Lots of global airlines could be bankrupt by the end of May according to the Centre for Aviation.
It sounds alarmist, but we've already seen UK business Flybe go bust, so it shows that the businesses which have risky balance sheets which will go first.
The problem is that airlines have high costs and their revenue have collapsed. For example, today Qantas Airways Limited (ASX: QAN) said that it would reduce its international capacity by around 90% until at least the end of May 2020, up from a 23% reduction.
Total group domestic capacity will be cut by around 60% until at least the end of May 2020. 150 aircraft have been grounded, including almost all of the group's wide-body fleet. Qantas is trying to help its people by using paid and unpaid leave.
The Australian Financial Review reported that the Centre for Aviation said: "Many airlines have probably already been driven into technical bankruptcy, or are at least substantially in breach of debt covenants. Cash reserves are running down quickly as fleets are grounded, and what flights there are operate much less than half full."
Airlines in various countries have already said that they need government support so that they don't go bust.
The British airline Virgin Atlantic has cut 80% of flights, asked staff to take eight weeks of unpaid leave and said that the government should bailout the airline for £5 billion to £7.5 billion.
The US is already supposedly working a package to help airlines survive.
The Centre for Aviation said: "As things stand, the likely tepid response to the airline crisis will equally be fragmented and nationally based. It will consist mostly of bailing out selected national airlines.
"If that is the default position, emerging from the crisis will be like entering a brutal battlefield, littered with casualties."
Foolish takeaway
The Qantas share price is down another 4% and the Virgin Australia Holdings Ltd (ASX: VAH) share price is down another 8.7%. As long as Qantas doesn't need to do a capital raising it could end up being a great buy for a longer-term buy when flight numbers start recovering.
