Bloomberg Businessweek August 10, 2020 pp10-12 Business “The Aborted. Airline Takeoff”. “Early signs of recovery by Covid Flareups during prime travel season”
A month ago lockdowns were easing and airlines were adding flights. Shortly thereafter airlines reversed that trend as Covid starting reemerging in Asia. All airlines now are wondering how long until a return to normal and whether or not they will survive financially.
IATA, the International Air Transport Association, predicts that the 2019 volume won’t be met again until 2024. Passenger volume is lower for leisure travel and for the all-important business travel as companies and large conferences have moved to virtual meetings.
Understandably, Public Health agencies are calling-the-shots but this makes even the short-term unpredicatable. Airlines consequently are left reacting on quick notice and having to suddenly adjust flight schedules accordingly.
Such changes can be especially devastating to small regional airlines and targeted charter operations. The larger players will sustain heavy losses but are thought unlikely to fail. United Airlines reportedly will lose $100M or three-fold more than resulted from the 2007-2009 financial crisis. All told, airlines will lose $100B this year and next. 34 carriers have failed so far with many more expected. Failing Airlines totaled 27 last year and 63 in 2008.
So far, government support for companies and staff have helped compensate for the loss of revenue. Such support could end. Direct costs-aircraft operations, fuel and staff are reduced by suspending flights. In contrast, fixed costs including leases etc. are not readily cut. There is some leaning out as older and excess aircraft are retired-1,000 so far with another 4,000 to follow by end of 2021.
Many are worried about “a new wave of infections over the Northern winter, coinciding with the seasonal slump in revenue…”. The likelihood for default in the next five years is 100% for American Airlines, 59% for United and 47% for Delta. “If a coronavirus vaccine isn’t found soon to calm travelers, that dire forecast [losing $100B] may need to be even higher.”