PwC report says airlines need to shrink their fleets and restructure their businesses, post-Covid
PwC report says drastic cuts are needed to airline fleets, and also business restructuring. PWC’s 2021 Aviation Industry Outlook says the disruption caused by the Covid-19 pandemic has permanently realigned the finances of airlines and many will go under. It also says investors are ready to pick up bargains in distressed aviation deals. “In order to survive and thrive in the post-Covid world, airlines will have to fundamentally re-think their fleets, their business models and their finances. For most, a return to business as usual is not going to be a viable option.” Airlines will not just be able to pick up where they left off last March, as many markets may have become uneconomic to serve. There are too many aircraft for the likely demand, which will not return for ages to the 2019 level of around 4.5 billion passenger trips. About 30% of the global passenger airliner fleet – over 8,500 aircraft – are inactive. The massive debt of airlines will need “root and branch restructuring” in order to return to profitability. IATA predicts the global airline industry will lose €98bn in 2020 and a further €32bn in 2021. Airlines have had at least €149bn to date in government support.
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Airline industry must overcome a mountain of debt to take flight after pandemic
PwC report says drastic surgery needed to right-size fleets, restructure business models and recapitalise airlines
January 18 2021 (Independent.ie)
Airlines will need continuing access to emergency funding and government support for the foreseeable future as the sector struggles with heavy debt loads, according to PWC.
PWC’s 2021 Aviation Industry Outlook, published today, says the disruption caused by the Covid-19 pandemic has permanently realigned the finances of airlines and many will be casualties of the crisis.
However, the report also says investors are ready to pick up bargains in distressed aviation deals for the first time in a decade.
The report notes that, in many cases, drastic surgery will be needed to right-size fleets, restructure business models and recapitalise airlines.
“In order to survive and thrive in the post-Covid world, airlines will have to fundamentally re-think their fleets, their business models and their finances,” said Dick Forsberg, author of the report and Senior Aviation Finance Consultant at PWC Ireland. “For most, a return to business as usual is not going to be a viable option.”
He said airlines could not simply pick up where they left off last March, when the pandemic went global, because many markets may have become uneconomic to serve. He added that there were too many aircraft in the system for a market that is unlikely to quickly return to pre-pandemic passenger numbers of 4.5 billion.
These factors meant the finances of many airlines would not work in the new world. “The crippling debt burden that is building across much of the airline industry will require root and branch restructuring in order to bring long-term solvency and profitability,” Mr Forsberg said
The International Air Transport Authority predicts that the airline industry will lose €98bn in 2020 and a further €32bn in 2021. Extensive government support, estimated to be at least €149bn to date, has played a major role in saving a number of weak carriers from collapse, but in doing so has created an unlevel playing field, the report noted.
On Friday, the High Court wound up an Irish-registered company within the Norwegian Air group. An examiner was appointed to the airline – which owes its creditors some €4.15bn – and several of its subsidiaries last month.
PWC said 2020 ended with 30pc of the global passenger airliner fleet – over 8,500 aircraft – inactive.
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PwC on aviation after the pandemic
https://www.pwc.co.uk/services/human-resource-services/insights/what-next-for-global-mobility.html
“So although many in the travel industry are predicting a robust recovery in leisure travel once borders can properly reopen as cooped-up workers make a break for overseas trips, business travel, which can generate as much as 75% of airlines’ revenue on some international flights according to PwC, faces a severe crisis.”
https://www.ft.com/content/867a5342-c94c-43f6-9783-a817443c9471
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