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Airlines in Midst of Gravest Crisis

As numerous flights are prohibited and travel bans are enforced with respect to the COVID-19 pandemic, major airline companies are now facing a collective decrease in value. Namely, Lufthansa has warned that they will run out of cash within weeks if it does not receive helping hands from European governments. Meanwhile, Delta Air Lines, which has already preempted quick actions in respect of the pandemic, should also bear a precipitous decrease in revenues as it has burned about $100m each day. Not to mention Southwest Airlines, which suffered a $94m loss in the first quarter of 2020. On Wednesday (29/04), Guillaume Faury, the CEO of Airbus, expressed that “Our industry now faces probably the gravest crisis in its history.” After the Airbus group faced an €8 bill cash outflow in the first three months and a net loss of €481m in lower aircraft deliveries in this year’s first quarter, Airbus signaled it was preparing a second cut to production in June, with thousands of job losses anticipated to follow. Furthermore, a massive cut in workers may appear mandatory to counter the losses suffered by Airbus. Airbus, which initially has 81,000 workers, have already discharged more than 6000 workers over the past couple of days. Mr. Faury also expressed that Airbus would have to lessen its discretionary investment and fixed costs. This problem will consequently impact the cancellation of Airbus’ project with Rolls Royce to develop an electric-power aircraft demonstrator, the EFan-X. Mr. Faury additionally expressed that adjustments inside the manufacturing expected to be much less than that already announced. However, this decision continues to be surrounded by uncertainty. Meanwhile in the domestic market, Garuda Indonesia claimed that they are facing significant losses as the Saudi Arabian government halted all umrah activities. The company's president director, Irfan Setiaputra, expressed that the absence of umrah activities severely affects the airline, as for ten days in a row flight to Jeddah and Medina is empty of passengers. Moreover, Irfan also predicts a decrease in the number of passengers will occur throughout May 2020, yet even more notably in drawing near the Eid Al-Fitr. This condition results in Garuda Indonesia's shares. The airline's share was corrected by 2 points to the level of Rp 177 at the opening session of trading on Friday (4/24) and continued to fall into the red zone with a correction of 5.59 % to the level of Rp 169 later that day. On top of that, Indonesia's Lion Air has postponed plans for an initial public offering (IPO). The $500m Lion Air IPO, which was set for launching at the end of February, must be put on ice as market conditions were not favorable. In conclusion, the plummeting demand for airlines and tourism in 2020 has been a punch to the gut to the global airline industry. Sources:

Financial Times Wall Street Journal The Straits Times Bisnis Tempo

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