Government ownership and a heavy debt burden

COVID-19 threw the airline industry into disarray, with a high number of market exits. That number would have been much higher had it not been for state-sponsored aid packages, but many in the industry are continuing to tread water and face a battle for survival. 

In several regions, airlines availed themselves of large government bailouts or took on large amounts of debt to avoid going under during the height of the COVID-19 pandemic. The result is the industry now has a heavy debt burden that will take years to unwind. In addition, government has stepped back into the industry.

The airline industry is today saddled with hundreds of billions of additional COVID-related debt. Simply servicing that additional debt will cost more than the industry has on average generated annually in profits.

Much of that debt falls due from 2023 onwards, and unless trading conditions are strong at that stage, real embarrassment is possible, particularly where debt is backed by aircraft assets.

As a result, 2023 to 2025 will be the critical period for the survival of traditional models and airlines. Given the dimensions of the COVID crisis it is remarkable that so few airlines have fallen by the wayside. But that cannot persist indefinitely.

• Have we not yet witnessed the worst of the COVID crisis on airlines?

• How active will governments be in controlling airlines in the future?

• Has COVID been a prelude to a perfect storm and airline debt crisis?