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As the panic over coronavirus ripples worldwide, airlines are facing their biggest challenge since the post-9/11 period. While many carriers should have strong enough balance sheets, or enough government support to get through it, some may not make it.

IATA, the industry trade group, said last week airlines could lose out on as much as $113 billion in revenue this year, up from an earlier estimate of $29 billion the group made about two weeks earlier. The difference: IATA realized the virus is no longer just an Asian problem, but a global one, affecting airlines everywhere. European airlines may lose about $44 billion from a prolonged slump, the group said, while U.S. and Canadian airlines might miss out on $21 billion.

“Bookings have fallen off a cliff over the last week and airlines sound gravely concerned about the outlook,” Hunter Keay, an analyst at Wolfe Research who covers North American airlines, wrote in report. “Commentary from the airlines this week is extremely similar to what we heard in late 2008, like how business travel shut off like a faucet over a weekend.”

It could get worse. For now, IATA seems to be betting airlines will keep flying, albeit with less capacity and pricing power. But there’s another scenario in which some airlines simply park planes and wait this out. If no one wants to go anywhere, does it make sense to fly empty jets?

“In the near term, airlines will suffer, as they cope with severe demand shocks for leisure and business travel,” said Madhu Unnikrishnan, editor of Skift Airline Weekly. “Although travel is beginning to recover in China, the threat of a global recession could further crimp demand even as the pandemic’s immediate health risks subside.”

Some airlines will not make it. The first to go likely will be airlines that were weak going into the mess, carriers that took advantage of a period of booming demand to gloss over problems like mediocre balance sheets or a lack of market niche. Flybe, a UK regional airline, went out of business last week, when the national government chose not to save it.

Korean Air on Monday warned it may not survive the coronavirus outbreak.

In some cases, particularly when an airline is vital to the national interest, governments may step in. Israel’s government was among the first to recommend citizens not travel abroad, a decision with horrible consequences for El Al, the iconic national airline. In the short term, the airline is suffering, but given the importance of El Al to the country, El Al is unlikely to disappear.

Still, that could be more the exception than the rule, as governments cannot prop up every airline. After the sting of the 2008-09 crisis, many national airlines went away, including Malev, from Hungary, and Olympic, from Greece. Others were absorbed by larger airlines, a phenomenon that may repeat, with stronger players acquiring weaker ones.

“Flybe, already teetering, was the first casualty immediately attributable to covid-19-related demand shocks,” Unnikrishnan said. “But others will follow. Already struggling airlines that are heavily exposed in markets affected by the pandemic could be the first to succumb: Alitalia, Korean Air, Norwegian, for example.”

His colleague, Airline Weekly Senior Analyst Jay Shabat, added a few more airlines to the mix. He said he’s watching Air AsiaX, Hong Kong Airlines, and Mexico’s Interjet, to see if they will make it.

The South China Morning Post reported Monday that Hong Kong Airlines is in talks about a strategic “lifeline” from Air China.

Risk by Major Region

No airline easily can withstand a prolonged period in which it does no business, but many U.S. and European airlines are in as strong of shape as possible, Shabat said.

The big mergers of the past 12 years have left many airlines in a better place than they were in the post 9/11 and Great Recession period.

“North American carriers are best positioned because of their strong balance sheets with lots of cash,” Shabat said.

Fragile Airlines

Skift Research’s Seth Borko ran a quick study of publicly U.S., Canadian and Mexican airlines. For simplicity, he looked at two metrics —  how much cash the companies have on hand today (higher is better) and how highly levered the businesses are (lower is better). Each two metric was equally weighted to come up with a blended risk rank.

Delta Air Lines and Southwest Airlines are probably strongest, he said, but even laggards, like American Airlines, are prepared. Shabat noted American has more debt than its competitors — a fact that has concerned investors — “but still tons of cash and assets.”

The big European airlines also should be able to weather the worst of it, Shabat said. It’s a group that includes International Airlines Group, Lufthansa Group, Ryanair, EasyJet, and Wizzair. Even Air France-KLM, sometimes considered a laggard, is in OK shape, he said.

Still, unlike the United States, European has many smaller and weaker airlines. Some eked out decent profits as demand boomed, but now face troubled prospects. Alitalia and Norwegian are probably most at risk, but other carriers, like Tap Air Portugal and Scandinavian Airlines, might fit this profile.

Asia is a mixed bag, Shabat said. Some countries will protect their top airlines at all costs, like China, which is expected to prop up failing carriers. Other countries may not be so accommodating, especially since some national airlines — like Malaysia Air and Philippine Air — were failing before the current climate reduced travel demand.

Healthier Airlines Make Moves

Airlines that want to survive likely will take drastic action as executives try to save their companies.

Some carriers have already been active, slashing capacity, freezing hiring, cutting salaries, reducing spending, parking airplanes and asking employees to take unpaid leaves.

Among larger airlines, Cathay Pacific has taken the most aggressive action, parking half of its fleet, according to the South China Morning Post.

But Cathay took most of its action after the virus wrecked its business. A few airlines in Europe and North America, aware of what was coming, tried to move sooner — before business was in major peril. That group includes United Airlines, which reduced 10 percent of its April domestic schedule and 20 percent of international flying, as well as Lufthansa and Air France-KLM. Last week, Lufthansa said it planned to cut its capacity by up to 50 percent, “to reduce the financial consequences of the slump in demand.”

Meanwhile Qantas, one of the world’s more profitable airlines, announced Tuesday morning it is cutting almost a quarter of its international capacity over the next six months. Rather than dropping routes, Qantas plans to use smaller airplanes and cut frequencies, the airline said. The biggest cuts will come in Asia, the United States and the United Kingdom, the airline said. Qantas also is grounding eight Airbus A380s.

JetBlue is another airline cutting its schedule, though not by as much. It said last week it would reduce five percent of its flights in the near term.

In an investor presentation released Monday, JetBlue said it had seen a “significant deterioration” in advanced bookings since late February. It said “trends have worsened through last week and have not yet stabilized.”

The airline told investors it may need further cuts, calling the current climate a “dynamic situation.”

Despite all the troubles, airlines are getting one boost. Oil prices have fallen considerably, making it cheaper for them to fly their jets.

“The dramatic fall in oil prices usually would be a boon for airlines that are on the edge, but with demand drying up and load factors falling, a low fuel bill is a cold comfort,” Unnikrishnan said.

This story was updated to include news from Qantas, which is cutting up to 25 percent of its international capacity. 

Photo Credit: Norwegian Air is among the airlines that could face a precarious financial future due to coronavirus. Mario Sergio Lima and Fabiola Moura / Bloomberg