In 2019, airlines needed an average of 76% of their seats filled just to break even. So how do they break even with capacity limitations while passengers mostly stay off planes? They don’t . The U.S. airline industry is burning through roughly $6 billion in cash per month. According to A4A, that number will ease to about $4 billion per month by the end of the year. But the thing is... airlines can’t keep losing billions of dollars every month forever .
So how do they break even with capacity limitations while passengers mostly stay off planes? They don’t. This is just the beginning. In addition to burning through boatloads of cash, the major carriers are taking on massive amounts of debt as they try to wait out the pandemic. A4A projects that total U.S. airline debt will jump 50% this year – from $105 billion in 2019 to $158 billion by the end of 2020. The airline industry is a capital-intensive business that requires costly planes. It’s prone to labor, economic, and fuel price disruptions. And the industry is known for brutal, cutthroat competition. Airlines tend to “fix” the problems by taking on more debt... but that only works for so long. That’s why almost 90 U.S. airlines have gone bankrupt since 1979. Around
EXPECT A MAJOR BANKRUPTCY SOON
The airline bankruptcies have already started. Smaller carriers like Compass Airlines, Miami Air International, RavnAir Group, and Trans States Airlines have all gone bankrupt due to the COVID-19 backlash. And at least 13 carriers outside the country have filed for bankruptcy or shut down this year as well.
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