Many countries has closed their borders, the COVID-19 outbreak acutely impacted the travel industry, especially airlines witnessing the most notable casualties. According to the International Air Transport Association (IATA), airlines could lose a quarter of a trillion dollars in revenue this year as commercial flights come to a grinding halt.
Sydney-based CAPA Centre for Aviation estimates that many carriers will go bankrupt by the end of May if they cannot find support and further predicted that about half of all global airlines could go out of business before the end of the year.
Bloomberg, using the Z-score method developed by Edward Altman in the 1960s to predict bankruptcies, determined that among airlines that are in danger of going under are Pakistan International Airlines, SpiceJet, Norwegian, American Airlines, SkyWest, Air Asia, Asiana Airlines, Virgin Australia, Korean Air, China Eastern, and China Southern Airlines.
This list is not exhaustive. The analysis, however, does not take into account government bailouts, extraordinary capital injection by shareholders, and other sources of funding. The Z-scores measure five variables including liquidity, solvency, profitability, leverage and recent performance.
Airlines are in serious cash preservation mode with nearly a third of the world’s aircraft fleet in storage, according to travel industry data provider Cirium.
Read EquityPandit’s Nifty Outlook for the Week