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While Travel Slowly Restarts, These Are The Airlines Running The Risk Of Bankruptcy
With a global travel recovery seeming closer in sight, many airlines have managed to bounce back while others are still facing the looming threat of bankruptcy. Recent analysis using Altman’s Z-score shows the list of carriers under the most threat.
With some travel restrictions only just being lifted following the imposed aviation safety regulations being put in place in 2020 at the start of the pandemic, the world expects some light at the end of the tunnel for the world of travel.
It is worth noting that while some governments throughout Europe and the U.S. offered billions to aid carriers, this same state support wasn’t found in other regions. With this lack of financial aid, certain cash-strapped airlines had to work out means on their own in court or directly with creditors.
Asian Airlines Hit Hardest
Most of the airlines running the risk of bankruptcy are Asian carriers due to the hard hit of travel restrictions following the pandemic.
In a recent Bloomberg analysis, the majority of the top airlines facing the risk of bankruptcy showed a surprising list.
The Z-Score method, a strategy created to predict bankruptcies, developed in the 1960s by Edward Altman has been used to identify the airlines most at risk. Typically scores of 1.8 or below indicate serious risk of bankruptcy, while above 3 suggests safety. It must be noted that this list doesn’t take into account sources of potential additional funding.
The list and the Alt-Z score:
AirAsia X (-71.9)
Pakistan International (-8.3)
Gol Linhas (-3.6)
Thai Airways (-3.4)
Nok Airlines (-2.4)
Norwegian Air (-2.4)
Garuda Indonesia (-2.0)
Philippine Airlines (-1.7)
According to the analysis undertaken by Bloomberg, of the lowest airlines, 6 of them are Asian carriers. Notably Bloomberg’s analysis didn’t cover non-operational and chartered airlines, and also removed carriers with the smallest fleets. It is clear that in the regions where travel hasn’t returned to pre-pandemic levels, the traffic has significantly impacted the score.
Some airlines are still hopeful about what the future has in store despite the airlines running the risk of bankruptcy. Abdullah Hafeez Khan, a spokesman for Pakistan International Airlines Corp. insists that a plan is in the works to shift about $3 billion in debt from its balance sheet.
“The world is opening and travel restrictions are going away gradually, but it is not yet over,” Khan added.