Airlines wary of the second wave of coronavirus
Rafiq Jan
Since the beginning of the year 2020 and the eruption of Covid-19, aviation is one of the important industries hit hard by the pandemic. Airlines still struggling to cope with the mounting losses are confronting a litany of problems. The journey to recovery has begun at a slow but cautious pace. Still, given the situation of continuing contractions of the virus, the future of the travel industry looks far from certain.
Accumulated and expected losses
The International Air Travel Association IATA sounded pessimism about the reverting of the air travel industry to pre-COVID-19 level before 2024. And it could be even dire than what is foreseeable now.
IATA predicted nearly $420 billion in lost revenue and almost $84 billion in other losses. Reportedly the major airlines of the world are cumulatively incurring nearly $14 billion each month.
An estimate on the world’s 20 top long-haul airlines revealed every grounded long-haul plane is burning $1 million per month due to its leasing payments, crew cost, and the impairment cost (essential maintenance on grounded planes)
Qatar Airways CEO Mr. Al Baker expressed his concerns in his latest candid interview. His despondence about bleak chances of recovery in the next few years is alarming for the industry already beset with billions of dollars in liabilities.
Qatar Airways received $2 billion recently as the state aid to cover the losses, but the business recovery and a turnaround is still a far cry from the pre-corona period.
The Impact of Debt
IATA CEO and Director General, Alexander de Junaic expressed his concerns in these words:
“The kind of aid provided will influence the speed and strength of the recovery. IATA urged governments still contemplating financial relief to focus on measures that help airlines raise equity financing.
“Many airlines are still in desperate need of a financial lifeline. For those governments that have not yet acted, the message is that helping airlines raise equity levels with a focus on grants and subsidies will place them in a stronger position for the recovery,” de Juniac said.
“A tough future is ahead of us. Containing COVID-19 and surviving the financial shock is just the first hurdle. Post-pandemic control measures will make operations more costly. Fixed costs will have to be spread over fewer travelers. And investments will be needed to meet our environmental targets. On top of all that, airlines will need to repay massively increased debts arising from financial relief. After surviving the crisis, recovering to financial health will be the next challenge for many airlines,” he added.
Continuing job cuts, a bad omen
Meanwhile, the cost-cutting drives continue with no let-up. Emirates Airlines of Dubai declared its employees as redundant as a continuation of its 30 percent reduction of headcounts envisaged months ago.
On October 1, American Airlines, Delta Airlines, and United airlines finally started laying off and furloughing their staff in thousands, following failed talks with the government for stimulus — a promise that never materialized.
American airline alone decided to send 25,000 furloughs following the failed negotiations with governments at the end of September deadline.
Singapore airline group announced it would cut jobs of almost 2,400 employees, as part of early retirements, layoffs, and mutual hand-shake schemes.
European planemaker Airbus Industry announced it would cut jobs of at least 15,000 staff to survive the shock of the slump in business.
Qantas CEO, the renowned Australian airline, announced they are mulling over cutting jobs of at least 6,000 workers across the board to survive the storm of the pandemic.
Mergers of giants — the only silver lining
So far, many premium airlines like Qatar, Emirates, and Etihad with unparalleled and unconditional support from their states managed to keep a portion of their fleet operations. Using long haul Boeing 777s as Belly-hold cargo transportation offered some breathing space in the thick of the pandemic afflictions. But given the operational cost per flight, including the leasing loan repayments per airplane they might have just ended up in breaking even. However, Qatar Airways played a leading role in offering most of the international Repatriation flights from the beginning of coronavirus and the shutdown of the border. Some others in the region followed suit, but due to its variety of planes, Qatar Airways found an edge over the rest in the area.
A merger of giants seems to be inevitable and will be the only way of survival to stay airborne. Overwhelming debts at present will only multiply with the passage of each day without concrete action. It will be a tradeoff worth doing as they all can now read the writing on the wall.
Ultimate walk on the tightrope
As the impact of COVID-19 starts diminishing towards the end of 2020, the industry hopes to see a marked increase in traveling as compared to the present level.
Once the marked signs of fall in infections start showing worldwide, the airlines will be scrambling to jumpstart their operation abandoned for almost a year.
Once the international borders open, governments will try to ensure the recommendations are in place and implemented for safe traveling. Once restrictions ease, the world would like to travel and need the airlines to rise to the challenges of passenger’s safety. Simultaneously the resumptions of traveling will mean the revival of airline business because the governments will want them to recover fast for the economic recovery of their states.
Courtesy: Bloomberg, CNBC, Aero time news
