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More airlines to go bankrupt in 2021
Richmond Mercurio (The Philippine Star) – December 12, 2020 – 12:00 am
MANILA, Philippines – Fitch Ratings expects more airline bankruptcies to occur next year, particularly among smaller and less capitalized airlines.
Fitch said that almost all airline ratings remain under pressure as traffic remains severely depressed.
“The airlines cut costs dramatically, but fixed costs will continue to sap cash until traffic trends return to historic levels,” Fitch said.
“Moderately higher traffic and cost reduction efforts will help stop cash burning compared to 2020. However, the combination of higher debt and prolonged weakness in operating earnings will lead to weak credit metrics for the sector at least for the next 18 to 24 months, “it said.
In Southeast Asia, Fitch said the pace of recovery would vary between countries.
He said the trend in the Philippines, where further spread of the coronavirus remains a high risk, would be similar to that of Thailand, Malaysia and Indonesia, which are affected by weak international traffic volume.
However, globally, Fitch expects operating conditions in the airline sector to improve in 2021, but only in relation to this year’s unprecedented recession.
He said rising coronavirus cases in various regions and inconsistent travel restrictions would keep airline traffic low for at least the first part of next year, with limited improvement relative to levels in the third and fourth quarters. .
“Recent positive news on vaccine development coupled with pent-up leisure demand may fuel a stronger rally in the second half of 2021,” he said.
Fitch said the first positive advances on vaccines at least reduce risks towards a bearish scenario, in which traffic would stabilize at low levels through 2021, and potentially leaves room for a more robust return to air traffic in the second. half.
“The successful development and distribution of effective coronavirus vaccines and / or treatments will be essential for air traffic to rebound to pre-crisis levels. The first positive news about the Pfizer and Moderna vaccines have positive implications, ”he said.
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