COVID-19 pandemic and aviation industry
The greatest effect of the COVID-19 pandemic will be felt in Europe, Asia, North America, and the Middle East, respectively. The trend of impact is increasing gradually across the globe. The estimates of the Italian scheduled international air travel compared to the baseline plan shows a decrease in 36-42 million travelers. Also, there would be a total loss of 4.3-5.1 billion dollars in total revenues. For example, in February 2020, a decline of 8% was experienced in the number of passengers. In March 2020, the volume of passengers reduced by 33% across the globe. However, the impact of COVID-19 on international flights was measured based on baseline reports, quick recovery, and prolonged infection.
Most of the Carriers across the globe are undertaking the three paths. However, the outcome of the impact will depend on the degree of the outbreak, the economic status, support from the government, and measures taken to contain the virus. IATA analyses both the international and domestic markets while ICAO analyses only the international traffic market. Due to the severity of the restrictions, IATA reports that the airline industry would experience a total loss of 252 billion dollars less than the total revenue of 2019. In the latest analysis by IATA of up to a loss of 113 billion dollars was experienced on March 20th.
Many airlines in Europe are seeking government support for are 7.5 billion dollars to pull through the next several months. Carsten, Chairman of Lufthansa, argues that if the novel coronavirus crisis continues, it may not survive without the financial support from the government. Air France halted a total of 3600 flights in the month of March.
Nevertheless, The biggest airlines in the US and Europe are taking measures to face the novel coronavirus crisis. The A4A carriers claim that the economic environment they are facing is not accommodating. They seek a bailout of 58 billion dollars from the US Congress. The US Treasury secretary claims that the novel coronavirus is worse than the 9/11 terrorist attack, and it may bring most of the airline companies down. He said that there are plans to provide relief to the US airline.
Just like the president’s promise to help the airline industry, the plans by the US Treasury are only vague and unpredictable. The Delta airlines were expecting a grounding of about 600 airplanes by the end of March. This would result in a loss of 2 billion-dollar revenues. The board of Directors of the Delta airlines cut off their salaries for the following six months. However, their conversation with Congress gave them a positive hope for support through the crisis. However, their first priority was saving money for the financial upkeep through the time of difficulty. According to JPMorgan analysts, on 16th March, United and Delta had at least $20 billion in the form of real estate and planes. These assets could be used to raise the finances required by these airlines. On the other hand, the American had assets worth $10 billion that could be converted to cash if need be. Moreover, these seven US carriers have the advantage of using the forthcoming benefit point credits in their operations as collateral for more substantial loans from their partner banks. Cash burns are still a challenge that still requires attention, but the chances leading to cash deficit in the following several moths are minimal.
On the contrary, the American airlines have no plan plans of grounding any of their airplanes but to reduce the flights. It has stopped the flights to the Asian/Pacific region altogether. According to the report from Parker, the American airlines will lead the way in sustaining the novel coronavirus impact on the industry. Also, the crisis is a test on the industry if they can withstand the upheaval; the Americans will definitely pass the test. United Airlines was expecting a total loss of 1.5 billion dollars in the month of March. In their message to the worker, all the salaries would be cut off, and 50% of the corporate officer’s salaries would be cut off by 50%. On the same note, 50% of the passenger capacity would be reduced in April and May. The international flights would be cut off by 85%. The only flights would be between New York, London, and Melbourne, among the few.