More airlines were expected to go bankrupt this year as sales remained severely dampened by the weak travel volume.
According to a report by The Philippine Star quoting global think tank Fitch Ratings, a bankruptcy trend was still possible for countries such as Indonesia, Thailand, and Malaysia which are affected by weak traffic volume, as well as the Philippines amid its growing number of infections.
“Airlines cut costs dramatically, but fixed costs will continue to sap cash until traffic trends back towards historical levels,” Fitch was quoted as saying in a statement.
“Modestly higher traffic and cost-cutting efforts will help stem cash burn compared with 2020. However, the combination of higher debt and prolonged weakness in operating profits will drive weak credit metrics for the sector at least over the next 18 to 24 months,” it added.
Operating conditions were projected to improve in 2021 but only relative to the unprecedented downturn this year.
Fitch said that further improvement in travel conditions would be seen in the third and fourth quarters of next year.
However, the continuing increase of coronavirus cases in various regions coupled with inconsistent travel restrictions would continue to keep airline traffic low at least through the early part of 2021.
It can be learned that some countries—one of which was Britain—have begun purchasing and vaccinating their population starting from the vulnerable sector such as the elderlies and medical workers.
“Recent positive news about vaccine development along with pent-up leisure demand may drive a more robust rebound in the second half of 2021,” the think tank said.
It added that positive early developments on vaccines at least reduced risks toward a downside scenario, in which traffic would plateau at low levels through 2021, and potentially would leave room for a more robust return to air traffic in the second half.
“Successful development and distribution of effective coronavirus vaccines and/or treatments will be essential for air traffic to rebound toward pre-crisis levels. Positive early news on the Pfizer and Moderna vaccines has positive implications,” it said.
Photo from Flickr