Airlines have felt the pain ofcoronavirus pandemic more than other companies. Almost overnight, most of their activities ceased. But by mid-2020, there was at least hope that Covid-19 was not as virulent as it had been thought; that warmer months would bring some respite; that travel lanes – deals allowing passengers to fly between two countries without quarantine – could get people back into the air.
Now, almost eight months after the start of the pandemic, with citiesreinstate lockdown and probable vaccinein a few months, it is obvious that there will be no quick turnaround. International air traffic in July was 92% lower than 2019 levels and there were little signs of improvement in August, according to theInternational Air Transport Association (IATA). More than 400,000 airline jobs have been cut since February, according to data compiled by Bloomberg. “It lasts longer and is deeper than most people thought,” says Scott Kirby, CEO ofUnited Airlines Holdings Inc. “And our opinion is that the demand is not coming back. People will not come back and travel as before until there is a vaccine widely distributed.
British Airways CEO Alex Cruz says the airline is “fighting for its survival”.Cathay Pacific Airways Ltd. stated thatrestructure or die. AndSingapore Airlines Ltd. boss Goh Choon Phong called the move to cut 4,300 jobs – about 20% of his workforce – “the hardest and most agonizing” he has had to make in 30 years with the company.
U.S. airlines are set to lay off thousands more workers when the Coronavirus Aid, Relief, and Economic Security Act, or Cares Act,expires October 1. United Airlines is burning $ 25 million a day, and “you can’t go on and on about it forever,” Kirby says.
In Europe, a resumption in air traffic in July and August, as vacationers sought to escape lockdowns lasting several months, was abruptly reversed.virus outbreaks are rushing people home before borders close and new quarantine restrictions come into effect. Carsten Spohr, CEO ofDeutsche Lufthansa AG is bracing for further job and fleet cuts, saying it will “take a marathon to get through the crisis, not a sprint”. Europe’s largest airline, which accepted a € 9 billion ($ 10.5 billion) German notebailout in early June, do not expect a full recovery in traffic until the middle of the decade.
According to IATA, 25 million jobs are at risk in airlines and associated businesses such as travel and tourism. This is more than the 22 million that the International Labor Organization estimates were lost around the world as a result of the 2008 financial crisis.
Further staff cuts are to come.American Airlines Group Inc. plans tolay off 19,000 workers on Oct. 1 following the expiration of job guarantees tied to $ 25 billion in federal payroll assistance under the Cares Act. United Airlines is expected to cut at least 13,000 jobs.Delta Air Lines Inc. is trying to avoid large-scale layoffs until next summer now that thousands of employees haveleft voluntarily or took unpaid leave.
Losses in the Asia-Pacific region, meanwhile, appear to beimplausibly small, says researcher Five Aero. This would indicate that Asia may be on the cusp of a torrent of cuts. Cathay is working on a restructuring expected to be announced in the fourth quarter, and analysts at Jefferies Hong Kong Ltd. said more airline downsizing was inevitable.
Government assistance has helped, but there may not be much more. European carriers alone received € 29 billion in aid, state-guaranteed loans and other forms of support until August 27, excluding paid holidays, with € 3.4 billion additional euros in the pipeline, according to the European airline bailout from Greenpeace.tracker. Airlines in India, until recently the worldThe fastest growing aviation market is asking for at least $ 1.5 billion in interest-free government credit lines, Civil Aviation Minister Hardeep Singh Puri said on September 17.
With the fall in airline stock prices, it is increasingly difficult to attract new investment.Warren Buffett completelyhas left its holdings in the four major US airlines, and the carriers that are for sale have found no buyers. MalaysiaAirAsia Group Bhd., Once the leader of a low-cost revolution in Asia, canborrow up to 2.5 billion ringgit ($ 605 million), andThai Airways International Pcl, which has approximately $ 11 billion in debt, recently obtained court approval for a restructuring.Richard BransonVirgin Atlantic Airways Ltd. suffers a 1.2 billion pound ($ 1.5 billion) bailout built around aloan from a hedge fund. The pandemic pushes the airlineVirgin Australia in the hands of private equity in aagreement approved in September.
In the United States, Delta was able to raise $ 9 billion in the sectorbiggest debt sale ever, offering yields as high as 4.5% to attract investors. Delta’s obligations are backed by its loyalty program, and it’s a part of airline operations that retains its value. American Airlines’ frequent flyer program is worth up to $ 30 billion, and United Airlines sold $ 6.8 billion in debt in June, backed by its program.
The aircraft are in acrisis of their own. One-third of the 26,000 passenger jets worldwide remain grounded, parked in the desert or lined up in rows along the tarmac, aviation data provider Cirium said. Those in the sky are only half full, according to IATA.Fleet reductions weigh on aircraft manufacturers.Airbus received only one order in August andBoeing is fighting to prevent cancellations of its 737 Max, which was grounded after two fatal crashes. Airlines are also looking to defer previously ordered planes. “An aircraft manufacturer must oblige his customer in difficult times”,Qatar Airways CEO Akbar Al Baker said on September 2. “People who don’t oblige us and stand by our side at this precise moment will not see us again.”
Business trips cannever recover, as businessmen around the world realize they can close deals and get the job done with Zoom and even from home. Leisure travel is expected to return once there is an effective vaccine, but tourists will likely be more careful. Walks in remote places where medical help is far away may have less appeal.
Wizz Air Holdings Plc has relaunched its services more aggressively than any other European carrier, but has sinceslowed down, freezing capacity plans for the fourth quarter at current levels.Norwegian Air Shuttle ASA has ditched its signature model of low cost transatlantic flights until at least next year – if it cansurvive the winter.
Others introduce new destinations. United isadding non-stop flights to places such as Lagos in Nigeria and Bangalore in India to serve large diasporas living in US cities. Traffic from trips to see family and friends is resisting the pandemic better than other segments, says Patrick Quayle, United’s vice president for international network and alliances.
After cutting down on planes, pilots and crew, airlines are moving into ground services such as baggage handling as well as fixed costs such as ownership, cleaning and electricity.Qantas has said it may move its headquarters from Sydney to another city as part of an Australia-wide property review. He’s already trying to sublet 25,000 square meters (269,000 square feet) of real estate. – With Christopher Jasper and Justin Bachman
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