Most airlines could be bankrupt by the end of May 2020 due to the impact of Covid-19, an Australia-based aviation consultant firm, Centre for Aviation (CAPA), has warned.

It added that airlines are depleting their cash reserves quickly, as a result of grounded flights, while flights that are operating are doing so at at less than half their capacity.

In addition, with the added effect of travel measures by various governments, many airlines could already be technically bankrupt or have substantially breached their debt covenants.

Countries implementing best solutions for themselves only

Currently, the situation is compounded by the fact that countries are adopting the best solutions for themselves, without considering its neighbours and trading partners.

For instance, the initial announcement by the U.S. about a 30-day ban on arrivals from mainland Europe was met with anger in the EU, the BBC reported.

Post Covid-19 aviation industry will be more nationalistic

On top of that, a likely outcome in the wake of the Covid-19 outbreak is an aviation industry that is more nationalistic.

CAPA added that this is due to major carriers such as the Chinese, American, European and Gulf airlines, having institutional backing in some form, such as their respective governments, while prospects for private airlines are dimmer.

This in turn means a bigger risk for a "nationalistic aeropolitical confrontation", which will have a severe impact on the aviation supply chain and the manufacturing sectors.

Action needed because aviation industry crucial for global peace

There is an immediate need for "coordinated government and industry action... if catastrophe is to be avoided", CAPA said.

In highlighting the importance of stabilising the aviation industry, CAPA pointed out how the International Civil Aviation Organisation was founded in 1944, before the end of World War II.

As per CAPA:

"... the aviation industry is about much more than airline health. It is crucial to global communications and trade.

It was because of aviation’s central role that the world’s governments convened in 1944 to establish a multilateral framework for post-war aviation. Notably, that was several months before the end of the second world war. A fully functioning airline system was considered essential to future world peace and prosperity and coordination was urgent."

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