agrees
Clark is not alone in his prediction. In fact, the CEO of an airline which is almost the polar opposite of Emirates has said just the same thing. In an interview with John Strickland for a World Aviation Festival webinar, CEO of Wizz Jozsef Varadi also predicted more casualties, saying,
“I also think that, given the current situation, you’re probably going to see airlines falling into three categories post coronavirus. One category – the airlines which will be bailed out by governments, another category – airlines that can sort themselves out like ourselves and can survive and move forward. And then there will be airlines that get stuck in between which will likely go bust.”
Varadi, without pointing fingers at any airline in particular, was clear that part of the problem lies in the fact that so many airlines have grounded their operations. They have no cash coming in and, even with funding from their respective governments, face a tough uphill struggle to get back into the black.
“I think the whole industry underestimates the financial burden of restarting airlines. It’s one thing to stop an airline and another to restart it. The cash flow burden on restart is going to be huge and you need to have the financial muscles to go through that.
“I’m not sure that every single airline on the ground at the moment will be able to do that. In fact, I’m pretty sure they won’t. You will see a number of casualties, actually quite a large number of casualties, so I think that would also imply that it will be a cleaner market post pandemic and post-recession and it will be a more focused market.”
Wizz is one of only a handful of airlines that never stopped flying. Although, in April, Wizz hit its lowest point with 97% of its capacity grounded, it never tipped the 100% mark. During May, that came down to 93% grounded. However, the Hungarian airline has a plan and is looking for a swift ramp up of operations going forward, opening new bases and moving to capitalize on the lack of capacity in the network.
It’s a sorry outlook for aviation around the world, but perhaps a realistic one. What do you think, will we see more bankruptcies? Let us know your opinion in the comments.