The COVID-19 coronavirus outbreak could drive most of the world's airlines into bankruptcy by the end of May, according to a new report out Monday by Australian consulting firm CAPA-Centre for Aviation.

Airlines are cutting flights and freezing capex to try to deal with a plunge in travel demand due to the novel coronavirus outbreak and actions by world governments to try to limit international flights. CAPA in a report said that as a result many airlines are likely substantially in breach of debt covenants already, and cash reserves are running down quickly.

"Coordinated government and industry action is needed-now-if catastrophe is to be avoided," CAPA wrote in its report.

Security screeners at the airport with no passengers around.

Image source: Getty Images.

The consultancy said that the U.S. decision to limit travel from Europe in particular will have a significant impact on airlines on both sides of the Atlantic.

"The US government's decision to initiate a travel ban covering the Schengen Area of Europe is essentially rubbing salt into the wounds the country's airlines are suffering as the COVID-19 coronavirus has reached pandemic status, and that decision significantly raises the levels of uncertainty about when a recovery in demand will occur," the report said.

While the situation is bad in the U.S., it is worth noting that all of the major U.S. airlines have cash on hand and each has more than $10 billion in unencumbered assets like aircraft that could be used as loan collateral, or in a pinch, monetized via a sale.

Of all the U.S. publicly trade carriers JetBlue Airways (JBLU -1.24%) appears the most vulnerable, but even it has some runway. And the U.S. government has said it is preparing to act to try to prop up the industry.

The situation is grim, but I still believe the U.S. airlines can weather the storm without bankruptcies.