Airline bankruptcies in 2025 | A review of the contributing factors

Diana Vorniceanu, Senior Editor at The Paypers, takes a close look at the airline bankruptcies that shook the travel industry in 2025 and the reasons behind them. 

In almost all instances, airlines rarely go bankrupt due to a single factor. Because of their thin margins and high fixed costs, airlines are very sensitive to external shocks. When an airline deals with drops in revenue or has costs piling on, the resulting debt can further amplify its vulnerability. Furthermore, additional failures can also tip the balance towards insolvency, be they regulatory, legal, or strategic (such is, for instance, the case of failed mergers).  

On top of these factors, geopolitical tensions and the overall global and regional economic strains also come into play. In 2025, the world in general, and airlines in particular, have found themselves having to deal with tensions resulting from new and ongoing armed conflicts, which have drawn up new no-fly zones on the world map stretching over Russia (where a limited number of international flights still have the way of passage), Israel, Iraq, Iran, and Ukraine. 

As the new trade wars are rewriting the long-established economic ties between countries, the sense of economic uncertainty has also affected the airline industry. Even though there is an overall increase in the number of passengers each year, IATA recently cut down its profit forecast for 2025 by 1.6% to USD 36 billion, and cited trade tensions as one of the leading reasons for its decision. 

Last but not least, in 2025, airlines are still struggling with the effects of the COVID-19 pandemic. Before we start to analyse specific cases of airlines that have either gone bankrupt or ceased their operations in 2025, let’s take a closer look at the impact of the pandemic on the airline industry. 

How the COVID-19 pandemic changed the rules of the game

The COVID-19 pandemic has had and still has a profound impact on the airline industry. As restrictions were set in place, the airline industry experienced a never-before-seen reduction in the number of flights worldwide. According to a recent review by the International Civil Aviation Organisation, when compared to 2019 levels, the COVID-19 impact on world scheduled passenger traffic in 2020 said it all: a 50% overall reduction of seats offered by airlines, a 60% (2,703 million passengers) reduction of passengers, and an estimated USD 372 billion loss in gross passenger operating revenues of airlines. The same study reveals similar figures for 2021, and somewhat improved ones for 2022.

As airlines owe most of their profit to revenue made from operating flights, the impact of the COVID-19 pandemic, which abruptly reduced the capacity of their operations, was tremendous. This is especially the case as most airlines did not have the financial resources they could use to deal with the situation. To reduce operating costs, many airlines temporarily grounded or even decommissioned some of their aircraft, while also making part of their staff redundant or placing them on unpaid leave.  As an immediate result, while some airlines like Miami Air International or Flybe ceased operations altogether, others had to rely on investments or government support. In the US alone, in March 2020, the Senate approved a USD 58 billion COVID-19 rescue package for the aviation sector. Similar government aid packages were introduced all around the world, totalling USD 100 billion worldwide. 

According to the UN Tourism’s World Tourism Barometer, at the end of 2024, four years after the start of the pandemic, the tourism industry finally made a full recovery. However, despite this, several airlines still have not found their footing and cite the pandemic as an important factor for their financial struggles. 

Airline bankruptcies in the US

Silver Airways

Silver Airways began operating flights in Florida, the Southwest, and the Bahamas in 2011. On 11 June 2025, the airline announced that it had ceased all operations after its efforts to restructure in bankruptcy were unsuccessful. 

The airline had filed for bankruptcy protection at the end of December 2024, citing its plans to secure new capital and to restructure its finances in an attempt to become more competitive. At the time of the fling, the company had amassed USD 500 million in unpaid debt. Initially, the airline expected to complete the bankruptcy process by the end of Q1 2025. However, as Silver Airways was unable to return to positive cash flow, the case reportedly turned into a liquidation bankruptcy. During its protracted bankruptcy and before its eventual shutdown, the airline had significantly reduced its fleet and its workforce. In the end, Silver Airways reportedly accepted a stalking horse offer of USD 5.77 million after it had failed to secure financing or a buyer. 

In 2018, prior to the pandemic, Silver Airways acquired Seaborne Airlines, a Puerto Rico-based air carrier that serves Puerto Rico, the US Virgin Islands, and other countries in the Caribbean. At the time of the acquisition, Seaborne Airlines had filed for Chapter 11 bankruptcy protection due to financial difficulties related to the 2017 hurricane season. Following Silver Airways’ collapse, Seaborne Airlines asked the bankruptcy court for approval to auction its assets by 1 July to preserve its operations.

Spirit Airlines

Spirit Airlines, once one of the most profitable ultra-low-cost carriers in the US, filed for bankruptcy in late 2024 after failed mergers with JetBlue and Frontier Airlines, substantial net losses, and mounting debt. In March 2025, the airline exited bankruptcy after it equitized USD 795 million in debt and secured a USD 350 million investment. After emerging from Chapter 11, the ultra-low-cost carrier announced its plans to rebrand as a premium airline and target more affluent travellers.  

Airline bankruptcies in Europe

Air Belgium

Charter and cargo carrier Air Belgium, which linked Belgium to Asia, was officially declared bankrupt in April 2025. The airline struggled with financial losses following the drop in business with China after the start of the pandemic. Since October 2023, the airline had cancelled all its passenger flights and scaled down its fleet and workforce. According to reports, French logistics company CMA CGM will take over Air Belgium’s cargo business, while the remaining company will be shut down and liquidated. 

One important aspect of Air Belgium’s bankruptcy concerns the problem of unrefunded tickets, which have made their way into the authority of the receiver, and not the airline itself. The situation prompted a response from the European Travel Agents’ and Tour Operators’ Association (ECTAA), which issued a statement demanding that European regulators set up better airline insolvency protections to prevent this from being a recurrent issue. According to ECTAA, Air Belgium’s bankruptcy left USD 9 million in unpaid passenger refunds, USD 5.6 million of which were sold via travel and tour operators, who had to shoulder the loss. 

The situation in Russia

It is reported that over 30 Russian airlines may go bankrupt in 2025 due to the effects of Western sanctions following Russia’s invasion of Ukraine. Airlines in Russia have been affected by flying bans, mounting debt, sanctions, as well as a drop in customers. The 30 airlines at risk of bankruptcy reportedly cover 26% of Russia’s domestic traffic, and their bankruptcies might lead to the cancellation of 400 domestic routes. 

Airline bankruptcies in LATAM

Azul Linhas Aéreas Brasileiras

After several failed out-of-court restructuring efforts, Brazil-based Azul filed for Chapter 11 bankruptcy protection in the US Bankruptcy Court for the Southern District of New York in May 2025. In terms of departures and cities served, Azul is the biggest airline in Brazil. Founded in 2008 by the founder of JetBlue, the airline operates 300 direct routes, has a fleet of 226 aircraft, and has more than 16,000 crewmembers. The airline also has a loyalty programme, as well as logistics and travel package businesses. 

During the pandemic, Azul took several steps to minimise its operating costs, from reducing the number of its flights to suspending its plans to acquire new aircraft. According to industry reports, by March 2020, the company had cut down 90% of its capacity and kept the equivalent of half a billion dollars in cash and equivalents. However, the airline faced several challenges stemming from the pandemic. The company leveraged private debts and equity markets to address its losses. As such, Azul raised capital and restructured its debt.

As per the Chapter 11 filing, Azul is heavily leveraged, with USD 4.541 billion in assets and USD 9.575 billion in debt. According to the official press release, during the restructuring, Azul has secured USD 1,6 billion in DIP financing and has already lined up restructuring support agreements from various bondholders, AerCap, and other partners. The company reportedly also has secured an exit financing of up to USD 950 million after its restructuring and has committed to eliminating over USD 2 billion in debt. Azul reportedly aims to exit Chapter 11 in early 2026. 

Voepass shuts down

Azul’s struggle is not unprecedented in LATAM, with several other airline bankruptcies making headlines. In April 2024,  Voepass, a Brazilian privately held airline, filed for bankruptcy and claimed a USD 36.78 million debt. The company cited LATAM Airlines, with whom it has a capacity purchase agreement (CPA), as a reason for the filing. According to Voepass, following its August 2024 fatal crash that killed all 62 on board, LATAM Airlines began suspending operations as part of the agreement, leading to a decline in revenue.  

On 24 June 2025, Brazil’s National Civil Aviation Agency (ANAC) permanently revoked the airline’s Air Operator Certificate (AOC), causing it to shut down and leaving doubts as to Voepass’ ability to successfully recover from the bankruptcy. 

GOL exits bankruptcy

In June 2025, GOL, another Brazilian airline, exited Chapter 11 after it secured USD 1.9 billion and reduced its debt after restructuring efforts. The airline had filed for bankruptcy in January 2024 after accruing debt and the financial pressure brought on by the pandemic. 

Conclusions

Looking at the reasons behind the airline bankruptcy cases discussed above, we can draw a series of conclusions regarding the airline industry’s current situation and the factors that push airlines towards instability and the need to restructure or, in some cases, shut down operations. 

With several of the airlines that filed for bankruptcy citing COVID-19-related financial issues as part of the causes for their filings, the long-term, systemic impact of the pandemic on the industry is evident. During the pandemic, many airlines took on debt to stay afloat and are still working to repay it. Moreover, many carriers only survived the pandemic because of the bailouts and government support, leaving them to currently deal with a delayed reckoning. 

The US market

In the US market, the collapse of Silver Airways reflects the vulnerability of small regional carriers and the discrepancy between small and mid-size and larger players. In the case of Silver Airways, once it filed for bankruptcy, the airline had less room for error, and the failure to get the necessary investors on board led to its closure. By comparison, a larger airline like Spirit Airlines was able to leverage its bankruptcy filing strategically, restructure its finances, and reposition itself. One point to note is that post-bankruptcy Spirit decided to move away from its ultra-low-cost carrier status and cater to more affluent travellers, indicating that the ultra-low-cost carrier business model in the US is maturing and facing limits.

The European market

In Europe, Air Belgium’s collapse is a reflection of the impact the pandemic still has on the industry, but also the direct result of the company's unsustainable business model and lack of scale. We asked Christian Möller, Director Transport and Distribution at ECTAA, to weigh in on the complications surrounding unrefunded tickets after the airline’s bankruptcy: ‘The vulnerability of airlines – and the travel industry as a whole – to crises is nothing new, and it has always been necessary to adapt in the best possible way. However, while some areas of the travel industry are fully protected, such as package tours and their providers, other areas, in particular airlines and airline tickets, are largely left unprotected. This not only means that a very large proportion of customers are unprotected if an airline goes out of business, but it also leads to a blatant distortion of competition. In such cases, package tour operators, 98% small and medium-sized enterprises, have to pay for the damage. Not only do they have to cope with the loss of the original flight ticket within a package tour, but they also usually have to organise new flights for their customers on short notice and at a very high cost. 

This unequal treatment is unacceptable, especially as flight tickets often have to be paid for in full months in advance. Denmark, where a fund for flight tickets has existed for many years, shows that there is another way. Airlines currently pay just under 30 cents into this fund for every flight ticket from Denmark, which ensures reimbursement and repatriation in the event of insolvency. ECTAA has been campaigning for decades for mandatory default protection for airlines throughout the EU’.

While Air Belgium’s bankruptcy and collapse underscore the vulnerability of small airlines and the impact such an occurrence has on customers and tour operators, Russia’s airline bankruptcies reflect the growing impact of geopolitical risks, as airlines are crippled by international sanctions and isolation, showcasing how geopolitics can destabilise a nation’s aviation market.

The situation in LATAM

We reached out to Livia Vité, the Chief Executive Officer at actuary.aero, to understand more about the situation in LATAM. As she explains: ‘Airline profitability is inherently fragile, influenced by a mix of fuel prices, currency exposure, geopolitical shifts, and competitive pressure amongst others. Often, it takes just one of these factors to tip the balance – especially given the tightrope airlines walk between investment returns and liquidity. While fuel has long been a leading driver of distress, government support during and after COVID-19 appears to have limited such cases in recent years. On the other hand, we’ve seen the impact of other vulnerabilities as a result. Brazil is a notable example: carriers manage costs and debt in USD, earn revenue in a fluctuating local currency, and operate in a competitive and evolving market environment. When multiple stressors converge, the financial strain escalates rapidly. That’s why optimising money flows across the travel payments ecosystem is no longer optional – it’s essential to building resilience and improving the long-term viability of airlines’.

The cases of GOL, Azul, and Voepass show that LATAM’s airline industry is facing significant weaknesses in 2025, ranging from currency volatility to surging debt. The fact that Azul and GOL, some of the biggest airlines in LATAM, have had to file for bankruptcy protection shows us that even big carriers are operating on thin margins and are dealing with high debt and volatility.

This article is part of The Paypers’ Travel Series, which includes contributions on topics spanning emerging trends in travel payments, fraud and security challenges, regulatory and tax impacts, risk management and forex, as well as sustainability in the travel industry. For a complete overview of all the contributions featured, click here. 

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