By Nadia Batok*
Impact of the 2019-2020 coronavirus pandemic on aviation
Aviation is undoubtedly one of the sectors hit hardest by the outbreak of COVID-19.
After first appearing in Wuhan in China in December 2019, coronavirus has spread to at least 171 countries and territories and, with an increasing number of confirmed cases and deaths, many governments have implemented travel restrictions leading to a decrease in demand for airline services.
It is unusual and sad to see deserted airports and most aircraft grounded, traffic drastically decreased, and more than 90 percent of flights cancelled. It is estimated that the three-month long lockdown of the global air travel market will devastate the aviation industry and related industries such as tourism.
Airline revenues are in free fall as travel restrictions mount and as fear of infection puts people off spending hours with others in enclosed spaces.
According to the International Air Transport Association (IATA), many airlines will face an immediate and critical liquidity challenge in the future due to the COVID-19 pandemic.
The World Travel and Tourism Council has warned that the pandemic could cut 50 million jobs worldwide in the travel and tourism industry and it could take several years for the travel industry to recover. Around 30 million jobs at risk would be in Asia, mostly in China, 7 million in Europe, 5 million in the Americas and the rest on other continents.
With the combination of trip cancellations and country-specific restrictions on international flights costing the global airline industry over 275 billion dollars,
IATA predicts a 4.7 percent contraction in global demand for 2020.
“We could not have foreseen the developments of the last days with massive restrictions on travel being put in place… and with no clear understanding how long they will remain in effect,” IATA Chief Executive Officer Alexander De Juniac said at a press briefing on March 17.
According to global travel data provider OAG, several years of industry growth have been lost and it could take until 2023 before the volume of fliers returns to the levels that had been expected for 2020.
Lucrative transatlantic routes which earned airlines more than 20 billion US dollars in sales last year in the United States have been hit by a 30-day ban on most flights and the initial ban on travellers from the Schengen area has been extended to the United Kingdom and Ireland. 99 percent of international flights between China and the rest of the world have been cancelled since February 2020.
The world’s major carriers have already cut flights by more than 75 percent for April and as more countries impose travel restrictions, most airline may need to thin schedules by 90 percent. Others that serve smallish domestic markets and rely on global interconnections may need to shut down altogether.
Most airlines are cutting flights, many are asking staff to take unpaid leave or retire, and more than 90 percent of the workforce in the aviation industry has been temporarily laid off.
Nearly 13,500 American Airlines pilots and flight attendants have agreed to voluntary leave or early retirement (Dallas Morning News).
Lufthansa, Europe’s biggest carrier, had already cut long-haul flights by 90 percent for April, has immediately retired six Airbus A380s, suspended dividends for 2019 and may sell some aircraft.
Qantas has chosen to ground the Superjumbo ahead of smaller jets, because the 500 seats will be hard to fill at any price.
Delta Airlines has decided to ground half of its active fleet, more than 600 airplanes and is reducing international flights by 70 percent.
The spread of the virus is also hitting the so called “super connector” carriers such as Emirates and Qatar Airways, the growth strategies of which have largely been based on linking cities in the Far East with the Middle East, Africa, Europe and the Americas. Emirates has stopped all passenger flights and offered staff voluntary unpaid leave.
Asia is expected to be the worst affected, with the flight capacity of China having dropped sharply in February 2020 by 71 percent compared with the same period in 2019. The Asia Pacific region will see a loss of about 57 billion US dollars in passenger revenue, with the bulk made up by countries including China, Japan, South Korea and Singapore.
Flight capacity for Hong Kong, which was already seeing its traveller numbers declining due to months-long protests, was down by an immense 81 percent in March 2020 compared with 2019. Cathay Pacific is fighting for survival having seen its business start to decline when the political protests began in Hong Kong, then plummet further as COVID-19 swept through Asia.
Singapore Airlines has slashed 96 percent of capacity and grounded most planes.
Meanwhile, the situation in Europe is not rosy for all carriers. At the top of the list of those considered most vulnerable in this pandemic crisis is Italian carrier Alitalia, the renationalisation of which has been announced by the Italian government. Its flights have dropped 80 percent from their normal rates.
In the midst of restructuring, the future of Norwegian Air Shuttle is uncertain. It has cancelled 85 percent of its flights and laid off 90 percent of staff. The Norwegian government has removed aviation taxes.
Scandinavia’s SAS and KLM have said they would cut jobs in the coming months, while Finnair followed with an announcement that it was reducing its flight capacity by 90 percent starting from April 1.
Budget carrier Ryanair is operating fewer than 20 daily flights, which is 99 percent less than usual and there is speculation about the financial health of Virgin Atlantic.
British Airlines has suspended more than 30,000 staff and had already reached a separate deal with its 4,000 pilots, who will take a 50 percent pay cut over two months. British Airlines and EasyJet have asked the government for wage assistance and loan guarantees.
Many small and weakened airlines will not survive the crisis. Europe has already seen the bankruptcy of British airline Flybe.
Most airlines are cutting capacity and taking emergency measures to reduce costs to stay afloat as they perform the vital task of linking the world’s economies. An entire aviation industry will need government support, ranging from loans to bailouts and even part-nationalisation of airlines
Regulators around the world have temporarily waived rules that require slots to be used at least 80 percent of the time, and to preserve valuable take-off and landing slots at busy airports. Some carriers have been flying ghost flights with no passengers to maintain slots.
As governments are working on plans to provide relief and stimulus payments for the airline industry, they will need to consider relief on taxes, charges and slot allocation.
IATA is seeking state aid for the industry globally, but many carriers will not obtain government bailouts. These include airlines in the China-Asian low-cost carrier sector, such as Hainan Airlines, Asiana Airlines in South Korea, South-East Asian low-cost carriers in Vietnam and Thailand, South African Airways and Eastern European legacy and state-owned carriers such as Croatia Airlines and Romania’s Tarom.
Many carriers are also scaling back expenditure, by deferring the purchase of new aircraft. Aerospace giants Airbus and Boeing have agreed to delay some deliveries.
Aircraft manufacturers will make fewer planes and are rethinking plans for ramping up production of narrow-body airliners. Falling profits will weigh on efforts to invest in new climate friendlier models.
Airbus has reduced working hours on its sites and its French and Spanish sites have suspended production. Boeing has frozen hiring and laid off employees; prior to the pandemic its business had been impacted by the grounding of its 737 MAX planes and it indefinitely suspended production at its factories in South Carolina and Everett in Washington.
On 26 March 2020, Bombardier announced the suspension of most Canadian production in Ontario and Quebec and 75 percent of the workforce was furloughed.
Brazil’s Embraer has reported deferment of orders for its commercial aircraft.
However, parked planes that would otherwise sit gathering dust are now undergoing revamping in order to transport medical cargo. Many airlines have announced an updating of some of their fleet aircraft to increase cargo capacity. Air Canada has already completed modifications on its 777-300 ER, which will be used to transport urgent medical supplies.
The coronavirus pandemic is throwing the fate of the airline companies up in the air and they stand to lose billions in sales, because interest in business travel might dry up once business travellers unable to fly today become accustomed to holding meetings or attending conferences via teleconferencing. Much business in the future will be conducted virtually, and non-essential business travel will be replaced by videoconferencing.
But let us hope that these predictions are not completely correct. Businesspeople prefer to meet in person and will continue to travel. Let us expect pent-up demand for leisure and business travel to rebound, stimulated by new generations seeking new experiences.
In the long-term however, the pandemic could help catalyse investment in new technologies and radically reshape the industry. Despite huge uncertainty in the next decade, the aviation industry should expect traffic to decrease and more investment to go into digital and technological advancements. The current health crisis might spur investments in different segments of robotics and drone technology. These changes will accelerate the forcing of all industries to rethink their ecosystems and shift towards a stronger adoption of new technologies, artificial intelligence and a roll out of 5G which will allow faster connections in all industries.
* Aviation professional and Protocol Officer for International Conferences at the European Center for Peace and Development (ECPD)
Nadia Batok, is a specialist in international congresses