Airlines with limited cash reserves face the greatest challenge in 2020 as businesses cancel travel plans and consumers reevaluate vacations due to the coronavirus, executives say 5 March during discussions at the US Chamber of Commerce aviation summit in Washington, DC.
Air Canada chief executive Calin Rovinescu says that “cash and liquidity is number one” for navigating falling demand, as it was for the Montreal-based airline during the Severe Acute Respiratory Syndrome (SARS) outbreak that stifled air transport for half of 2003.
“Coronavirus is obviously going to take a bite out of the industry as we know it,” Rovinescu says.
The downturn in stock prices on virus concerns potentially offers a silver lining for prospective airline investors or for carriers mulling consolidation, Indigo Partners principal Brian Franke tells Cirium.
“Our airlines today are in good shape, but we are looking for opportunities at airlines that don’t have as strong a balance sheet,” Franke says, adding such carriers may be more receptive to consolidation.
Indigo has stakes in several carriers including Frontier Airlines, Volaris and Wizz Air. Franke says these carriers are prepared to “ride out the storm” and are “looking at a variety of initiatives to maintain demand”.
“We find in a challenging time people will trade down and look for less-expensive travel,” he says, creating potential demand for the ultra-low-cost carriers in Indigo’s portfolio.
Indigo Partners Bill Franke, father of Brian Franke, is chairman of Wizz Air, Frontier Airlines, JetSMART Airlines and Enerjet. He is also a director of Volaris. Franke and others speaking during the conference say the negative impact on the airline sector may continue even after the public health risk subsides.
“We are getting to the point where the reaction to the virus may be worse than the virus itself,” Airlines for America (A4A) president Nicholas Calio says at the summit.
Airlines globally during 2020 could lose between $63 billion to $113 billion in revenue as governments try to contain the coronavirus outbreak in 2020, IATA reports.
The global drop in stock values for airlines dealt the final blow to financially troubled UK regional operator Flybe, which on 5 March ceased operations and entered administration. Virgin Atlantic says the negative impact of the coronavirus on Flybe’s trading was a factor leading the Connect Airways consortium to decide it “can no longer commit to continued financial support”.