Why does an airline go bankrupt??

Sadly we see news about air closureídenies in the world, but ¿becauseé an airline goes bankruptínea? Hereí We review some of the possibilities and causes.

Regardless of the pandemic we are experiencing worldwide, that has forced dozens of aerolíeager to seek state aid, préWe are private or enter processes under the Capíleakage 11 from United States, not all have had this luck.

Others have been forced to definitively close their operations and enter a process of liquidación of its assets to meet its previously acquired commitments.

Si bien la situationón current is very particular, Without a pandemic we still see Aerol newsíneas announcing its cessation of operations, so hereí We will review some of the reasons mácommon steps to reach this situationón.

¿Becauseé Aerosols go bankruptídenies?

Although there are endless reasons, In this installment we will try to detail some of the más communities forí tell them, but without any doubt, there could be other factors regardless of whether this is a cargo or passenger company.

And términos básicos an aerosolínea enters bankruptcy proceedings when it runs out of cash flow to cover its daily or imminent obligations with suppliers., investors, landlords, passengers, etc.

It is generally thought that aviationóIt is a highly profitable, multi-billion dollar industry.ólares in profits, in few casesí, but in general the márgenes are less than 5%, so any change in the market affects the indicators drástically.

The costs that a company incurs in the operationón are the main elements to take into account, where these expenses include: pay accrued wages, pay suppliers or cover the payments of your debts.

Then in the múwe have multiple reasons:

Costs control

It is a key point for the survival of an airline.ínea, poor handling of fixed and variable costs of the company generateá a lack of control in expenses leading to over-indebtedness and péloss of profitability.

Esta situationón se da más in airítraditional or legacy lines, which generally maintain 50% higher administrative expense versus a low cost one potentially leading to closure if not course corrected.

Combustible, spare parts, diversify usón of the fleet, overstaffing, opening of routes that do not justify a profitable demand and increase in the price of fuel is some of the factors to take into account.

external situations

This is possibly the point máIt's complex to control for an airlineínea and cash flow is essential to counteract these situations:

• Crisis econólittle bye byeís of global origin.
• Fenóless natural like earthquakes, hurricanes, rashes, etc.
• pandemics.
• Terrorist attacks.
• wars

point of order, It has not been seen that an aerosolíne closure due to hurricaneán, but yesí They are situations that can harm your financial flows and that if added to other situations such as the first point couldíto trigger bankruptcy.

Inability to adaptón about evolutionón

In the úlast toños, possibly a few 5 a 10 añthe atreás, the appearanceón with force of the airídenies low cost has led to change the way of flying in the world.

In this change of way of flying, we have all had to adapt to the new conditions, where you pay less and receive less, but that without a doubt has greatly captured the consumer, democratizing aviation.ón so everyone can fly.

With this «threat» for the aerosolíneas legacy growing día a día, even in crisis, It has generated that many have not changed their mentality in time or generated strategies to sustain their market, lowering their income and finally leading to the definitive closure.

Administrationón

This is a complex point to analyze., but that undoubtedly goes hand in hand with cost control. Many headlines have seen that due to poor administrationón quebró X aerolínea, ¿but thaté It means this?

Una had an administrationón comes through his decisions that at the time turn out to beívoices and affect the airline's financesíneat as it can be:

• Negotiationón leasing or purchasing aircraft.
• unprofitable routes.
• High administrative expense.
• Excessive non-operating expenses.

Something important needs to be clarified., the aerosolsícompanies generally do not go bankrupt at the beginning of a crisis, let's say económica, It generally occurs over the weeks when the cash on hand is depleted until it reaches a point that makes the operation unsustainable.ón, the planes are left on the ground and they do not take off again.¿

¿Cuáhe is the bankruptcy of an airlineínea that máDo you remember what called you?ó the attentionón?