AMERICAN AIRLINES AND UNITED AIRLINES ARE GOING BANKRUPT

Two largest airlines of the USA might be declared bankrupt in the nearest future according to the financial analysts. The air carriers are being pushed to this step due to the situation that is currently exists in the air transportation market because of the COVID-19 pandemic. The debts of both carriers are growing, and the transportation itself is practically stopped – there is almost no corresponding income from it.

Previously, a dozen major airlines appealed to the US Presidential Administration with a request to help them in the conditions of collapse of the passenger flows. In addition to the main debts, the companies need to pay wages and cover the service of the aircraft.

With the filing of the CEO of Boeing company, the rumors about the impending bankruptcy started circulating in the American media. And although David Calhoun did not indicate the specific company that would face this in the nearest future, the investors are getting nervous.

According to Calhoun, the industry is unlikely to recover to at least 25% of the level, preceding the crisis by the fall of 2020.

The profits from early bookings on the ticket sales are also at risk for many companies. Large carriers such as American Airlines and United Airlines do not refund money to the passengers, issuing the vouchers for the amount of money for a ticket purchase that could be spent over a certain period of time. The companies understand that in the event of bankruptcy, they will not be able to receive money. That is the reason why the experts easily predict a further reduction in the number of the ticket sales.

The US stock analysts say that in the current situation it will be more difficult for the large airlines to find the sources of financing than for the small ones. One of the markers of this situation is Warren Buffett, who sold the shareholdings of four large companies that he had previously acquired at a loss. Given that he is a well- known long-term investor, many are waiting for a denouement in this story.

According to the open source data, the bankruptcy of the Southwest Airlines and Delta Air Lines seems to be the least likely among the four major US airlines that control about 80% of the market.

One company, although it completed the first quarter of the year with the losses of $ 9 million, having increased its debts to $ 17.81 billion, has $ 26 billion in assets and, according to the analysts, can avoid bankruptcy.

The financial situation of Delta Air Lines is slightly worse. The company, despite an attempt to use the passenger aircraft as cargo, failed to complete the first quarter of 2020 without losses. The debt of $ 54 billion is a record in the entire history of the company. But given that the assets of the Delta Air Lines are estimated by the experts at $ 68.7, which exceeds the debt by about 20%, there is a chance to survive.

The American Airlines company is the closest to bankruptcy.

If the bankruptcy takes place, it will be the second restructuring procedure in the history of the company over the last decade. The carrier’s losses for the first quarter are estimated at billions ($ 2.24 billion). The company's debts ($ 61 billion) have already exceeded its assets by three billion dollars.

Another elimination candidate is the United Airlines company. The holding received a net loss of $ 1.7 billion in the first quarter of a year. The company's debt to the creditors corresponds to the situation that developed after September 11, 2001 ($ 43.63 billion).

The securities of all mentioned airlines, except Southwest Airlines, have recently fallen in price by about 70-75%.