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Airlines unlikely to restore to pre-coronavirus levels: Moody's
来源： 编辑：编辑部 发布：2020/04/01 14:10:33
THE crisis engulfing the aviation industry deepened after some of the world's biggest international carriers announced drastic measures to cope with the coronavirus outbreak, with giants Emirates and Singapore Airlines among the latest to slash flights.
Dubai-based Emirates have stopped flying passengers for two weeks starting March 25 because of travel restrictions. Singapore Airlines said Monday it is cutting 96 per cent of its capacity through April, mirroring an earlier announcement by Hong Kong's Cathay Pacific Airways.
Airlines across the globe, estimated to be facing more than US$100 billion in lost revenue this year, are being forced to make unprecedented groundings and furloughing staff. Though large carriers should have adequate liquidity to ride out the crisis through June, smaller and less liquid operators may collapse without more support from shareholders and governments, according to Moody's Investors Service.
"The severity and abruptness of deterioration in the operating environment will precipitate similarly paced erosion of what looked like perfectly adequate excess liquidity just a few weeks ago," Moody's analysts including Jonathan Root and Russell Solomon wrote in a report. "Most companies will emerge from the crisis with weaker credit fundamentals that may not be readily restorable to pre-coronavirus levels."
Other major carriers including Delta Air Lines and American Airlines are waiting for a bailout package to be cleared, while in China, the government has lowered fees and may back mergers of struggling smaller airlines into the bigger state-backed ones. The government has started taking steps to control the parent of Hainan Airlines Holding Co.
The International Air Transport Association (IATA), which represents 290 carriers around the world, forecasts the global airline industry needs government aid and bailout measures of as much as $200 billion to survive the crisis. Manufacturing giants Boeing and Airbus are also in talks about state support, while Embraer SA is placing some workers on unpaid leave. Airbus said it is withdrawing its proposed dividend payout and converting a credit facility to help boost its available funds to about EUR30 billion ($32 billion).
Air France-KLM appears increasingly likely to seek more funds. Regional Express Holdings Ltd, which flies to smaller towns and remote parts of Australia, said the country's airlines may need a bailout of A$4.6 billion ($2.6 billion), which is six times the amount the government has provided thus far. Qantas Airways and Virgin Australia have axed international flights and slashed capacity.
Moody's forecasts industry capacity could be cut by more than 60 per cent on average in the second quarter, or over 75 per cent in some cases on a year-on-year basis, depending on the airline's geographic base and if its operating model is domestic, long-haul or both. Some may cut services altogether in April, Moody's said. Cathay's low-cost unit Hong Kong Express, which it acquired last year, said it would suspend all flights from March 23 to April 30, according to Bloomberg.
Assuming the spread of the virus slows by the end of June and demand rebounds, airline capacity globally will fall 25 per cent to 35 per cent this year, Moody's said, noting that there is still a high degree of uncertainty around forecasts because virus-related events are unfolding so rapidly. Long-term demand for travel should be robust and grow steadily, but the virus may have a lasting impact that reshapes the industry, according to the report.
Dubai-based Emirates have stopped flying passengers for two weeks starting March 25 because of travel restrictions. Singapore Airlines said Monday it is cutting 96 per cent of its capacity through April, mirroring an earlier announcement by Hong Kong's Cathay Pacific Airways.
Airlines across the globe, estimated to be facing more than US$100 billion in lost revenue this year, are being forced to make unprecedented groundings and furloughing staff. Though large carriers should have adequate liquidity to ride out the crisis through June, smaller and less liquid operators may collapse without more support from shareholders and governments, according to Moody's Investors Service.
"The severity and abruptness of deterioration in the operating environment will precipitate similarly paced erosion of what looked like perfectly adequate excess liquidity just a few weeks ago," Moody's analysts including Jonathan Root and Russell Solomon wrote in a report. "Most companies will emerge from the crisis with weaker credit fundamentals that may not be readily restorable to pre-coronavirus levels."
Other major carriers including Delta Air Lines and American Airlines are waiting for a bailout package to be cleared, while in China, the government has lowered fees and may back mergers of struggling smaller airlines into the bigger state-backed ones. The government has started taking steps to control the parent of Hainan Airlines Holding Co.
The International Air Transport Association (IATA), which represents 290 carriers around the world, forecasts the global airline industry needs government aid and bailout measures of as much as $200 billion to survive the crisis. Manufacturing giants Boeing and Airbus are also in talks about state support, while Embraer SA is placing some workers on unpaid leave. Airbus said it is withdrawing its proposed dividend payout and converting a credit facility to help boost its available funds to about EUR30 billion ($32 billion).
Air France-KLM appears increasingly likely to seek more funds. Regional Express Holdings Ltd, which flies to smaller towns and remote parts of Australia, said the country's airlines may need a bailout of A$4.6 billion ($2.6 billion), which is six times the amount the government has provided thus far. Qantas Airways and Virgin Australia have axed international flights and slashed capacity.
Moody's forecasts industry capacity could be cut by more than 60 per cent on average in the second quarter, or over 75 per cent in some cases on a year-on-year basis, depending on the airline's geographic base and if its operating model is domestic, long-haul or both. Some may cut services altogether in April, Moody's said. Cathay's low-cost unit Hong Kong Express, which it acquired last year, said it would suspend all flights from March 23 to April 30, according to Bloomberg.
Assuming the spread of the virus slows by the end of June and demand rebounds, airline capacity globally will fall 25 per cent to 35 per cent this year, Moody's said, noting that there is still a high degree of uncertainty around forecasts because virus-related events are unfolding so rapidly. Long-term demand for travel should be robust and grow steadily, but the virus may have a lasting impact that reshapes the industry, according to the report.