A second summer lost to the coronavirus crisis would likely trigger a spate of airline failures and bankruptcy filings, alongside a repeat of 2020’s bailouts, job cuts, and jetliner deferrals and cancellations, according consultants IBA Group.

In just the past week, the optimism that took the Bloomberg World Airlines Index to the highest since the start of the pandemic has evaporated.

TUI AG, the world’s biggest tour operator, scaled back its summer schedule to reflect a peak season that won’t start until July, at least two months later than normal. Ryanair Holdings Plc held a press briefing to reassure would-be holidaymakers they could change flights for free and exhorted them not to be “panicked” by negative headlines.

“The ground is shifting from one day to the next,” IBA’s Stuart Hatcher said in an interview. Governments are aware that pushing back the reopening of travel will mean more pain for the aviation industry but have been spooked by resurgent infection rates even as vaccine rollouts continue, he said.

European carriers especially have felt the gloom that’s set in because of rising cases and fresh lockdowns. Leisure-focused companies such as TUI and Ryanair usually use the first three months of the year taking summer bookings, giving them a cash stockpile to work with as they gear up operations.

Any wiggle room is swiftly contracting. TUI, which caters to German and British travelers who flood to the Mediterranean during the warmer months, said Thursday it has enough liquidity to last “until the summer,” without being more specific. British Airways owner IAG SA secured a new loan using its coveted takeoff and landing slots at London Heathrow airport as collateral.

July or Bust

Travel needs to restart in earnest by July 1 or carriers risk missing out on the handful of months that will provide the bulk of annual earnings, Air France-KLM Chief Executive Officer Ben Smith said Thursday.

“What’s critical about July is that Q3, for the majority of European carriers, is the key quarter to make it through the year,” Smith said in a briefing held by the Airlines for Europe lobby. The group is pushing for the rapid adoption of so-called vaccine passports and an end to quarantines it says crush demand.

While 45 airlines failed in 2020, many more have been hanging on in hopes of an imminent revival of leisure markets, Hatcher said. That’s looking less likely as the year develops, with Airports Council International on Thursday forecasting global passenger traffic will remain almost 50% below usual levels this year.

While most carriers could survive a delayed summer, the cost to bail them out would be considerable. Even before the latest setbacks, the International Air Transport Association said carriers would need as much as $80 billion more in government money this year.

More Bailouts

In Europe, Air France-KLM is seeking further aid on top of 10.4 billion euros ($12 billion) in loans and guarantees granted last year. TUI, which has taken 4.8 billion euros in German government aid, gave no financial forecast at its annual meeting on Thursday, promising only that cash flow will trend toward breakeven as business normalizes.

The airport sector will also need state support, the ACI group said, warning that even large hubs are struggling. The industry is “in a precarious situation right now,” the trade association’s economist Patrick Lucas said.

Discount carriers such as Ryanair, EasyJet Plc and Wizz Air Holdings Plc have strong liquidity positions and easy options for boosting reserves through aircraft sale-and-leaseback deals if necessary.

There could also be an extension of $50 billion of Cares Act loans and worker payments in the U.S. and a similar continuation of furloughs in Europe and elsewhere. Even then, airlines may need to deepen cost cuts.

More carriers are likely to pursue local bankruptcy protection where that’s possible, following companies like Norwegian Air Shuttle ASA and Virgin Atlantic Airways Ltd.

Major Latin American carriers including Latam Airlines Group SA, Avianca Holdings SA and Grupo Aeromexico SAB that secured U.S. Chapter 11 protection for their main businesses in the absence of state bailouts at home are likely to seek extensions if cash flows fail to revive, Hatcher said.

Bloated Orders

IBA anticipates moves to rationalize supply in Asia, where aircraft order books remain bloated, especially in Southeast Asia and India, and airline failures have been limited. Mergers like that between Korean Air Lines Co.’s and national rival Asiana Airlines Inc. may become more common.

A cash crunch will have further implications for airline fleet plans, prompting the retirement of more older planes and extended deferrals of new deliveries. Outright order cancellations would become more likely at Airbus SE and Boeing Co.

China Aircraft Leasing Group Holdings Ltd. this week reduced an order for Boeing’s 737 Max model to 66 planes from 92, and will push out the delivery schedule for some of the remaining aircraft. Airbus lost 92 plane orders last month, mostly from insolvent Norwegian Air.

While the number of airline failures last year was comparable with recent peaks in 2019 and 2011, aircraft exits hit an all-time high. Some 1,500 planes were retired early by reasonably healthy airlines, while operators in bankruptcy or full collapse added 800 to the total, according to IBA. All told, aircraft exits are likely to approach 3,000 since the start of the pandemic.

Airlines and travel firms are now waiting for U.K. Prime Minister Boris Johnson to deliver his verdict on reopening travel from Britain in an update set for April 5. A targeted date of May 17 is expected to be pushed back.

“The market is there, the customers want to travel,” said Fritz Joussen, TUI’s CEO. “However, the conditions for tourism need to be created at the political level.”