Will international airlines ever fully recover?

Will international airlines ever fully recover?
Source: AFP via Getty Images

Flights and passenger numbers plummeted from February and March of this year as governments around the world adopted drastic measures to curtail the spread of the novel coronavirus within their own borders.

International flights, perceived as a potent vector of the coronavirus, suffered immensely as they were forced to deal with border closures and mass cancellations by cautious travelers, which ultimately saw a majority of the world’s passenger airlines grounding their fleets and laying off thousands of workers.

But with some economies around the world taking tentative steps toward a full reopening, albeit with new coronavirus provisions in place, the airline industry may be able to begin making a recovery under this “new normal,” providing the risks of flying during a pandemic can be minimized and passengers can be convinced to return in large numbers.

Yet the uncertainty driven by the present lack of any vaccine and the fact that the virus is still surging in some parts of the world and declining in others, may not provide the solid footing the industry needs to begin staging a recovery.

For now, with the future of COVID-19 still uncertain, more pain may yet arrive for the ailing international airline industry.

The COVID collapse

The first coronavirus death outside of China was reported in the Philippines on February 2, virus deaths were reported in Europe (February 14) and the United States (February 29) soon after.

By the end of February, numerous countries outside of China had emerged as virus hot spots, including Italy.

In response, international airlines faced mass cancellations by passengers, with airlines themselves reducing services in the wake of growing cases around the world. By February 24, international flight frequency had already declined by around 10% on a year-on-year basis, with US flight frequency having yet to suffer any drop off in activity, as cases remained relatively low.

This situation would change rapidly. By the end of March, the US was the first country to report more than 100,000 coronavirus cases, as the situation in the country rapidly grew out of control in certain regional hot spots.

In March, the Trump administration announced a 30-day ban for travelers from most European countries. The announcement sent airline stocks tumbling, with United Airlines and Delta stocks both collapsing by 20%.

Already, the situation for the airline industry was reaching an unprecedented point, with the President of United Airlines, Scott Kirby, stating in March that the “financial impact of our dire scenario is worse than the post-9/11 decline in demand.”

In April, for the first time since its formation following the September 11 terrorist attacks in the US, the TSA screened fewer than 100,000 travelers, pilots, flight attendants and other workers at its checkpoints throughout American airports.

As a result of the pandemic, airports across the world were pictured empty and lifeless as the industry faced its worst-ever collapse in demand.

United Airlines Chief Executive Oscar Munoz, discussing the first quarter results for the company, called COVID-19 the “most disruptive crisis in the history of aviation,” with United having lost around US$1.7 billion over the first three months of the year.

For workers in the industry, the crisis has certainly been disruptive. According to the US Bureau of Labor Statistics, employment in the air transportation industry suffered a steep decline from 512,000 US workers in March 2020 to a low of 378,000 in June at the height of the virus’ spread.

The Association of Flight Attendants-CWA, the American union representing about 50,000 workers, has reported that some 1,000 flight attendants in the US have tested positive for the coronavirus.

Guillaume Faury, Airbus chief executive, believed the airline industry was “in the midst of the gravest crisis” it had ever faced and believed it could be “three to five years” before passengers were once again willing to fly like they had before the outbreak of the pandemic.

Limited recovery

Although scheduled flights in international airports around the world declined by nearly 70% by July 2020 (compared with July 2019), small shoots of recovery are starting to be seen as some areas of the world have successfully contained the coronavirus and reduced case numbers.

Some areas of the world have already begun to trial new post-COVID international travel arrangements. In the United Kingdom, international travel from July 10 onward became more possible as trips could be made to certain countries via “air bridges” as long as case numbers remained low in that destination.

If case numbers grew to an unacceptable level, travelers from that destination could then be put under quarantine. This would allow air travel to continue but would remove the heightened risk of bringing the virus back from international hot spots.

Likewise, with new stipulations to air travel imposed, such as the wearing of face masks and limiting “high-touch” areas on an aircraft, flight frequency both globally and from the US has begun to slowly tick upward.

Uncertain future

The International Air Transport Association, a trade group representing around 300 airlines, has said that the industry is “only at the very beginning of a long and difficult recovery” and that there remains a “tremendous uncertainty about what impact a resurgence of new COVID-19 cases in key markets could have.”

This uncertainty may prevent a full recovery from coming anytime soon.

According to Mark Manduca, an aviation analyst at Citi, under the “new normal” airlines will regularly face “going from zero to 70 per cent capacity in the blink of an eye then having to ramp back down” when some destinations experience a spike in COVID-cases and certain scheduled destinations are canceled.

That airlines can no longer adequately predict and forecast their operations, at least until a vaccine has been produced and the issue of cases is irrelevant, has knock-on effects for the thousands of workers in the industry.

With the end of payroll support for workers in the industry and no new stimulus seemingly forthcoming, major airlines in the US have warned of thousands of redundancies to their workforces as the industry struggles with low demand and low revenues.

United Airlines has previously said it would lay off half of its US workforce – about 36,000 workers – as a result of the financial impact of the pandemic on the company’s accounts.

This would be in addition to the thousands of voluntary redundancies, reduced work hours and leaves of absences already adopted by major airlines. American Airlines has stated that 41,000 of its team members have already accepted early retirement or reduced working hours, with 60% of JetBlue’s workforce – 20,000 workers – having also taken voluntary leave to reduce the furlough burden.

It may take years to convince passengers to return in significant numbers, with perhaps the best way to achieve this recovery residing in a widely-accessible and effective vaccine for the virus.

Even then, the financial impact the pandemic has had on the industry will not go away. With tens of thousands of redundancies planned in the US alone, when it does eventually recover, the airline industry may be much smaller than it was before the outbreak.

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