28 airline casualties of the coronavirus

Updated: Sep 25, 2020

Air travel has become so ingrained in our culture and everyday lives that it is unthinkable that so many airline companies could disappear so quickly. This in itself poses a social problem for people who will be unable to visit their relatives on the other side of the world. The ever growing number of airline casualties of the corona virus is taking its toll on air travelers.


The interesting thing is that a lot of airlines were already in financial trouble before the COVID pandemic arrived. Those that were on the verge simply buckled once the pandemic hit. The question remains how many more airline companies will go under in the future. So far most major airlines have managed to survive the lock-down but the longer this pandemic continues the more likely they will also eventually fall.


The Air Transport Association has stated that global bankruptcies will continue and that most airlines will cease to exist in the future. Financially 2020 will be remembered as the worst for the aviation industry in history assuming that things start to improve next year. Every day the airline industry is losing 230 million dollars worldwide according to the IATA. In the cargo sector, the IATA expects overall freight demand to drop whilst cargo rates will go up by 30% due to a severe shortage of belly cargo capacity normally available on passenger aircraft.


Even though planes are not flying they need a lot of maintenance whilst on the ground. Planes are not designed to stay parked for long lengths of time and need to be in the air. The buildup of dust and the possibility of corrosion is always a risk. Airline companies still have to pay wages to hundreds of technicians and other maintenance staff to keep their fleets ready for service once the pandemic is over.


There are four legal methods that companies in serious trouble use in a last-ditch effort for survival. All four methods are commonly known as bankruptcies but there are some minor differences between them.


Two aircraft parked on the runway.


Bankruptcy


This has become the most popular way to dissolve a company when it is unable to pay its debts due to a lack of funds. The great thing about bankruptcy is that debts that are owing to creditors may not have to be paid in full and as a result, the company can relieve itself of debt obligations. This allows a company to remain in business but at the same time work out ways to repay its debts to creditors. Bankruptcy also damages the companies credit rating.


Voluntary administration


This a resolution that is decided by a majority vote of directors that lasts one month is a way to avoid any involvement of the courts. It allows for an independent administrator to take over the director's roles and for a moratorium of any action by creditors against the company and its directors. A company in voluntary administration is a viable business but has had a bad trading period and needs more time to fix the underlying problems. Usually, this time period allows the company to continue operations and to make adjustments by cutting debts, reducing staff, overhead costs, and to find a better way to rebuild sales and profit margins. Unfortunately, only 26% of companies in voluntary administration survive and end up in bankruptcy afterward.


Insolvency


When a company goes into insolvency it means it can't pay it's debts when they are due, when debts exceed assets, and when there is a cash flow problem. There are solutions to coming out of insolvency such as negotiating debt payment through a settlement plan with creditors but by this time the company troubles are too severe. Insolvency is usually made to buy more time in order to try and remedy problems before it becomes too late. If no remedy can be found to repay debts then the only other alternative is to file for bankruptcy.


Liquidation


A company can apply for liquidation to a court when it cannot pay it's debts and has run out of funds. The company can become solvent or insolvent due to mitigating factors. If it remains solvent it can still be run by the directors and if it becomes insolvent then the company will go under the control of a liquidator who will take over all actions in the winding down process. A company will go into liquidation when it is decided that it can no longer continue because it has run out of funds. All company assets are sold off in order to pay off debts to creditors first followed by shareholders.


It doesn't matter which legal approach a company takes but any of these proceedings mean that the company is in deep trouble. Most of these various forms of legal actions are really designed to allow more time to repay debts if there still is more time but once they are undertaken most are at the point of no return. The CAPA warned that most of the world's airlines will be bankrupt by the end of 2020.


The list of airlines below have either closed or are going through legal maneuvers to stay alive.


Airlines in voluntary administration


1. Latam

The leading airlines for South America in Chile, Brazil, Columbia, Argentina, Peru, and Ecuador.

2. Avianca Holdings

The second-largest and oldest airline in South America that even survived the great depression. Now trying to restructure its entire operations in a last ditched effort to stay afloat.

3. Virgin Australia

Australias second-biggest airline and currently under voluntary administration and hoping that the Bain capital group will buy the airline and release its debt.


Side-view of parked Virgin airlines aircraft.

4. Flybe

Brittain's biggest regional airline that was struggling even before the pandemic is now in voluntary administration.


Side-view of Flybe airlines plane.

5. BRA

The Swedish airline that is in voluntary administration.

6. South African Airlines

The South African government has decided to shut down the airline and said it would possibly start a new one (God knows why?)

7. South African Express

A subsidiary of South African Airlines had been plagued by financial trouble since 2018 but finally went into liquidation.

8. Sun Express Germany

This is a joint company owned by the giant German Lufthansa and Turkish airlines that were busy flying passengers to Turkish holiday destinations now in liquidation.


Airlines that are bankrupt


9. Miami Air International

A specialist airline flying cruise operators, sports teams, and even the US military around the world.

10. Air Italy

Qatar owned airline was in trouble ever since it's 20 Boeing 737 MAX planes were grounded in 2019 due to safety concerns. The pandemic was the last nail in the coffin and Air Italy is finished.


Air Italy plane taking off.

11. Atlas Global

This Turkish airline has had its fair share of problems and almost went bankrupt in 2019 but survived only to go bankrupt this year in February.

12. Trans States Airline

This Missouri-based regional airline decided to go into bankruptcy by the end of this year.


Side-view of Trans States Airlines jet.

13. German Wings

The German airline partly owned by Lufthansa made an announcement that it is folding in April.

14. Avianca Airlines

A small airline company in Peru.


Front view of Avianca airlines jet.

15. Jet Time

This Danish airline company declared bankruptcy but stated that it will return (I'll be back, Arnold Schwarzenegger)

16. Go2 Sky

A regional Slovakian airline.


Airlines in liquidation


17. Ravn Air

Alaska's regional airline flying passengers and freight is now up for auction.

18. Trans States Airlines

A regional US airline that flew routes for United Express.

19. Compass Airlines

Now closed, provided services for regional airlines in the US such as Delta and American Eagle.

20. Air Deccan

India's regional airline is now closed.

21. BRA

The Swedish airline that is in voluntary administration.

22. Air Mauritius

The main international airline couldn't survive.


Airlines in insolvency


23. Level Europe

This well known Austrian airline couldn't make it.

24. One Airlines

A small regional airline company in Chile.

25. Nok Scoot (Thailand)

A medium distance international airline serving Asian countries.

26. Tiger Air

The well known Australian domestic airline partly owned by Virgin Australia.

27. LIAT Air

Leeward Islands Air Transport has been in financially difficult circumstances for some time but finally, threw in the towel.

28. Shoreline Aviation

The Northwest-based regional company consisting of 10 Cessna seaplanes also couldn't survive.


What does this mean for passengers with tickets?


Unfortunately, there is not a lot that passengers with outstanding tickets can do once an airline becomes bankrupt. The company must pay it's creditors and shareholders first before anyone else. In the US the airlines are required to have insurance but the amounts of money involved mean the insurance companies could go bankrupt themselves. Some airlines have given out vouchers or credits instead of cash but this is only a public relations exercise as vouchers cannot be exchanged for cash.


What about frequent flyer points?


Knowing that your frequent flyer points could earn you a free flight was a great incentive that many people signed up to. Unfortunately, frequent flyer points don't have a cash value and therefore cannot be cashed in. However, if the airline you are with that is in bankruptcy merges with another airline at the last minute, you may be able to have your frequent flyer points reinstated so hold on to them. Sometimes a new airline will want to attract your loyalty and business and may give you the opportunity to redeem your previous points.


Always follow your airline's financial status and be ready to use your frequent flyer points well before it looks like the airline is getting into trouble. This in itself is difficult to plan because so many countries have different rules as to lockdowns and quarantine measures. Of even greater importance is to use the flight ticket you have before the airline closes because refunds are almost impossible.


Credit card refund claim


If you purchased an airline ticket with your credit card you may be able to have the bank reverse the payment if the airline has gone into bankruptcy or has canceled your ticket. According to the Fair claim billing act in the United States consumers have to act on this within 90 days to make their claim. You would need to check with the bank where your credit card was issued for their regulations. Some banks allow up to 30 days others up to 7 days to reverse the payment and some not at all.


The future for air travel


What makes this pandemic so frustrating for air travelers is that governments keep changing their rules. One week they say they will open up flights again the next week they change their mind or put it back. Then the destination country also changes its rules and to plan a trip becomes almost impossible. Most countries have quarantine measures that involve a 14-day quarantine and some even make you pay for the quarantine period. Until such time as this pandemic is truly over its going to be a nightmare for air travelers and airline companies.



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