ICAO forecasts that the Covid-19 crisis could send the number of international air travellers falling by up to 1.2 billion by September 2020, compared to a typical year. It also estimates that airline revenues could fall by $160-253 billion for the first nine months of this year, with international capacity down by up to two-thirds. According to its baseline scenario, referencing originally planned capacity, passenger numbers could have risen by 64 million in the first nine months of this year, while revenues could have increased by $15 billion. In a new report published on 21 April, ICAO says that Europe and Asia-Pacific will see the greatest hit to capacity and revenue. Over two-thirds of the predicted revenue loss will be accounted for in Asia-Pacific and Europe, it estimates. The report also details a 19% year-on-year drop in air freight for the month of March, measured in tonnes transported, for a 22% drop in air freight revenues as the grounding of passenger aircraft worldwide led to the loss of belly capacity. Belly cargo is down 31% while all freighter capacity is up 9%. It also estimates that so far in April global passenger capacity is down 91%. ICAO’s estimates vary across two scenarios - one a V-shaped recovery with first signs of recovery in late May and the other a U-shaped path with a restart of air travel in the third quarter or later. The 2003 SARS outbreak had a V-shaped impact on aviation, ICAO says. It notes, however, that the impact of Covid-19 has already surpassed that outbreak, which was largely confined to the Asia-Pacific region. “The 6‐month recovery path of SARS might not apply to today’s situation,” the report cautions.

Source: Cirium

Air Canada plans to suspend all flights to the USA between 26 April and 22 May following an agreement between Ottowa and Washington, DC, to extend border restrictions already in place to slow the spread of coronavirus. The Canadian flag carrier disclosed the move on 21 April, adding that it is completing flights this week to repatriate people to their respective countries. The Montreal-based carrier reduced its transborder network to 11 US destinations from three Canadian hubs to facilitate these flights and to ship essential cargo. Air Canada's network after 22 May will depend on any travel restrictions between the two nations. Air Canada has also limited its domestic network from 62 airports to 40 through April. It has already reduced its overall capacity by 90% compared with April 2019. The company will announce its first quarter results on 4 May.

Source: Cirium

Ratings agencies have revised their views on Virgin Australia, expecting creditors to take a haircut on their debt after the airline entered voluntary administration. Virgin Australia, which has around A$5 billion ($3 billion) of net debt, appointed administrators on 21 April to try and restructure its finances so that it may emerge from the Covid-19 crisis. In response, S&P Global Ratings lowered its issuer credit rating on Virgin Australia from "CCC" to "CC" with a negative outlook. The related issuer ratings on the airline’s unsecured debt were lowered to from "CCC-" to "C". “We expect the proposed debt restructuring and recapitalisation process to constitute a default under our criteria because we expect that unsecured debt providers will be forced to accept less value for amounts owing under the terms of the existing secured debt facilities,” the ratings agency said in a report dated 21 April. It said the negative outlook on the company reflects its expectation that if the debt restructuring process is completed as anticipated, it will likely lower the issuer credit rating to "selective default" and the issue rating on the group’s unsecured debt to "default". On a positive note, it added: “However, we expect that a debt restructuring should facilitate a recapitalisation of the company, which should enable Virgin to emerge from the restructuring and continue as Australia’s second-largest domestic airline.” Virgin Australia and its administrator said on 21 April that they are hopeful the airline will emerge from the administration process in better shape, and Deloitte’s Vaughan Strawbridge stated that over 10 parties are interested in being a part of the restructuring. Moody’s, which had downgraded Virgin Australia’s corporate family rating from "B3" to "Caa1" on 17 April, said in a 21 April report that its ratings remain under review for further downgrade, pending the outcome of the voluntary administration process. The agency said in its latest report that Virgin Australia entering voluntary administration was in line with its base case assumption that any future steps taken to ensure the airline’s ongoing viability will result in economic loss to creditors and in particular to unsecured creditors. "The key issue for existing creditors will be the haircut they are requested to take in a restructure, relative to the risk of putting the company into liquidation with uncertain recovery prospects," it writes. In the 17 April report, Moody’s estimated that Virgin Australia had A$900 million of unrestricted cash but minimal availability under its credit facilities. Meanwhile, Fitch had downgraded the airline from "B-" to "CCC-" on 17 April due to the increasing uncertainty over whether the airline will be able to secure additional financing. The agency issued a further downgrade to "D" on 21 April, stating: "VAH's restructuring would need to result in the airline's profitability and cash generation improving in order to secure financing from a third party and enable the airline to continue as a going concern." It adds: "We believe that, in this case, the airline will focus on bringing back profitable routes and realigning its cost structure to its revenue base while in administration."

Source: Cirium