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Airline Companies that Went Bankrupt during Coronavirus Pandemic

The first industry to get hit by the economic turmoil of coronavirus is also the worst hit. Although the air travel started to catch up since the end of June it’s hard to ignore the plummeted consumer demand across the world. When the virus was first identified, airline companies started to drastically cut flights to Asia but within few weeks Americas, Europe, and Africa also joined the list.

Even after the lockdown restrictions were eased in some countries, people avoided air travel mainly due to sharing an enclosed space with other passengers for long hours. Soon it became a huge problem for airlines as they were starting to run out of cash.

Coronavirus Pushed Airline Companies into Bankruptcy

A massive reduction in revenues forced some airlines to make drastic choices. Some had to lay off employees while others declared bankruptcy due to uncertainty surrounding the pandemic. The general reason for a business going bankrupt is to pay off debts. There are six different types of bankruptcies and each may lead to a different outcome even for airline companies.

Chapter 7 Bankruptcy: Liquidation

Also known as straight bankruptcy is the most common type to occur among entities. In some cases it involves the sale of everything a person or business owns to pay off creditors, which means going bankrupt with no assets. Sometimes it is possible to pardon most of the unsecured debt like credit card bill, medical bills, or personal loans but secured debt like unpaid taxes from prior years, court fines, child support, alimony, or student loans cannot be forgiven. A party is only eligible for chapter 7 bankruptcy if its income is too low to pay off debtors. Once filed, it cannot be filed again for at least 8 years.

Chapter 13 Bankruptcy: Repayment Plan

This type of bankruptcy may not forgive any debt but it restructures it. Court orders a monthly payment plan which is easy for the creditor to clear its debtors. Creditors has to pay all of its secured debt and also a portion of unsecured debt as well. The monthly plan depends on the income capacity of the creditor but the court has full authority to keep tabs on the spending behavior of the creditor. The bright side of this bankruptcy is that unlike chapter 7, creditor is able to keep all of its assets. On the other hand, a creditor would not qualify for Chapter 13 if its secured and unsecured debts are higher than a certain amount which varies according to the price of the dollar. It can be filed after every two years if eligible.

Chapter 11 Bankruptcy: Large Reorganization

Chapter 11 is concerned with restructuring of the whole business. A company is expected to present a plan about how it is going to operate while paying off its debts. Then this plan has to be approved by both court and the creditor. It is ideally for those who have too much debt to qualify for Chapter 13 for example real estate investor, electronics manufacturer, or befittingly an air carrier.

Chapter 12 Bankruptcy: Family Farmers

This is normally to protect farmers and fishermen, so they don’t have to sell of their possessions. The process is similar to Chapter 13 but offers higher debt limits. 

Chapter 15 Bankruptcy: Used In Foreign Cases

It is to give foreign debtors access in the local bankruptcy courts.

Chapter 9 Bankruptcy: Municipalities

This option is for cities, towns, districts, and other authorities to reorganize their operations and start paying off their debts.

How Many Airline Companies Have Filed For Bankruptcy?

Currently, at least 26 carriers have filed for bankruptcy amidst pandemic. International Air Transport Association (IATA) predicted in March that losses from this revenue drop can reach 314 billion USD this year. Center for Aviation (CAPA) also estimated that many airlines would go bankrupt by the mid of 2020 if the lack of government and industry support continued.

Here is a chronological list of bankrupt companies starting from the month of February 2020.

Air Italy (Italy)

At the beginning of the coronavirus pandemic, Italy was one of the worst-hit countries. Italian carrier is owned by two companies; Alisarda (51%) and Qatar Airways (49%) who collectively decide to cease all of its operations. Reportedly, third party carriers were operating the Air Italy flights before they made this decision. There is news of a plan about a new airline by the owner of Air Italy.

AtlasGlobal (Turkey)

Turkish airline used to schedule domestic, international, and charter flights mainly from its hub at Istanbul airport. It suspended its operation last year as well due to restructuring but resumed in December 2019. After two months it filed for Chapter 7 bankruptcy and ceased all of its operations. Reportedly they returned their entire fleet of two planes (Airbus A330 and 200s) to their lessors. 

Flybe (UK)

The regional airline of the UK was already on the edge of collapse until coronavirus pushed it over. It entered administration on 5th March which is a similar practice to declaring bankruptcy.

Despite assistance from government and heavy investment by a consortium led by Virgin Atlantic, Flybe was the first big airline to become a victim of pandemic. It was operating nearly 40% of the domestic flights in the UK before voluntarily entering administration.

Miami Air International (US)

This airline has been operating since 1990 but COVID 19 reduced its sales dramatically. Reportedly the consumer demand went from zero to none when the carrier had enough. It filed for Chapter 11 bankruptcy and ceased all of its operations immediately.

The carrier used to fly the likes of US Military and professional sports teams as well in its fleet of Boeing 737s.

Trans States Airlines (US)

Trans State Airlines flew under the brand of United Airlines. It announced to cease all operations in a memo to its employees stating impact of coronavirus on travel demand as the reason.

Earnest Airlines (Italy)

Italian budget airline operated a fleet of 4 Airbus 320 family planes to 22 destinations in 5 countries from Milan. Its operations were suspended since January 2020 until coronavirus hit the final nail in the coffin.

RavnAir (US)

It was the largest regional carrier in Alaska, US which connected the remote areas of Alaska. It filed for bankruptcy after it was unable to operate planes anymore and also couldn’t pay salaries of their employees.

Compass Airlines (US)

Compass Airlines was a regional flight operator for American Airlines which is one of the largest airlines in the world. Sadly it was not large enough to save the domestic carrier that abandoned its operations by the end of March. Reportedly, American Airlines decreased the capacity of domestic flights by 80% in May which rendered the carrier useless. Compass Airlines and Trans States Airlines were both owned by Trans States Holdings in the US.

Braathens Regional Airways – BRA (Sweden)

It filed for debt restructuring (Chapter 11) to protect itself from bankruptcy and suspended all flights due to low consumer demand. Reportedly it has laid off all its staff members except 20 people. According to the reports, BRA may resume operations after the summer of 2020.

CityJet (Ireland)

The Irish regional carrier stopped its scheduled operation and adopted wet leasing and charter flight since 2017. It means it operated as a contractual service for other companies such as Aer Lingus and Scandinavian Airlines (SAS). CityJet had to go through interim examination in the Irish court when one of the partners, Brussels Airlines cancelled their wet lease contract in the wake of pandemic. The future of CityJet remains uncertain. It is also the official travel aircraft of Leinster Rugby team in Ireland. 

Virgin Australia Holdings (Australia)

Australian carrier of Richard Branson’s Virgin Group also entered administration after the government denied assistance. Initially it tried to overcome financial struggles by suspending most operations and send employees on furlough. Still, it suffered huge losses and operated only 60 to 65 flights on daily basis.

It was Australia’s second biggest airline after Qantas Airways and the biggest to fall in the history of Australia. It filed for Chapter 15 bankruptcy and an American investment firm, Bain Capital agreed to purchase Virgin Australia Holdings for an undisclosed sum. Bain Capital also announced a plan for Virgin 2.0 followed by retiring some of the fleet. 

Air Mauritius (Mauritius)

The flag carrier of Mauritius also became a victim of ongoing airline crises due to pandemic. It was already struggling with finances since last year which was further intensified by the loss of demand during pandemic.

It entered voluntary administration to protect the interest of itself and its stakeholders. It seeks to change its business model and is hopeful in resuming operations from September.

German Airways (Germany)

This regional airline of Germany cooperated with Air Berlin for years. After Lufthansa purchased Air Berlin when it collapsed, German Airways unconventionally came under the low-cost subsidiary of Lufthansa named Eurowings. It operated on a wet lease for Eurowings until a logistics company, Zeitfracht purchased it which resulted in the termination of the contract with Eurowings. Soon after it filed for insolvency.

Avianca (Columbia)

It is the second largest airline in South America which survived the great depression but gave up arms in front of COVID-19. It filed for Chapter 11 bankruptcy in the US and liquidated its subsidiary in Peru. It had significant financial liabilities since last year which forced it to post further debt to pay off short term liabilities. It accumulated 7.3 billion USD in total debt. Now this year, the travel restrictions due to coronavirus made it impossible for Avianca to recover. This is the second time it has filed for Chapter 11 bankruptcy.  

Thai Airways (Thailand)

It is the national flag carrier of Thailand which has reported a number of management issues in the past. Mismanagement fueled by corruption and political interference has led to consistent operational losses for many years. These issues also came in the way when it filed for debt restructuring because of coronavirus impacts.  Thailand’s ministry of finance reduced its share below 50% in Thai Airways which made it a limited company. It also means that its employees will no longer be protected by labor laws.

The bankruptcy court appointed an administrator to save the company and its 20,000 employees. Despite the restructuring process, the carrier issued a press release stating that it will continue operating whenever the coronavirus restrictions permit.  

TAME (Ecuador)

TAME was the largest airline company in Ecuador formed by the air force. It came out of the administration of air force in 2011 by becoming a state-owned company. However, it kept on struggling for many years until coronavirus compounded its problems. Ecuadorian government eventually filed for liquidation and ceased all of its operations.

LATAM (Chile)

Chilean LATAM is the largest carrier in Latin America and also in this list of airline bankruptcies. For the last four years, LATAM has made more than 700 million USD in profits. Where other carriers halted payments due to financial meltdown by coronavirus, LATAM continued to approve dividends for the year of 2020.

It was also a strategic company for Chile. Despite being under severe budget problems, Latin American government was reluctant to let go of LATAM because it has become a recognizable brand among Latinos.

The parent group filed for Chapter 11 bankruptcy in the US and its subsidiaries in Chile, Ecuador, Peru, Columbia, and Argentina. 

Level Europe (Austria)

Budget airline of Austria amassed the debts equal to 14.6 Million USD and the government did not grant any financial support which led to its insolvency effective immediately. 

SunExpress Deutschland (Germany)

The German-Turkish operator resumed its international flights on 10th June after suffering grounded flights for couple for months. A substantial portion of its profits were due to tourism in Turkey and Germany which has now halted due to the pandemic.

It is reported that the company will soon go into liquidation but it stressed about coming back strong from the crises. Its Parent Company and Eurowings will partially operate its route network. 

One Airlines (Chile)

It suffered a difficult financial situation amidst the pandemic and did not receive any aid from the government. The chairman mentioned that the competition from other Latin carriers; JetSMART, SKY, and LATAM was very tough. They were offering charter flights at the rate which One Airlines couldn’t compete with. Currently, it’s no longer operational and is on the brink of liquidity. 

NokScoot (Thailand)

One of the coronavirus-hit airline companies includes NokScoot. The budget airline of Thailand decided to liquidate the business after realizing that it couldn’t recover from the effects of COVID 19. It returned three units of its 7 plane fleet to its parent company, Nok Air in Singapore. Reportedly 450 employees will be left out of work after liquidation. NokScoot was unable to record a single full-year net profit since its establishment in 2014.  

LIAT (Antigua and Barbuda)

Government authorities announced that LIAT could not deal with increased debt and pandemic effects so it will enter liquidation. It is announced that the company will be reformed and transformed into a new entity which will provide services between the Caribbean islands. 

Alitalia (Italy)

When the lockdown was announced in Italy, the flag carrier lost 22% of its international flights. The Italian government decided to take over Alitalia because it could not survive the economic destruction of coronavirus on its own. After the takeover by the state, Alitalia left one of the three major airline alliances in the world, SkyTeam.

South African Airways (South Africa)

SAA vote for restructuring has been delayed due to heavy financial losses the company endured over the period of 10 years. Its restructuring plan involves reducing the number of fleet and arranging at least 578 million USD to pay off creditors. It aims to resume services after the restructuring process but it is not clear whether they will be able to arrange such a big amount.

Jet Time (Denmark)

It filed for bankruptcy and dismissed most of its employees attributed to the outbreak. According to the reports, it is preparing for restructuring into a new company styled as Jet time. It was also announced that 5 fleet units belonging to Jet Time will be transferred to Jet Time along with the CEO and key staff members. 

Virgin Atlantic (US)

Another among the prominent airline companies from Virgin Group based in the US filed for Chapter 15 bankruptcy while struggling to arrange 1.5 Billion USD to save itself. As mentioned above, this type of bankruptcy tries to protect the American assets possessed by the foreign company. Virgin Atlantic will be dealing with the restructuring process in its home country, UK.

Virgin Atlantic suffered the worst downfall due to pandemic and had to lay off approximately 3,500 staff members. The company also shut down its base at Gatwick airport, London.

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