The airlines of the USA are under the risk of bankruptcy.

Shares rose in price immediately by several percent (“American Airlines” went up by 7%, and “Alaska Air” - by 9%).  However, the experts attribute the need for financial injections into the air transport industry from the part of the US government department to the necessity of salvation from the bankruptcy.

In case of the more than a few months flights termination between individual states, which  is rather possible, due to the spread of coronavirus infection, the main carriers are at a risk of going bankrupt.

It is likely that the relevant legislative act on the financial injection into the industry will be adopted by the middle of this summer.  The fact that the head of the US financial department compared the current situation in the air transportation market with the situation, experienced after the terrorist attacks of 2001, is not surprising.  Then, after September 11, carriers suspended flights for a week. At that time, industry was saved by the investments, made by the administration of George W. Bush. The airlines received about $ 5 billion in subsidies, and another $ 10 billion in loans.  The current situation, according to Mnuchin, is much worse, therefore it is assumed that the companies will receive assistance from the state in tenfold.

However, there are fundamental differences between the current situation in the field of air transportation and the situation of 2001.  The deplorable situation of aviation was then determined by high oil prices, competition between discounters, and climatic disasters (in particular, hurricanes that hit the eastern states).  Many companies then resorted to the bankruptcy law and, relying on the Article 11, which allows deferring payment of the debt, expanded the network of their routes.  As a result, carriers were able to recover over a decade after the price wars and the global financial crisis, associated with an outbreak of SARS.  The expenses were reduced, and the rich Chinese, who began to fly around the world, brought the necessary profit to American carriers.

The current situation is associated with completely different market expectations.  According to the results of 2019, which was rather complicated in geopolitical terms, the world aviation was preparing for an increase in profits, and IATA gave quite favorable forecasts.  At the end of last year, no one thought to talk about the need for survival. A few months ago, no one could expect that, for example, at “Virgin Atlantic”, the flights would be cancelled, the tickets pre-order would collapse by 40%, and the employees would have to be sent on long-term vacations without payment. 

However, experts note favorable news for the industry.  Oil prices have fallen, which means we can expect cheaper aviation fuel.  Ticket prices have remained at the same level, which means that losses can be compensated by reducing the route network.  Just considering that most companies make fuel purchases ahead of time, actually working through prepayment, experts doubt whether many carriers will be able to live up to the moment when low prices for aviation kerosene can give favorable results.  In the meantime, the American Airlines Group was forced to reduce the number of international communications by three quarters, and United Airlines predicts a decrease in ticket reservations this month by one and a half billion dollars.

However, the experts note that there are some favorable news for the industry.  Oil prices have fallen, which means we can expect cheaper aviation fuel.  The tickets prices have remained at the same level, which means that losses can be compensated by reducing the route network.

But, considering the fact that the most of the companies make fuel purchases ahead of time, actually working through prepayment, experts doubt, whether many carriers will be able to live up to the moment, when low prices for aviation kerosene can give favorable results.  In the meantime, the “American Airlines Group” was forced to reduce the number of international communications by three quarters, and the “United Airlines” predicts a decrease in the ticket reservations by one and a half billion dollars this month.