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| The failure of Europe's biggest regional airline Flybe could be the start of more casualties, analysts predict. |
Flybe's collapse could be 'first of many'
airlines
By Justin
Harper
Business
reporter
6 March
2020
Demand has plummeted from both holidaymakers and
business travellers
Flybe collapsed on Thursday after it failed to secure
fresh funding
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.
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. Last month, it had predicted losses of $29bn.
Demand has
plummeted, not just from holidaymakers, but from corporate travel as firms
restrict business trips for employees and conferences are postponed.
"There
will be a significant increase in airline casualties in this scenario,"
said Michael Duff, managing director at The Airline Analyst.
Cathay
Pacific asked staff to take three weeks of unpaid leave
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.
Paul Charles, a former director of Virgin Atlantic,
told the BBC's Today programme that he expected "other casualties"
due to pressures such as the coronavirus.
"You're going to see massive consolidation within
six months' time," he said.
"Management
teams at airlines at the moment are entirely stretched because of coronavirus.
You're not going to see anyone else come in and try and replenish the network
or fill the void left by Flybe."
Scottish
airline Loganair has said it will take on 16 former Flybe routes.
But Mr
Charles said: "What Loganair is doing is cherry-picking the best routes,
which does make sense, but I wonder how long it's going to last - I do think
some of those 16 won't survive for several months."
However,
Loganair chief executive Jonathan Hinkles said he disagreed, and that other
airlines would buy some of the routes. "I'm aware from friends and former
colleagues in the Channel Islands that they'll be stepping up today to announce
some former Flybe routes as well.
"I
think airlines will be stepping up where it makes sense."
BBC
Business reporter Tom Espiner contributed to this article.
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