The failure of Europe’s biggest regional airline Flybe could be the start of more casualties, analysts predict.
On Thursday, a global airline industry body warned the financial hit from coronavirus could reach $113bn (£87bn) this year.
The bleak prediction came on the same day UK-based Flybe went into administration.
Airline experts are forecasting more failures as passengers cancel flights.
- Airlines warn of coronavirus bookings hit
- Future of Flybe routes hangs in the balance
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Flybe’s collapse “will likely be the first of many in 2020,” said James Goodall, transport analyst at Redburn. “We expect that the demand destruction caused by Covid-19 accelerated its demise and we believe further airline bankruptcies should be expected in the coming months.”
Airlines could lose $63bn to $113bn in revenue from the slump in passenger traffic globally this year, the International Air Transport Association (IATA) said on Thursday. It previously predicted losses of $29bn in an estimate last month.
“There will be a significant increase in airline casualties in this scenario,” said Michael Duff, managing director at The Airline Analyst.
Mr Duff singled out a handful of airlines based in China, Hong Kong, Thailand, South Korea, Norway and Mexico that rate very low on his firm’s financial strength index.
“This is a very difficult time for the airline industry and it will be about conserving cash,” said Greg Waldron, Asia managing editor of Flightglobal magazine. “It will be a very challenging time for those airlines who don’t have a lot of cash, especially those that have been involved in a price war.”
Analysts said regional airlines in Asia were more vulnerable as they rely heavily on passengers from China, the epicentre of the coronavirus outbreak. “They also have some of the largest aircraft order backlogs so we can expect some pressure on Airbus and Boeing to delay deliveries and to refund aircraft deposits,” added Mr Duff.
Many airlines have introduced cost-cutting measures such as asking staff to take unpaid leave and pay cuts as planes are grounded.
Emirates has asked workers to take unpaid leave for up to one month, while Cathay Pacific asked staff to take three weeks of unpaid leave.
Singapore Airlines has frozen some hiring while its executives will be given a 10% to 15% pay cut to help the airline cope with the coronavirus outbreak.
Demand has plummeted, not just from holidaymakers, but from corporate travel as firms restrict business trips for employees and conferences are postponed.