Deals Activity: Low
Restructuring Activity: Very high
Restructuring activity in Civil Aviation
Despite recent failures in the sector in the UK and Europe, the sector has broadly recovered from the impact of the pandemic extremely well. Demand for travel, especially within Europe, remains extremely strong.
However, debt levels remain elevated, which may dampen profitability for the foreseeable future. Nevertheless, order books for new fuel-efficient planes remain at near-record highs.
Airlines more exposed to business travel are more likely to be impacted by long-term corporate trends than leisure-focused operators.
There is a possibility of airline consolidation in the medium-term.
The latent demand for travel in recent months has surprised many in the sector, with short-term challenges of flight and airport operations being widely publicised.
A number of potential issues lie amid this cautious optimism. Airline, airport and contractor balance sheets were particularly impacted by the pandemic. Many national airlines and international terminals sought government support, while others raised cash through increased debt, sale and leaseback of planes and new equity. It has left balance sheets materially weaker than in 2019, placing increased pressures on operations to continue cash generation.
Against this backdrop, an economic slowdown threatens to severely impact the sector over the months ahead as consumers look to reduce discretionary spending and businesses scale back non-essential travel. Increased fuel prices are also likely to place upward pressure on costs. As well as affecting airlines directly, the entire supply chain, from caterers to ground handling, is likely to see a knock-on impact.
There is a growing focus on consolidation and integration throughout the supply chain, creating economies of scale and improving control over service and quality levels. Sustainability remains a focus, requiring a massive investment in new infrastructure, aeroplanes and fuels in the years ahead.
We were appointed Joint Administrators to most of the Monarch group, which operated as a UK scheduled airline. Our team had a critical role supporting the CAA and Air Travel Trust repatriate over 100,000 customers and reimburse those with ATOL protection. This complex case demonstrated our innovative approach and ability to operate at pace.
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David Pike is Interpath Lead for the Transport & Logistics sector, which includes Civil Aviation as one of four core segments. Mike Pink leads our approach to Civil Aviation nationally for Interpath. For a full list of our senior people with experience in the sector use the button below.Our senior team