The U.S. airline industry has claimed its first COVID-19 bankruptcy victim: RavnAir. Compass and Trans State Airlines have also failed. Alex Martinez Rivera explains:
While the U.S. still is processing phase 3 of the economic package the largest regional regional airline in Alaska falls through the cracks without any economic assistance.
COVID-19 is taking RavnAir, its first airline victim
As previously mentioned, the virus is a menace to the airline industry as a whole. It has brought down its first U.S. airline.
RavnAir filed for Chapter 11 (restructuring) on Sunday, laying off the entire staff as the airline runs out of cash.
Although the U.S. Treasury Secretary is working the logistics of sending the airline loan, Alaska’s RavnAir couldn’t wait for the red tape to materialize.
The virus still has weeks to go. The regional airline in Alaska which gives an “essential service” had shut its service.
Alaska is more and heavily dependent on passenger and air cargo transport than the rest of the union. More than 80% of Alaska’s communities are only accessible by air.
The White House considering how to distribute the CARES Act money to airlines
As RavnAir was failing in Alaska, the White House was figuring how to distribute the $32 billion. While sources confirm that the stimulus could be issued as soon as this week (to cover payroll costs), the rollout has been less than swell.
Regional Airlines are the last mile connection to far-flung communities and are the first to feel the downturn whether a pandemic or an economic meltdown strikes.
The puddle jumpers are seeking priority from the U.S. Treasury Department on disbursing the funds on a priority basis when awarding the grants.
The regional airlines are seeking help to cover their payroll cost. The airlines filled out their forms on Friday, but they don’t know whether or not they would be getting help.
An astonishing decline in bookings, owing more than 91 million
The chapter 11 filing of RavnAir indicates an astonishing bookings decline in its Delaware filing, due to the COVID-19.
However, there is a glimmer of hope. The airline (in the same filing) says:
“In the event that government relief, under the CARES Act or otherwise, becomes available, (the company) hopes to restart operations with as many of its laid-off employees as required.”
The airline up to this point owes $91 million dollars.
Taking Chapter 11 creates an environment of “pause” while the airline awaits the money that the CARES Act promised paying the payroll for airlines.
Bottom Line: This is just the beginning for Airlines
Current industry events are just opening salvo for airlines around the world. For example,
- Compass and Trans State Airlines (TSA) have already shut down operations.
- In Germany, Lufthansa is in the process of restructuring.
- Other airlines are cutting benefits.
I said this before, governments need to execute their economic packages quickly as it can unravel the economic well-being of the airline industry as well as the economic well-being of the United States!
We want to hear your opinion. What will be the state of the airline industry after the virus-crisis is over? Was the Ravnair COVID-19 bankruptcy just the beginning of many airline bankruptcies to come? You can contact Alex Martinez Rivera here.
Feautured Image: RavnAir.