COVID-19 Hits Airlines Hard

Updated: Jun 21

By: Nikita Dhar

The aviation industry was one of the hardest hit industries over the quarantine period. Worldwide borders were closed, people were told to stay-at-home, fear of the virus engulfed the population, and this made many weary of travelling. Most airlines opted to cut their fight schedules down to 20% of their regular schedules and staff were meant to find alternative sources of income.

Federal aid for the industry was quick to come. Under the terms of the CARES Act, airlines got $50 billion of aid. The terms of the aid stated that airlines have to continue flying to ensure essential air service was not lost altogether, but deeply hurt the cash of airlines. However, many U.S. airlines have yet to tap $29 billion of federal pandemic relief loans as they wait to see whether the reopening of the economy revives demand and diminishes the need for money that comes with government strings attached. Such airlines have raised capital through secured loans, bond offerings and equity sales and are hoping to use the government loans as a last resort. Restrictions on the loans include a cap on executive compensation and it would also require carriers to offer equity or other financial stakes to the government in exchange for the aid.

How have the airlines decided to cope with the coronavirus crisis? Many airlines have started requiring masks and stopped serving food and drinks. They have spent much more disinfecting flights between each flight in the hopes that this creates renewed trust in customers to start flying again, or even just choose the particular carrier as their preferred flight carrier. Other changes include filling in the airplane from both the front and the back and limiting queues outside the bathroom.

Although 321,776 people passed through security at U.S. airports last Thursday in one of the busiest days since late March, this is still an 87% decline from the same day last year, according to the U.S. Transportation Security Administration. The prediction is that airlines will only see pre-corona levels of demand by 2023 and downsizing airlines will have to be the solution till then. Southwest for example has offered voluntary separation packages as one of the methods to downsize.

Many international flight routes and operation of flights again are dependent on the opening of borders and people’s willingness and necessity to travel. Countries like the UK, Australia and Malaysia that have imposed a 2-week quarantine period for anyone who enters the country, may deter unnecessary travel for the period to come till these restrictions are lifted. Officials expect these limits to slow the return of international travelers for some time, with the International Air Transport Association (IATA) forecasting a three- to four-year recovery in long-haul flying. However, there is still hope for governments to allow air travel soon again. Spain is set to reopen its borders fully on July 1, while the UK government will review its two-week quarantine policy on June 29 for international visitors.

My prediction is air-travel will pick up and that the trough of travelers will have bottomed out by the end of June. It is likely that air travel will only be for more essential work until the pandemic is over and a vaccine is found. Until then, I hope you enjoy this time without having to fight for the space on the armrest next to you on your next flight.