The financial crisis brewing in the supply chain underneath the world’s airlines

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The global spread of coronavirus has sent the world’s airlines reeling, but the expansive supply chains that make their operations possible are facing an even more acute and uncertain future.

Dynamics within the industry built up over the last decade are creating the conditions for an acute financial crisis for the companies that provide airlines everything from catering and internet to aircraft maintenance, according to interviews by The Air Current with senior executives and officials at airlines, plane makers and suppliers.

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The risk is not just an unprecedented crisis for airlines fast running out of cash with the collapse in demand for flying, but there are concerns of widespread business failures within the supply chain that may trigger, at best case, massive consolidation and at worst case, cripple any return to flying once the COVID-19 crisis subsides.

“I don’t think anyone has processed the shockwave that is about to go through,” said the chief executive of one such large supplier to the world’s airlines.

As soon as airline bookings collapsed and cancellations spiked, airlines immediately started finding ways to hold on to the cash they needed to run their operations. The CEO said almost immediately the company faced a “tsunami of airlines requesting delay in payment terms.” That instantly began to crimp the flow of working capital back into the supply chain.

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