Which Airlines Are Best Positioned To Survive COVID-19?

It’s no secret that airlines are facing challenges this year. Some have stopped flying altogether, others have lopped off capacity and vacated markets. Some airlines have pushed on, staying in the air even if many of their planes were often nearly empty. Trying to determine which airlines will pull through COVID-19 can be difficult. There are a lot of forces at play, and many more we don’t know about and cannot foresee.

Many factors contribute to an airline’s ability to survive COVID-19.  Photo: Miami International Airport Newsroom

Airline data analysis companies ISHKA and OAG have combined their brainpower to come up with an airline vulnerability matrix. On a simple grid, they plot where some of the world’s best-known airlines lie in terms of financial risk and level of government or shareholder support. It gives some indication of how well-positioned airlines when it comes to surviving COVID-19.

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Source: ISHKA / OAG

Second-tier US carriers better positioned than the big names

Pick of the crop are those airlines with a low financial risk all while getting through 2020 with no known government or shareholder support. In this group fall Air Canada, Cebu Pacific, IndiGo, Pegasus, Ryanair and Wizz. You may not have thought Air Canada was flying so high, but the real surprise is Cebu Pacific.

While the Philippines-based airline took a revenue hit in 2020, it has maintained a strong balance sheet and had a net debt to equity of 1.90 as of June 30. Cebu Pacific has measures in place to mitigate the worst effects of the travel downturn. This includes reducing capital expenditure and cash flows. Cebu Pacific’s stellar performance stands in marked contrast to most other carriers in its neighborhood.

In the next group are those airlines also deemed a low financial risk but enjoying some moderate levels of government or shareholder support. In this group are Qantas, Southwest Airlines, Alaska Air, EVA Airways, JetBlue, IAG, easyJet, ANA, and Japan Airlines. It’s an interesting mix.

Note the inclusion of both the big Japanese carriers. Also note the inclusion of IAG, owner of British Airways. That airline hasn’t had an easy time of it this year. Also sheltering under IAG ownership is Iberia and Aer Lingus.

The United States airlines in this list group are all second-tier airlines in terms of capacity and market share. It goes to show that, this year, it’s not necessarily size that matters. The ISHKA / OAG analysis puts these smaller US airlines in a far better position than the big three US airlines.

Southwest Airlines is considered one of the best-positioned airlines to survive COVID-19. Source: McCarran International Airport Newsroom

Government ownership plays a role

The final group of airlines deemed a low financial risk enjoy high levels of government or shareholder support. These airlines include Air New Zealand, Emirates, Finnair, Lufthansa, Saudi Airlines, SIA Group, and China Airlines.

What do these airlines have in common? If they are not entirely state-owned airlines, the respective governments have retained stakes after privatization. They are also all highly regarded premium carriers.

The amount of government assistance these airlines got this year varies. Air New Zealand made do with a government loan facility just over US$600 million. Emirates picked up a handy US$2 billion from the Dubai Government. But the Emirates’ top-up was nothing compared to what Singapore Airlines got. They trousered a handsome US$13.5 million courtesy of the Singaporean Government.

In the next group are those airlines receiving no known government or shareholder assistance and deemed a moderate financial risk. In this group are Air Transat, VietJet, SmartLynx, Sky (Chile), Grupo Viva, Viva Aerobus, JetSMART, WestJet, and Copa Airlines.

There’s a mix of airlines here. Most hail from countries where the government may not be in a position to support them financially. Panama’s Government might argue that they have more pressing matters to pay for than to prop up Copa Airlines. But there are exceptions.

WestJet scoots around North America and is owned by Canadians with deep pockets. A private equity firm in the United States is behind South America’s JetSMART. That private equity firm also owns top-ranked WizzAir.

JetSMART’s owners have deep pockets and own various airlines, all positioned differently on the matrix. Photo: Airbus

Most US airlines ranked around the middle of the pack

In the middle of the matrix are those airlines considered a moderate financial risk while also receiving moderate amounts of government or shareholder assistance. Here you’ll find some big names, including a swag of US airlines. They include Allegiant Airlines, Azul Airlines, Frontier, Hawaiian Airlines, Jet 2, SkyWest, Sun Country Airlines, United Airlines, Bamboo Airways, flynas, SunExpress, Aegean Airlines, Delta Air Lines, and Spirit Airlines.

So here we see a lot of US carriers that are under financial stress that are being supported by the multi-billion dollar CARES Act. No-one is suggesting any of these airlines are going to go bust, but it’s interesting so many airlines from the United States get grouped here.

The final group we’re going to talk about are those airlines deemed a moderate financial risk while still receiving high levels of government or shareholder assistance. There are a lot of well-known airlines in this group, and again, there are a lot of state-own or quasi state-owned airlines here.

They include Etihad, Qatar Airways, Vietnam Airlines, Air China, Air France / KLM, China Eastern Airlines, China Southern Airlines, Ethiopian Airlines, Turkish Airlines, Pobeda Airlines, airBaltic, Royal Air Maroc, Sichuan Airlines, Air Macau, Gulf Air, Transavia, and Royal Jordanian Airlines. These are generally high-quality airlines, but a lot of them have a talent for losing money hand over fist. COVID-19 would have exacerbated that. Without government or shareholder assistance, many of these airlines would not be in the air.

Pobeda Airlines receives lot of financial assistance but retains a moderate risk profile. Photo: Anna Zvereva via Wikimedia Commons

American Airlines a laggard when it comes to positioning to survive COVID-19

The ISHKA / OAG analysis does not pretend to be exclusive. There are hundreds of airlines in the world, and this matrix only touches on a few of them. But the matrix does suggest that reputation, branding, and positioning in the industry don’t accurately reflect an airline’s ability to survive COVID-19.

Indeed, the most robust airlines are those low-cost carriers who run on the smell of an oily rag, keep fares low. They are used to fighting for market share and doing without assistance. Those kinds of attributes put airlines like WizzAir, Ryanair, and IndiGo in an excellent position to withstand whatever COVID-19 throws at them.

Finally, reading through this, you might have picked up we’ve missed a big name carrier from the United States; American Airlines, one of the biggest airlines in the world. How well-positioned does ISHKA / OAG think American Airlines is to survive COVID-19? Check the middlebox in the top row of the matrix. American Airlines is there, busy keeping Thai Airways company. That’s an interesting assessment of American Airlines and perhaps something to discuss another day.