Coronavirus’ impact on Airlines Worse than Expected, British’s Flybe Has Collapsed

The Chinese-originated coronavirus epidemic, which has already severely impacted the global economy, could hit the global airline industry up to $113 billion this year. On Thursday, March 5, 2020, the International Air Transport Association (IATA) has warned that the total revenue loss of the airline industry would be more than three times the projections that analysts suggested two weeks ago.

Meanwhile, the British airline, Flybe became the first casualty for the sharp decline in the revenue due to less travel demand and some analysts expected more companies are likely to declare their present operational status.

Virus’ Impact on Airlines

At present, the COVID-19 virus has taken more than 3,000 lives and more than tens of thousands are confirmed of virus infection mostly in China and slowly expanding to more than 60 other countries.

Concerning the possibility of further escalation of the virus epidemic, most of the countries decided to put a restriction on traveling and started installing screening tests in major cities of almost all countries. As a consequence, airlines across the world have started closing their services and cutting their operational costs which led to their revenues loss severly.

Recently, Turkish Airlines jet returned to Istanbul from Singapore without any passengers on board on Thursday after the Singapore government ordered to cancel the flight since a passenger who traveled on the same plane on Tuesday was found positive of the virus. The world air traffic management congress in Madrid, which is scheduled to be held on March 10-12, was finally canceled.

IATA projected that the impact of the virus outbreak in airline industry would lead to revenue loss in a range between $63 billion and $113 billion this year, depending on the trend of the virus’s spreading. On February 20, it was forecasted a revenue loss of around $29 billion by several analysts. According to IATA data, the total revenue of the global airline industry was $838 billion in 2019.

Flybe Ceases Operations

Nearly two months ago, the UK government had agreed to a rescue deal with the owners of the British passenger flight carrier, Flybe but the failure to make up its operations had forced the airline company announcing to cease its operation today, March 5, 2020. As a reminder to its creditors and investors, Flybe released a statement declaring, “All flights have been grounded and the UK business has ceased trading with immediate effect.”

The UK regional carrier, Flybe, which was owned by a consortium of Virgin Atlantic, Stobart Group, and Cyrus Capital, had previously provided services for around eight million passengers a year connecting 81 airports across the globe. The failure of the airline could be a signal of the existing threat for the other regional UK airline companies which had put around 2,400 jobs at risk.

Yesterday, an Irish Ryanair Airline’s Chief Executive, Michael O’Leary predicted that the virus crisis would lead to the bankruptcies of some regional airlines. Citing Flybe as the most vulnerable among the airlines, O’Leary told Reuters, “It’s inevitable in the next couple of weeks we’ll see more failures.” He earlier said during an event in Brussels on Tuesday, “Where you have a massive short-term decline in bookings you have a massive short-term decline in cash flow.”

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