The coronavirus pandemic has impacted every region of the world, with cases and sadly deaths, continuing to rise daily. The World Health Organization’s (WHO) recommended approach to contain the virus has been to lockdown the population in affected areas.

As the disease spread, these lockdowns extended beyond towns and cities, to countries and entire regions. Borders have been closed by governments and quarantine restrictions placed on foreign travel. Entire fleets have been grounded, primarily during the first quasi-global lockdown in March/April 2020, but also periodically throughout the year to the latest December/January lockdowns, mainly in the UK and Europe, in response to soaring cases. However, the situation in China and some parts of Asia-Pacific, has been more positive. The Chinese government was the first to lockdown its population when the disease was first discovered in Wuhan in December 2019. That swift and severe response seems to have brought the disease under control and travel is returning. Domestic travel in China in particular has been recovering steadily during the second half of 2020 and into the new year.


Following periods of consolidation, the USA has financially strong airlines, which have enjoyed a lengthy period of profitability immediately prior to the pandemic and which operate large domestic networks. However, as a result of the crisis, IATA estimates that airlines in North America will post a net loss of $45.8bn in 2020. 

Although North American international travel is down by 75% in the 11 months to end November 2020, domestic travel fared slight better and fell nearly 60% in the same period but showing a steady recovery from the record low of April 2020. Over the year-end 2020 festive period, domestic traffic in the US was at the highest level it’s been since the pandemic began but COVID-19 cases are again surging in the region, resulting in ongoing and increased lockdowns and quarantines requirements that restrict travel. 

IATA expects the recovery in North America in 2021 to be prompt, driven by the presence of large domestic markets, with profit margins forecast to improve to –6.8% from –41.4% in 2020. 

“This crisis is very different to previous crises for North American carriers, because they entered the crisis in a much stronger financial state than they had been previously, their balance sheets were stronger,” says Pat Hannigan, CEO, CDB Aviation, which has boosted its portfolio this year with sale-leaseback deals with United and WestJet. 

Although all airlines are experiencing intense financial pressure, stronger airlines from a balance sheet and a route network perspective, have been more successful in accessing additional capital. “Right now performance is all about liquidity,” says Gary Rothschild, Head of Aviation, Apollo Global Management. “Airlines with a strong management team, which can access liquidity to strengthen balance sheets and manage cash burn are the stronger airlines. They are the airlines that are going to get through this and will probably emerge in an even better competitive position on the other side of the recovery.” 

The US carriers are in this strong position thanks to the market being consolidated following the last crisis, which resulted in stronger carriers with a robust domestic market. Many lessors are betting on US airlines to emerge from this crisis as the “winners” even though they are all expected to be much reduced in size. “The major US carriers will emerge post-crisis with an even more dominant position, but probably reduced in scale,” says Kieran Corr, Global Head of Aviation Finance, Standard Chartered. “We also expect to see the emergence of more start-up carriers in the US markets.”

US airlines have all raised significant amounts of liquidity during 2020 to construct “fortress” balances sheets to ensure their survival – tapping the debt and equity capital markets, accessing bank facilities and securing new term loans, as well as leveraging aircraft assets from aircraft sale-leasebacks, to monetising frequent flyer schemes and other alternative assets, from slots/gates/routes to spare parts. The ability of airlines to tap into the capital markets has been an essential factor in the survivability of airlines around the world, which was only made possible, and on such a scale, by the intervention of the US Government with much needed support for the airline sector (more on this in Chapter 3, which covers aviation finance in detail). 

Canadian airlines have not yet received any substantial government support and have been struggling especially since the country has some of the most restrictive COVID-19 measures, which have essentially shut down most air connectivity. As of 7 January 2021, the Canadian government mandated that passengers provide proof of a negative COVID-19 molecular polymerase chain reaction (PCR) test taken within 72 hours before planned departure to Canada. The 14-day quarantine rule also remains in place. 

Despite the significant challenges, Air Canada has succeeded in raising significant amounts of liquidity in the capital markets – both debt and equity – and has also worked to reduce cash burn by slashing jobs and cutting capacity by almost 80%, with measures including the retirement of certain aircraft and deferral of new deliveries. Air Canada ended the third quarter of 2020 with cash of $8.189 billion at September 30, 2020. However, the airline posted a $785 million operating loss in the third quarter of 2020 compared to operating income of $956 million in 2019, as total revenue passengers carried fell 88% over last year’s figures. 

Carriers in South America have been the most hard hit by the pandemic. Prior to the crisis some airlines were already facing a challenging economic and operating backdrop, which has now only been compounded by the onslaught of the coronavirus pandemic. With little to no support from their respective governments, it is unsurprising that most of the insolvencies and restructuring filed in 2020 are from carriers in the region. “One of the big issues the airlines in Latin America had was the lack of political will to put money into airlines to bail out investors from the United States,” observes one banker. 

The major airlines in Latin America have a large proportion of US-based shareholders. For example, Colombia’s Avianca airline, which filed for Chapter 11 bankruptcy protection in New York on May 10, is 14.46% owned by Kingsland Holdings, which is controlled by United Airlines. Colombia closed its airspace in mid-March and the majority of the countries Avianca flies to were also shut to air travel. The airline received approval for its $2bn debtor-in-possession (DIP) financing in October, which comprises: $1.27bn Tranche A senior secured financing and a $722m Tranche B secured subordinated loan, provided in part by Kingsland and United, which refinance their existing debt commitments. The Colombian government contributed 20% to the total DIP financing. 

Delta Air Lines is a major shareholder in LATAM with a 20% stake, while Qatar Airways owns 10%, the company was also listed on the New York Stock Exchange. LATAM filed for Chapter 11 bankruptcy protection in the US in May 2020 after passenger traffic declined by 95% and the company posted a $2bn loss in the first quarter of 2020. At the end of Q1 2020, LATAM’s financial debt was US$7.6 billion. LATAM Argentina ceased operations in June, while LATAM Brazil filed for bankruptcy in July. LATAM secured a total debtor-in-possession (DIP) financing of US$2.45bn, comprising: (tranche A) $1.125bn from Oaktree Capital Management and $175m from Knighthead Capital; and (tranche C) $750 million from shareholders Qatar Airways, the Cueto Group and the Eblen Group; $250 million from Knighthead Capital; and $150 million from LATAM minority shareholders.

LATAM’s restructuring shook the aviation finance market when as part of its Chapter 11 filing in May, the company rejected the 2015-1 enhanced equipment trust certificates (EETC) secured on a portfolio of 11 A321-200s, two A350-900s and four 787-9s. At the time, the move was received unfavourably by the industry. At the time, one banker said: “The rejection by LATAM of all the aircraft of their EETC may not help to attract investors for non US EETCs. In the US, no US airline can treat EETC investors too badly because it is a very important source of funding for them.” 

There was concern that the move may severely curtail the drive to promote the EETC product outside of US airline names. Those concerns may have been misplaced since Air Canada successfully tapped into the EETC market shortly after and British Airways also successfully placed a EETC in November. However, both names are top tier airlines and repeat issuers; future inaugural issuers may struggle.

Fitch Ratings called the rejection of the EETC transaction by LATAM as “unexpected” but stated that it was a “stark indicator of the market disruptive impact of the coronavirus crisis on airlines’ need for aircraft, at least in the near term”. The severity of the downturn has caused fleet sizes to shrink, with airlines abandoning large fleets of aircraft types, which calls into question the efficacy of the cross-collateralisation in EETC structures (this issue is discussed further in Chapter 2: Aviation Finance).

Looking ahead, the region faces a protracted recovery. Having lost $5bn in 2020, IATA is forecasting the airline industry in the region to post a $3.3 billion net loss in 2021.

The major US carriers will emerge post-crisis with an even more dominant position, but probably reduced in scale,. We also expect to see the emergence of more start-up carriers in the US markets.

Kieran Corr
Global Head of Aviation Finance
Standard Chartered


Europe’s fragmented airline market was already suffering from overcapacity before the pandemic and its reliance on international travel and the economic downturn will impede its recovery. In 2020, IATA estimates net losses for the region to be $26.9 billion. IATA forecasts Europe to be the worst-hit global region in 2021 in terms of airline losses, which are expected to in the region of -$11.9 billion with EBIT margins down to -9.5%. Passenger traffic (measured in RPKs) is estimated to have fallen 70% this year, the worst performance of any region with the exceptions of Africa (-72%) and the Middle East (-73%). RPK growth next year is expected to be a weak 47.5%, trailing the comparable regions of Asia Pacific (50%) and North America (60.5%). 

IATA expects a further deterioration in revenues, job prospects and economic activity across the entire continent. IATA estimates that more than seven million jobs have already been lost or are at imminent risk due to the COVID-19 shutdown. “Our projections for this year and next are little short of a disaster for European air transport. Border restrictions and quarantine measures have brought demand to a halt and the region has been affected even worse than most other parts of the world. There is optimism over a vaccine, but as our forecast for next year shows, this is unlikely to come in time to prevent hundreds of thousands more job losses in the industry unless governments take immediate action,” said Rafael Schvartzman, IATA’s Regional Vice President for Europe in December 2020. 

The impact of travel restrictions and quarantine on travel has ensured intra-EU bookings remain depressed and are 81% down for the period to 10 January 2021 compared to the usual curve. 

The airline failures in Europe to date were weaker airlines going into the crisis. Flybe was an early victim and ceased operations in February. Virgin Atlantic Airways (VAA) entered a private recapitalisation process in July and filed for Chapter 15 bankruptcy protection in the US in August. The c.£1.2bn refinancing package, which was finally approved in September 2020, comprised £600m from shareholders (including £200m from the Virgin Group), the deferral of c.£400m of shareholder deferrals and waivers, cost savings of c.£280m per year and c.£880m rephasing and financing of aircraft deliveries over the next five years. New partner Davidson Kempner Capital Management, a global institutional investment management firm, provided £170m of secured financing. Creditors have supported the airline with over £450m of deferrals. 

VAA has further shored up its balance sheet with the recent sale-leaseback of two 787s in partnership with Griffin Global Asset Management and Bain Capital Credit. Oliver Byers, Chief Financial Officer, Virgin Atlantic said: “Since the beginning of the crisis, we have taken decisive action to reduce our costs, preserve cash and protect as many jobs as possible. As provided for in the recent privately funded solvent recapitalisation of the airline, we have continued to explore additional financing opportunities to strengthen our balance sheet into the new year… This deal will allow Virgin Atlantic to further bolster our cash position and we are confident that we will emerge a sustainably profitable airline, with a healthy balance sheet.” 

Norwegian has been the most high profile airline failure in Europe, with a year-long series of restructuring negotiations culminating in the airline filing for examinership in Ireland on 18 November (chosen because its assets are held mainly in Ireland) and for bankruptcy protection in Norway on 8 December. Norwegian Air’s shareholders voted to support its restructuring plan during an extraordinary general meeting on December 17, which included raising up to NOK4bn ($454.4 million) from a proposed rights issue of shares or hybrid instruments in February 2021, and carrying out a reverse split of the company’s shares where 100 old shares give one new share. Norwegian is still renegotiating its debt and liabilities of 66.8 billion Norwegian crowns ($7.8 billion) with its creditors, which include Airbus, Boeing, Avolon, US Export-Import Bank (Eximbank), Wells Fargo and the Irish Revenue. 

Most recently, Norwegian has announced that it will refocus operations on a simplified short-haul route network, abandoning its low-cost long-haul transatlantic routes and its 787 fleet, which has been grounded since March 2020. The airline plans to serve a reduced short-haul network with a fleet of 50 narrowbody aircraft in 2021, which it plans to increase to around 70 narrow body aircraft in 2022. 

Certain European airlines have been successful in gaining government support – significant aid in the case of Lufthansa and Air France-KLM (full details in Government Lifelines section below) – which has allowed them to continue to operate. As the pandemic drags on into 2021, more airlines are beginning to access government-backed funds. In the UK, British Airways for example confirmed a $2bn commitment for UKEF-guaranteed loan in December. As discussed further below, while the support from national governments during the crisis is viewed as a positive for the industry, there are concerns that in the longer-term, it may prevent the airline consolidation, which has been badly needed in the European market for some time. The winners in the European market are likely to be the stronger low-cost carriers. Ryanair has bolstered its liquidity position with capital markets debt despite its continued battle against the EU for granting state aid to its rivals. In September, Ryanair raised €400m from shareholders and its €850m five-year secured eurobond with a 2.875% coupon raised orders in excess of €4.4bn. Ryanair’s balance sheet is one of the strongest in the industry with over €4.5bn cash in the bank as of 30 September. Ryanair is also one of the few airlines to have retained its investment grade credit rating – rated BBB by S&P and Fitch (Southwest is the other), which will have been helped by the recent cash raising that has eliminated its refinancing risk for debt maturities in 2021, which includes the £600m CCFF in March and its €850m bond in June. 

Wizz Air has also weathered the crisis well so far. Speaking at Airline Economics Growth Frontiers Dublin virtual conference, Bill Franke, founder of Indigo Partners and chairman of the board of Wizz Air, credited this success to its position and hub in Central and Eastern Europe, where the appetite to travel has driven “dramatic growth over the last five years” as well as its “excellent senior management team” and “well-prepared cost structure, where costs are now or equal or below that of Ryanair”. Franke adds that what sets Wizz Air apart from its rivals is the fact that it hasn’t been required to “dramatically restructure its balance sheet, which differentiates it dramatically from most airlines in Europe and there hasn’t been any significant additional state funding or borrowings or equity issues” leaving it well positioned. Wizz Air has also pressed ahead with the launch of a new start-up airline in Abu Dhabi, which commences operations in mid-January 2021, which Franke states gives “great potential to expand Wizz Air into markets that it doesn’t serve today”.

József Váradi, Chief Executive Officer of Wizz Air, also spoke at the Airline Economics Dublin virtual conference, who spoke at length about the airline’s highly disciplined liquidity strategy and plans for the future (full interview in Airline Economics magazine Issue 59 and at 

easyJet has also succeeded in boosting its liquidity in January 2021 with a new five-year $1.87 billion term loan facility, which has been underwritten by a syndicate of banks and supported by a partial guarantee from UK Export Finance (UKEF) under its Export Development Guarantee (EDG) scheme. The EDG scheme for commercial loans is available to qualifying UK companies, does not carry preferential rates or require state aid approval, and contains some restrictive covenants including around dividend payments. 

This five-year facility, which will be secured on aircraft upon drawing, will allow easyJet to repay and cancel part of its shorter term debt, comprising its fully drawn $500m revolving credit facility and term loans totalling c.£400m, which will free up a number of aircraft assets to further strengthen easyJet’s balance sheet. 

“This facility will significantly extend and improve easyJet’s debt maturity profile and increase the level of liquidity available. easyJet has taken swift and decisive action, having now secured more than £4.5bn in liquidity since the beginning of the pandemic,” said Johan Lundgren, easyJet CEO. “The loan facility, provided on commercial terms, reflects constructive and collaborative work between easyJet, multiple banks and UK Export Finance.

British Airways accessed the EDG facility in December when it received commitments for a £2bn five-year term loan underwritten by a syndicate of banks, partially guaranteed by UKEF, which the airline intends to draw down in January 2021. BA is entitled to repay the loan at any time with notice but, like easyJet, is restricted from making any dividend payments to IAG. Flag carriers are expected to survive but be much reduced in scale and restricted in scope due to conditions on government funding restricting short-haul flights for environmental reasons (see Government Lifelines section below). 

Flag carriers will find it difficult to compete with low-cost carriers who are positioned to capitalise on the expected pent-up demand for leisure travel when restrictions are finally lifted and the vaccination programmes are well under way. Hybrid carriers in Europe – those airlines that focus on both the charter market and the low fare market – are expected to continue to struggle and will be restricted by the government aid that they have already received, such as Tui for example.

In 2020, IATA estimates net losses for the region to be $26.9 billion. IATA forecasts Europe to be the worst-hit global region in 2021 in terms of airline losses, which are expected to in the region of -$11.9 billion.


The Asia-Pacific region is large and diverse, with a very mixed picture for airlines. Overall, Asia-Pacific airlines suffered from a 61.7% fall in passenger traffic (RPKs) in the Jan-Nov 2020 period. International traffic was down 79% in the year to date period and down 95% in November. As the first region to be exposed to the COVID-19 outbreak, the decline in traffic started at the very start of 2020 but as a result the recovery has already begun. China domestic passenger traffic has already returned to pre-pandemic levels even though its international traffic remains depressed due to border restrictions around the world. 

Analysts are bullish on China. “We thought China would lose a year of growth, and they did, but they are now back to pre-pandemic traffic levels in their domestic market (we can’t speak to air fares, just to demand). They have clearly handled this pandemic better than other countries,” says Helane Becker, Cowen.

Although airlines are lowering fares to stimulate demand, IATA expects Chinese airlines to cash breakeven by the year-end. Overall for the region, net losses in 2021 are forecast to decline to $7.5 billion, almost one fourth of the losses in 2020, according to IATA’s latest predictions.

Elsewhere in the region, airlines dependent on cross border traffic continue to suffer. In Thailand, the decline of Thai Airways came as a shock to the industry. It was expected that the Thai government – which owns 51% of Thai – would step in and recapitalise the struggling flag carrier but the state rejected its request for a THB58.1bn bailout loan in May and the airline entered administration with debts of THB300bn (US$10bn). The Thai Central Bankruptcy court approved its restructuring plan in September but the airline remains in difficulty and needs to reach an agreement with its creditors soon or risk ceasing operations. 

The AirAsia Group of companies has felt the full force of the pandemic’s impact on aviation. The group is experiencing a very public deterioration in the operating strength of its airlines and in October AirAsia Japan ceased operations. 

At the same time, AirAsia X announced its intention to restructure and since then has been conducting protracted negotiations with its lessor creditors. AirAsia X’s restructuring plan includes the proposed debt settlement and waiver of debts involving unsecured creditors, along with a revised business plan that includes: route network rationalisation, aircraft fleet right-sizing, cost base overhaul and workforce optimisation.

In December, in a bid to avoid liquidation, AirAsia X proposed raising fresh funds by way of a RM300 million rights issue from existing shareholders and a share subscription of shares of up to RM200 million from new investors. Several of its creditors are reported to have objected to the restructuring scheme, which is a prerequisite for the recapitalisation. 

Philippine Airlines (PAL) is struggling to manage its debt burden and so far has resisted entering formal restructuring processes and has downplayed rumours it is poised to seek court protection from creditors. However, the airline is seeking to return leased aircraft and make further staff cuts to secure cost savings of $1bn. Cebu Pacific is also pursuing a restructuring plan to cut costs and was approved to pursue $500m in fresh capital with the issuance of $250 million in new convertible preferred shares and $250 million in privately placed convertible bonds.

Cathay Pacific was experiencing difficulties prior to the crisis given the troubles in Hong Kong but the pandemic has only exacerbated its financial problems. In October, under a new corporate restructuring plan, Cathay’s wholly-owned regional subsidiary Cathay Dragon ceased operations. The Hong Kong-based airline also reduced its headcount by 24% and cut capacity significantly. In November, Cathay Pacific passengers figures fell by 98.6% compared to 2019, with a cut in capacity by 90.9% year-on-year. The airline’s passenger load factor dropped by 61.5 percentage points to just 18.5%. The airline continues to rely on its cargo business to generate some revenue, with cargo and mail revenue per tonne/km down by 26.2% over 2019 figures.

In Japan, after reporting a loss of ¥280.9bn (approx. $2.7bn) for the six months to end Sept. 30, 2020, the ANA Group announced a significant restructuring. ANA retired a total of 35 aircraft in 2020, 28 more than its initial plan of seven. The airline delayed delivery of its 777s and one A380 and reduced capex payments for pre-existing aircraft orders to net ¥150bn savings in FY20/1, and approximately ¥250bn in FY 2021/2. 

Because ANA expects leisure travel to remain buoyant following the crisis and business travel to remain depressed for some time, the group has created a third airline brand, a low-cost carrier based on the Air Japan entity, for medium-haul routes to destinations in Southeast Asia and Oceania that will utilise 787 aircraft configured in two classes. The new airline is expected to launch in FY2022.

Peach will continue to serve the short-haul LCC market but with the addition of certain medium-distance routes being served by the A321LR aircraft, while also entering the air cargo business. ANA plans to continue as the long-haul, full service carrier. 

In a bid for survival, Korea has chosen to merge its two main airlines – Korean Air Lines and Asiana. In December, Hanjin KAL and Korean Air agreed to acquire Asiana Airlines for KRW 1.8 trillion (approx. US$1.625bn). In order to secure this amount, Korean Air states that it plans to raise KRW 2.5 trillion worth of capital by issuing new shares early in 2021. Shareholders of Asiana already approved a share capital reduction plan, where three common shares in Asiana will be worth one, which has been structured to help the airline offset part of its KRW1.5 trillion (US$1.3bn) deficit. The merger of the two airlines is expected to further enhance the competitiveness of the Korean aviation industry with more streamlined route operations and lower costs. 

Singapore Airlines has been recapitalised by its state-backed shareholder and has raised significant liquidity but the airline remains absolutely dependant on international traffic, and will continue to burn cash until borders fully reopen. However, the airline is in a strong position. Since the start of its 2020/2021 financial year, SIA has raised approximately S$12.7bn in additional liquidity. This includes S$8.8 billion from SIA’s successful rights issue, S$2bn from secured financing, S$850m via a recent convertible bond issue, and more than S$500m through new committed lines of credit and a short-term unsecured loan. In December SIA successfully raised a further S$500 million via a private placement of new 10-year bond with a 3.5% coupon, which was upsized from the initial offer size of S$300 million due to demand from what SIA calls a “select group of private investors”. For the period up to July 2021, the airline also retains the option to raise up to S$6.2 billion in additional mandatory convertible bonds and is considering sale-leaseback agreements to raise further funds if necessary.

Airlines in smaller countries such as Vietnam, Malaysia, Thailand, Singapore and Indonesia will continue to struggle as borders remain closed because they are so dependent on international traffic. The majority of leasing company arrears are coming from airlines in South East Asia and this is expected to continue.

Middle East/Africa

Middle Eastern airlines are also heavily dependent on international hub travel and have suffered coming into this crisis with existing capacity pressures. IATA expects Middle Eastern airlines losses to rise to $7.1 billion in 2020, with a loss of $3.3bn predicted in 2021 with the net loss margin at double digit levels (–10.8%).

Although not disclosed, the large Gulf carriers are understood to have received some government support. Only Qatar Airways has indicated it received a sizeable government bailout of almost $2bn, while Emirates is rumoured to have received a similar amount. 

African airlines have been deeply impacted by the pandemic, with losses of ¢2bn predicted for 2020 and $1.7bn loss forecast for 2021. South African Airways (SAA) went into the crisis with a heavy debt burden and has spent a large part of the crisis reorganising into a brand new state-backed flag carrier for South Africa. 

Kenya Airways remains in nationalisation talks with the government as the airline continues to suffer deep losses and continues calls for bailout funding. Air Namibia is negotiating a state bailout of ¢11.6m to restart operations. Royal Air Maroc received $623m from the Moroccan government as part of a bailout plan that also includes some route cancellations and job losses. Ethiopian remains the most healthy African airline. The airline has converted 25 of its 777 passenger aircraft to freighters to capitalise on the surge in demand for air cargo, but it is suffering losses due to the closure of international borders but has not yet requested any government support.


Get in touch

If you have any queries on any topic raised in Aviation Industry Leaders Report 2021: Route to Recovery, please contact Joe O'Mara of our Aviation Finance team. We'd be delighted to hear from you.