Travel restrictions imposed due to the coronavirus caused airlines to respond to the unprecedented impact from the pandemic by reducing capacity by 50, 60 even 90 percent in some cases and securely parking hundreds of aircraft at numerous locations around the world. Capacity was cut dramatically by all airlines around the globe, some suspending service altogether. And hits just keep on coming, changing daily, hourly.
American Airlines cut 55,000 flights from its April schedule and could make further cuts into May. In a letter to employees, American Airlines president, Robert Isom said, “In recent days, we have seen unprecedented declines in future bookings and customer demand. This is a crisis unlike any we’ve faced in the past…We are in the fight of our lives.”
Southwest Airlines CEO Gary Kelly put out a video to employees telling them that he would keep them informed but that it was uncertain how long the recovery from the impact would be and adding it was likely “far worse than 9/11 was.”
Delta Air Lines stock lost the cap in its feather as its status from S&P Global Ratings was cut to junk. “The steep decline in airline bookings due to the coronavirus outbreak will sharply reduce Delta Air Lines Inc.’s revenue and cash flow,” S&P said in a statement.
Investor’s Business Daily reports rallies for airline stocks as the $2.2 trillion economic stimulus package was approved. The bill will give $25 billion to U. S. airlines to allow continued payroll obligations to be met, but predictions of hundreds of thousands being laid off is hanging in the balance of what happens next.
Numerous trade groups are calling this the industry’s worst crisis ever. “Global carriers may lose $252 billion in sales this year,” according to International Air Transport Association (IATA).
With each passing day, the health of the airlines weakens. Some analysts say that if the travel restrictions are loosened by May, airlines should have the strength to weather the storm. If the restrictions extend much beyond the summer, more government interventions will be necessary to keep employees on.
The situation is changing so rapidly that IATA’s director general and CEO, Alexandre De Juniac, upped his initial early March prediction “that industry revenues could take a hit of up to $113 billion as a result of what we thought then would be a worst-case scenario,” to “$252 billion loss of passenger revenue — 44 percent down on 2019,” by March 24. “Time is of the essence. Governments cannot take a wait-and-see approach. We have seen how dramatically the situation has deteriorated globally in a very short time. They must act now and decisively,” De Juniac went on to say. “Some of you may wonder why, given the broad economic impact of this crisis, governments should focus on airlines. It is because connectivity is crucial. The world will get through this crisis. And when it does it will need a functioning air transport sector. Without financial relief that is not guaranteed.” The IATA leader said airlines transport about 35 percent of global trade. “Every job in air transport supports another 24 in the travel and tourism value chain, nearly 70 million jobs. Prioritizing air transport, helping airlines financially survive through these dark times, will position the world for the eventual recovery.”
The Aeronautical Repair Station Association (ARSA) says that in addition to asking for relief, they will be beseeching its members to offer every remote technology that provides individuals the same visual acuity as if on premises, in person. This is something the association has been advocating for two years. “There is no reason that industry should come to a grinding halt because an inspector is staying home,” says Sarah MacLeod, executive director. “If the agency ‘refuses’ to accept the offer, we are not above going to congress and the administration to ask why the hell not when states, counties and cities are conducting building and health inspections in such a manner and the executive branch has a clear dictate.”
MacLeod also stresses that the industry needs to make lemons out of lemonade. “Component repair stations are able to catch up on demand, the lack of workforce will not be as severe provided the elder workforce that we have do not become victims of a virus 10% stronger than the flu,” she says. “On the other hand, maintenance providers are a pretty hearty, if not totally healthy, bunch! At any rate, we are also, of course, encouraging members to catch up on training—online/on-demand.” This would allow workers that are forced home to participate at any time. “Additionally, if anyone was slow on upgrading manuals or procedures, which in turn could lead to more training, now is the time,” MacLeod says.
Airlines for America (A4A), the industry trade organization for the U.S. airlines, says U.S. carriers need immediate assistance and the current economic environment is not sustainable. The group stresses that the situation is compounded by the fact that the crisis does not appear to have an end in sight. “This is an extremely fluid situation that is evolving rapidly. The rapid spread of COVID-19, along with the government and business-imposed restrictions on air travel, are having an unprecedented and debilitating impact on U.S. airlines,” a statement issued by A4A says. “Carriers have seen a dramatic decline in demand, which is getting worse by the day. Carriers have been forced to remove flights from their schedule and make historic capacity cuts. Cancelations are spiking, and for U.S. carriers those cancelations are outpacing new bookings. The economic impact on U.S. airlines, their employees, travelers and the shipping public is staggering. This crisis hit a previously robust, healthy industry at lightning speed and we remain concerned that the impacts of this crisis will continue to worsen.” A4A President and CEO Nicholas E. Calio says, “This is a today problem, not a tomorrow problem. It requires urgent action.”
Marcel Versteeg, founder of VZM Management Services, cautions in the consultancy’s annual MRO market outlook that “the pandemic could lead to a global recession with unknown timescale.” The report says the impacts of the virus will likely halve the economic growth for 2020. Versteeg still predicts once the crisis is over and the economy rebounds, labor shortages of qualified and experienced aircraft mechanics and technology upgrades will need to be addressed. “Airlines and MROs talk a lot about new technologies, but I am puzzled why so little attention is paid to get the basics right within their organization and empowering their own people,” Versteeg says.
The Boeing Company announced measures the company will take during COVID-19 pandemic to include CEO Dave Calhoun and Board Chairman Larry Kellner forgoing all pay until the end of the year. Boeing also announced a suspension of production operations at its Puget Sound area facilities. “We will keep our employees, customers and supply chain top of mind as we continue to assess the evolving situation,” Calhoun said. “This is an unprecedented time for organizations and communities across the globe.”
Boeing says it will take an orderly approach to restarting production with a focus on safety, quality when the suspension is lifted and considers this a “key step to enabling the aerospace sector to bridge to recovery. The company says it will work closely with its defense and space programs customers in the coming days to develop plans that ensure customers are supported throughout this period. “Critical distribution operations in support of airline, government, and maintenance, repair and overhaul (MRO) customers will continue,” a company statement says.
Airbus, with facilities around the world, laid out their plans to stay healthy during the pandemic. “Our first priority is protecting people while supporting efforts globally to curb the spread of the coronavirus. We are also safeguarding our business to protect the future of Airbus and to ensure we can return to efficient operations once the situation recovers,” says Guillaume Faury, Airbus CEO. “We have withdrawn our 2020 guidance due to the volatility of the situation. At the same time, we are committed to securing the liquidity of the company at all times through a prudent balance sheet policy. I am convinced that Airbus and the broader aerospace sector will overcome this critical period.”
General Electric says it will lay off about 2,600 employees, or 10 percent of the U.S. workers in its aviation business, another repercussion from the coronavirus crisis and a resulting slowdown in commercial air travel.
FAA is experiencing an increase in COVID-19 cases at air traffic facilities and other offices across the nation and has had to close some control facilities briefly due to diagnoses and exposure concerns. FAA Administrator Steve Dickson voluntarily self-quarantined after a short meeting with Rep. Mario Diaz-Balart just before a House hearing on March 11. Diaz-Balart was diagnosed with COVID-19 and out of an abundance of caution, Dickson quarantined. As we went to press, the top FAA executive and former Delta Air Lines SVP was exhibiting no symptoms. “Our air traffic system is resilient and flexible. Every air traffic control facility in the country has a contingency plan to keep air traffic moving safely when events impede normal operations. In some cases, this means transferring duties to adjacent facilities,” the agency said in a statement.
IATA says their latest analysis shows even if the severe travel restrictions are lifted after three months, the recovery in demand for travel will be weakened by a global recession based on unemployment and consumer confidence and all of this will lead to a slow recovery.
“The airline industry faces its gravest crisis. Within a matter of a few weeks, our previous worst case scenario is looking better than our latest estimates. But without immediate government relief measures, there will not be an industry left standing,” IATA’s de Juniac says.