Covid-19 Hits Hard In the Air, Aviation Industry on a Ventilator
Covid-19 also known as Novel coronavirus is caused by a virus named SARS- Cov-2. This virus first appeared in December 2019, in Wuhan, China. As the virus spread all across the globe and the main reason for this spread of virus was considered due to physical contact with a host body. As soon as it gained the title of a pandemic, the movement of an individual was restricted. This restriction has largely hit the aviation and tourism industries. Eventually there had been a significant reduction in the number of passengers travelling resulting to the situation where the scheduled flights flew almost empty. Which further lead to cancellation of flights. These damages were just to prepare them for the big hit. The government announced the first lockdown on 25th of March giving airlines no choice but to park their aircrafts and bear the losses. The maximum money spent by aviation industry is on the fuel consumption. As the aircrafts remain grounded, that cost is saved but the parking charges of so many aircrafts proves to be a greater burden. They forecast a minimum of 5,000 grounded Airplanes by September. With an average of 5.8 crews per plane (medium and long haul combined), that would make more than 70,000 Unemployed Pilots worldwide. All commercial passenger flights have been suspended for the lockdown period. However, cargo flights, medical evacuation flights, and special flights permitted by the aviation regulator Directorate General of Civil Aviation (DGCA) are allowed to operate. Effect on the industry is expected to be more significant than 9/11, the 2008 economic crisis or the volcanic ash cloud that led to the cancellation of flights over much of Europe in 2010. According to IATA, the aviation industry will need up to $200bn in financial support to recover from the crisis. We will now dive in the details of different companies and the challenges faced by them.
Airbus
Airbus is considering to cut down the number of planes it manufactures, considering the long lasting effects of the Coronavirus. The company strongly believe that the aviation sector will continue to be in wreaking havoc for a long time even after government lifts the lockdown. The aircraft manufacturer usually produces more than 60 of its bestselling Airbus A320 every month at assembly lines in Toulouse and Hamburg, but said it would cut short that to 40 after they noticed they were unable to generate any sales from the last month resulting in 60 newly manufactured aircrafts with no buyers. It will also cut A330 output to two a month and A350s to a rate of six. There also have been increased cases of cancellation of orders which include 18 A350s. The company has 13,500 UK workers, most of whom make wings at its two key sites in Broughton, north Wales, and Filton, Bristol. Airbus also supports about 2,500 firms in its supply chain. The Franco-German company did not initially say whether it expected to lay off staff or put them on a furlough scheme.
Boeing
Boeing Company will need to borrow more money over the next six months and does not expect to pay dividends again for years, as the U.S. plane maker wrestles with industry fallout from the coronavirus and the grounding of its 737 MAX jet, chief executive Dave Calhoun told shareholders on 27th April, 2020. Boeing is trying to bring its 737 MAX jet back into service after two fatal crashes, even as the aviation industry slumps because of the coronavirus, which has dried up demand for passenger air travel. Calhoun said Boeing expects it will take two to three years for travel to return to 2019 levels and an additional few years more for the industry's long-term trend growth to return. The largest U.S. plane maker, which reports first-quarter earnings Wednesday, last month drew down its entire $13.8 billion credit line and suspended its dividend. Boeing's first-quarter deliveries were a third of the 149 seen a year earlier and the lowest since 1984 for the first quarter. Boeing shares closed down 0.3% to $128.68. Boeing is cutting about 10% of its work force through a combination of voluntary and involuntary layoffs and natural turnover and slowing producing the planes to deal with a downturn in business that started. Grounding of its best-selling jet and has accelerated because of the coronavirus pandemic. Approx. 40 new aircraft stored at Boeing with no buyers in sight and there also have been increase in existing order cancellation which currently includes 10 B747s.
Virgin Australia Airline
Almost a decade ago, Virgin Australia shifted
from a low- cost operator to a full-time service airline. This change was made when the Virgin Australia welcomed its new CEO, Kohn Borghetti. He lost the chase for top jobs at Qantas to Alan Joyce because of which he jumped terminals to Virgin Australia. Mr. Borghetti had the motive of stand up to Mr. Joyce and create a mess for him. He thought the best way to do so could be by standing up to the quality of Qantas and pull Virgin above it. With that motive, strategic directions at Virgin Australia changed. Virgin Australia move up in the market but it was believed that it was a very petty reason to bring such a big change. The current pandemic has forced Australia’s second- largest domestic air carrier into voluntary administration after government refused to help it out. As on 18th March 2020, The Virgin Australia Group had announced a temporary suspension of international services and further cuts to domestic capacity in response to expanded government travel restrictions and increased impacts from COVID-19 on travel demand. The Group suspended all international flying for a period of two and a half months (30th March- 14th June as of now) in response to the new travel restrictions announced by Government. This includes the grounding of five Boeing 777, one Airbus A330 and fourteen Boeing 737 aircraft from the Group’s international fleet. Virgin Airlines will also reduce domestic capacity by around 50 per cent until 14 June 2020. This includes the grounding of twenty Boeing 737, six A320, two ATR and five Airbus A330 aircraft from the Group’s domestic fleet. The Group is undertaking a range of measures to address the current situation including the use of accrued annual leave, leave without pay, redeployment and, in some circumstances, redundancies which has resulted in more than 3,000 people including 600 Pilots losing their jobs. These are in addition to measures they have already announced, including the temporary reduction in Chairman and Board of Director fees by 15 per cent, removal of management bonuses, no base salary increases for non-EA team members and additional leave measures.
On 24th April 2020, the aircraft of Virgin was not allowed to take off from Perth. With help of heavy machinery, a car and stair truck the way of the aircraft was blocked at terminal gates to prevent it from taking off. The reason for this behavior was to keep the aircraft as a collateral until the airline paid its outstanding airfield and terminal fees. The airline is collapsing under the strain of covid-19 due to which the airport operator wanted to make sure his debt is paid off. A total of 4 aircrafts were seized but none of them was in service. The airline went into voluntary administration on 21st April, 2020 with more than Aus$5 billion ($3.2 billion) in debt, becoming the largest carrier so far to buckle under the strain of the COVID-19 outbreak.
Australia's government had refused an Aus$1.4 billion loan request to bail out the majority foreign-owned company, which had already made 1,000 workers redundant and stood down 8,000 of its 10,000 pilots, flight attendants and ground crew. It is also believed that old rivalry was ignite again and Mr. Joyce was to one who urged the government not to help out Virgin Airlines (his competition) as he wanted to have the sole monopoly over aviation market of Australia. The Australian Competition and Consumer Commission are investigating on this matter to make sure of Qantas Group (Mr. Joyce) encouraged an anti-competitive behavior. After which Virgin airline filed for bankruptcy but the group can be revived if a personal investor is willing to pay off the debts of the company. The company also are looking up to its foreign partners (including Etihad and Singapore Airlines) who own a total of 90% stake in the company’s shares.
Air Mauritius
In 2020, Africa is expected to lose over half the air traffic it had in 2019, losing USD 6 billion in passenger revenue, and nearly half of the sector’s employees. This will also result in voluntary administration of airlines such as Air Mauritius and Virgin Australia due to decline in travel demand all across the globe. The airline is handling this situation with a positive state of mind and believe that this a good time take a break and have the right breathing space. They also are working towards setting conducive conditions for restructuring opportunities in order to still be able to fly. Sattar Hajee Abdoula, FCA and Arvindsingh K. Gokhool, FCCA have been appointed as voluntary administrators. The administrators are currently working along with the Management to make sure that Air Mauritius continues to operate and plan the phased resumption of operations. Air Mauritius will maintain planned humanitarian flights for the repatriation of stranded passengers, including Mauritian nationals, as well as for the carriage of important medical supplies. Abdoula takes immense proud and pleasure in handling Air Mauritius and consider the airline to be a huge contributor to the economy of the nation. Till now the company has not filed for bankruptcy yet and the administrators believe that safeguarding the company’s interest and also reengineering the activities of the airline so that it becomes easy for the airline to get back on its feet, once we are done with the pandemic is its biggest objective to achieve in near future. “In such difficult times, it is essential that we get down to work without delay, along with all the partners of this industry to implement the measures deemed necessary to save the national airline”, added Sattar Hajee Abdoula. The company has suspended their flights till May 15, 2020 (as of now).
Lufthansa Airlines
Lufthansa Airlines is a company owned by a
German group who also own Swiss International, Austrian Airlines and Brussels Airlines. There are a total of 138,000 people employed by the company and the company have not made any statements on laying off the workers and is expected to support most of the employees by continuing their employment during such harsh times. Whereas the airlines have decided to reduce its fleet size. A 700 aircrafts of the 763 unit fleet were grounded by the airline in the month of March as the severity of the pandemic situation intensifies. Which eventually resulted in reduction of passenger capacity by almost 95%. Reduction in the number of working hours and suspended dividends are few other after effects of Covid-19 on Lufthansa Airlines. It also noted that the airlines will not be able to sustain without financial assistance if the pandemic continues. With the increase in number of cases of Coronavirus all across the globe, the airline has decided to permanently reduce its fleet size. Lufthansa will be decreasing capacity at the Frankfurt and Munich which are top 2 hubs of Lufthansa airline. As part of this move, the carrier has permanently phased out six Airbus A380s, seven A340-600s and 11 Airbus A320s, as well as five Boeing 747-400s. The decommissioning of A340-600s and 747-400s was based on the environmental and economic drawbacks while the A380s were initially planned for sale to Airbus in 2022. The carrier has also removed 11 Airbus A320s from short-haul operations. In addition to the permanent reduction, Lufthansa Cityline will retire three Airbus A340-300 aircraft from service. Lufthansa’s regional carrier operates flights to long-haul tourist destinations. The group’s airlines have ended almost all wet-lease agreements with other airlines.
Germanwings Airlines
Lufthansa will close its Germanwings low-cost airline as part of a broader overhaul including capacity cuts across the group as the group warned it could take years for the industry to recover from the coronavirus crisis. The fate of Germanwings has hung in the balance as the low-cost sector came under pressure, and after a suicidal pilot deliberately flew a jet into a mountainside in 2015, killing all 150 people on board. The group announced that they will be discontinuing the operations of Germanwings to reduce its cost. To slash costs further Lufthansa will also cut capacity at its hubs in Frankfurt and Munich, including reducing the number of aircraft in service for Lufthansa and Eurowings.
Etihad Airways
Etihad airways along with Emirates predicted that if the government do not jump in to bail out the aviation industry then almost 85% of carriers globally will have to face bankruptcy by the end of this year. The company is still operating and working to let people reach their home. This will continue until 31 May, 2020. Special flights are operation between Abu Dhabi to 14 destinations across the globe. But the company has also noticed a reduction in passenger traffic because of which the airlines decided to cancels 18 orders for A350. Grounding of 10 A380 and 10 Boeing 787. Which resulted in laying off 720 staff members.
Emirates
The Dubai-based carrier's net income for the financial year ending March 31 rose to Dh1.1 billion, from Dh871 million a year ago, due to "healthy" demand and cheaper fuel. This resulted in a 21% increase in the annual profits for the company. But annual revenue declined six per cent year-on-year to Dh92 billion due to temporary suspension of passenger flights in March (Covid-19) and the 45-day runway closure at Dubai International Airport. It is believed that the fourth quarter has highly effected by the coronavirus outbreak. Emirates' revenue fell 4 per cent as it carried 56.2 million passengers. The carrier reduced seat capacity by six per cent, leading to passenger load factor of 78.5 per cent, reflecting the airline's "successful capacity management and positive travel demand across nearly all markets up until the outbreak of Covid-19 in the last quarter." The UAE suspended all passenger flights from March 25 to limit the spread of the virus. Emirates currently operates a limited number of passenger repatriation flights and continues full cargo services.
Operating costs fell 10 per cent as the airline's fuel bill declined 15 per cent due to the lower prices of jet fuel. The drop in the energy costs offers some respite as fuel accounts for 31 per cent of the carrier's operating cost. "We continue to take aggressive cost management measures, and other necessary steps to safeguard our business, while planning for business resumption," Sheikh Ahmed said. Emirates is planning to tap the bank market in order to gain liquidity for the first quarter of its fiscal year. It is said to provide a cushion from the impact of covid-19. The government has also pledged to help the airlines. Emirates Group, which includes airport and travel services arm dnata, reported an annual 28 per cent decline in profit to Dh1.7bn, due to the impact of the coronavirus in the fourth quarter. Annual revenue dropped five per cent to Dh104bn. The group will also not pay dividend to its government shareholder, the Investment Corporation of Dubai, due to the "unprecedented business environment" during the Covid-19 pandemic and to protect the group’s liquidity position. The airline believes that it will take almost 18 months to bring back the travel demand back to normal because of which Emirates grounds 38 A380s and cancels all orders for the Boeing 777x (150 aircraft, the largest order for this type). They also "invite" all employees over 56 to retire in order to cut further expenses. Also other 103,000 employees are to receive reduced pay, with many going down to half pay.
South African Airways
South African airways was suffering from net
loss 32 billion rand ($1.7 billion) in the year 2008. It has not been profitable ever since and was saved by government bailouts. In the past years it has received 20 billion rands ($1.1 billion). It proves to be a drain of public resources that too at the time of weak economy. With the years of government support, the airline is now under huge debt and has high unprofitability rates. It comes amid a nationwide lockdown to slow the spread of Covid-19 in South Africa that led SAA to suspend most flights through the end of May. In February, the government set aside 16.4 billion rand ($863 million) to repay the airline’s guaranteed debt over the medium term, with the anticipation that additional funds would be required to cover restructuring costs. Since the start of the year, SAA has relied on 3.5 billion rand ($184 million) in emergency funding issued by the state development bank. As the airline collapses it has decided to lay off its entire workforce which included of 4,708 employees. Initially the SAA was willing to offer severance packages to its entire workforce but that was not possible as the government refused to sanction any more loans to the airline. The 86 year old national carrier will be selling its remaining assets including two night time slots at London Heathrow Airport.
Finnair
Finnair has been closely monitoring the pandemic situation. They have decided to cancel almost 1,400 flights from its network and is still trying to adjust to the havoc Coronavirus pandemic has caused. They have also considered decreasing the seating capacity for the European traffic in April by almost 20%. This will be done by cancelling almost 2,400 flights resulting a cut in 90% of its normal flight capacity. They have also considered using smaller aircrafts according to the routes based on the demand in order to cut extra cost on fuel. For instance, flights that were scheduled to be operated with an Airbus 350 to Brussels will be operated with Airbus 321 aircraft in April, as is one of the two daily wide-body frequencies between Helsinki and London. The cancellation of flights by Finnair will affect between 1,500 and 2,000 flights from 16 March 2010 until 31 March 2020, with only critical air connections for Finland maintained. This has also resulted in returning 12 planes and laying off almost 2,400 people. In order to protect the financial position of the company few steps have been taken which include, raising a revolving credit facility amounting to €175 million, contemplated reborrowing of statutory pension premium loan in the amount of €600 million and sale and leaseback of unencumbered aircraft. Also the state which owns majority percentage of the shares has been proposed to guarantee the reborrowing of the pension premium loan. The guarantee arrangement is still pending the approval of Parliament.
Wizz Air
In these harsh times, Wizz Air is currently
operating only 3% of its pre-coronavirus capacity. Wizz Air says will recognize exceptional losses in Q4 of F20 of EUR 70–80 million, specifically related to hedging losses for the months of March to May 2020. Wizz Air has offered multiple governments, repatriation flights for the citizens of that nation who are stuck in different places Europe, Central Asia, North Africa, and North America. The company is providing support by operating flights between China and Hungary by transporting medical supplies. The most of these orders were placed by the Hungarian government. The airline has taken a decision to fire 1,000 of its employees which would result in total of 19% reduction in the total work force. There also will be a cut in the salary of the employees to support the financial system of the company from the impact of Covid-19. Váradi says that the Wizz Air has taken various initiatives to protect the company during the COVID-19 pandemic and are reviewing the competitiveness and allocation of assets. They have decided to improve their strategic, cost and cash position in the aftermath of this crisis to ensure that they are able to deliver long-term growth target. Due to travel restrictions, employee furlough measures will also be taken. Additionally, Wizz Air has been working with suppliers to reduce contracted rates and improve payment terms. The airline will gradually return 32 older leased aircraft by the end of the 2023 financial year (F23) as existing lease contracts expire. All 32 aircrafts are A320. The airline will also consider laying off people which sums up to 1,200 people out of which 200 are pilots. They are planning to lay off another 430 employees in the coming month. Remaining employees will see their wages reduced by 30%. The company also announced that for the whole financial year (F21, which ends on March 31 2021) the remuneration of the CEO, the Board of Directors and all senior officers will be reduced by 22%, while salaries of pilots, cabin crew and office staff will be reduced by 14% on average.
Brussels Airlines
Belgium's Brussels Airlines like any other has been hit hard by the pandemic. It has decided to reduce the workforce of 4,000 people to just 1,000 people by just leaving a quarter of people left. This step was taken to with stand the economic impact of coronavirus crisis. To avoid the spread of the virus and abiding by the government regulations, the airline suspended all of its scheduled flights. The carrier is also planning to reduce its fleet size from 54 to 38 aircrafts resulting in 50% reduction. The airline is taking help from the government but at the same time is being criticized by some politicians for the fact that it is taking loans but also firing its employees. Brussels Airlines does not expect a return to normal before 2023.
HOP!
The airline was also hit hard by the pandemic. The parent company, Air France is considering to take a bail out of 7.6 billion dollars. Hop believes some exceptions will be made for the short haul flight but still to with stand the impact of the coronavirus pandemic the airline is considering the possibility of reducing fleet and staff by 50%.
IAG
IAG is the parent company of British Airways. It also owns Spanish airline Iberia and Ireland's Aer Lingus. The IAG feels the need to impose a restructuring and redundancy programme until the demand of air travel shifts back to what it was in the year 2019. IAG said: "The proposals remain subject to consultation, but it is likely that they will affect most of British Airways' employees and may result in the redundancy of up to 12,000 of them." British Airways has already put almost 23,000 staff on furlough including about 4,500 pilots and 16,000 cabin crew. The company believes it will take several years for air travel to touch levels of pre-virus demand. IAG says it is grounding surplus aircraft, freezing recruitment, reducing capital expenditure and cutting non-essential IT spending. Personnel are being offered voluntary leave options and the company is also temporarily suspending employment contracts and cutting working hours.
The decision of grounding 56 planes for Iberia airline took place by the parent company IAG. Grounding of 34 planes of British Airways was done by the parent company and everyone above the age of 58 were asked to retire. Air Europa was to be taken over by IAG but this deal was called off as the pandemic hit the aviation industry hard. The calling of the deal cost up to 40 million euros to IAG as a compensation to the company.
It was revealed that the coronavirus has put a great impact on the group’s revenue. In the first three months of 2020 revenues fell 13% to €4.6bn (£4bn). The company further expect first-quarter capacity to be down by 7.5% compared with last year’s figure. IAG’s management team is to remain in place for the time being, to help steer the company through the coronavirus crisis, as it prepares to cut capacity by 75% for April and May.
LUX AIR
Like every other airline Lux airline has been
hit hard as the government of Luxembourg announced lockdown in the country for a period of 3 months in the end of March. To withstand the harsh winds of Covid-19 Lux Air will also be considering ways to cut down its cost. They have decided to reduce its fleet size by 50%. They are also considering reduction in the associated costs to the company. The CEO of the airline, Adrien Ney has decided to step down on 1st June, 2020. He was handling the company for the last 15 years. It is no surprise that the company will have to make a smart decision while choosing the successor of Adrien Ney as once the lockdown is lifted, the company would need the right guidance to regain its position in the aviation industry.
Ryanair Airlines
With increased travel restrictions in European countries, Ryanair airlines are preparing themselves to ground their flights. It is considered to Europe’s largest airline group and has taken back 80% of their schedules by grounding 113 aircrafts in the times of Covid-19. The remaining 20% will be operated by small number of flights to keep the connectivity. The company has also said that they will keep in touch with governments to supply rescue flights as needed for the European citizens who are stuck abroad. Ryanair said that although it has sufficient liquidity to with stand these times but the company is still willing to cut short its expenses so that it could come strong once all this is over. It has got rid of 400 pilots initially and will be looking into more 450 employees and take decision for the same. The low-cost airline group, which only has a passenger service operation, confirmed that it had $4.47 billion in liquidity but warned that it might be forced to ground the fleet if government restrictions on movement continued. Ryanair has decided to temporarily suspend all its recruitment decisions and salary increases because of the coronavirus crisis and the impact on its activity.
Norwegian Airlines and SAS
Norwegian airlines have decided to call off
3,000 flights from mid-March to mid-June as the pandemic is on lose. This is almost 15% of the total capacity. These cancelations have affected the connections of the airline but to stop the wide spread of Coronavirus this step is important. Cancellations will also result in laying off 50 % of the workforce till the things are settled. Norwegian, which has been in deficit for three years and is heavily indebted due to an ambitious expansion policy, especially in long-haul flights, is particularly vulnerable. High expenses of long-haul flights have made the airline to stop its long-haul flights 100% in these times. Although the company had forecasted return of profits in the year 2020 if corona had not hit the aviation sector. Norwegian’s rapid expansion has left it heavily in debt. It has repeatedly raised cash from shareholders in order to stay in business, and some analysts have predicted it may seek to do so again. Norwegian has reported its staffing subsidiaries in Denmark and Sweden have filed for bankruptcy, meaning roughly three quarters of its pilots and crew will lose their jobs. Norwegian Air could run completely out of cash by mid-May unless its proposed financial rescue plan is approved by creditors and shareholders. If approved by bondholders, leasing companies and shareholders, the plan may help Norwegian survive the coronavirus outbreak, which has grounded 95% of its fleet, leaving just 7 aircraft in operation.
Scandi Airlines (SAS) initially cancelled its flights to break the chain of coronavirus and stop the spread of it all across the globe. SAS shares have fallen 36% this year as the virus that began in China spread to dozens of countries across the world, curbing airline travel and savaging stocks in the sector. It has also considered reducing the short haul network capacity in order to reduce the expenses. SAS, part-owned by the governments of Sweden and Denmark, said it was pursuing a number of measures to cut costs, including postponing marketing and a hiring freeze, while it was also looking to reduce spending on personnel. This impacted around 10,000 people who lost their job at SAS due to the reduced demand of air travel. The job cuts will impact 90 percent of the airline’s workforce, including pilots, cabin crew, and ground staff.
SAS said it plans to merge most of its Norwegian operations into one air carrier to cut costs and beat price competition in home markets. The Scandinavian airlines will merge with Norwegian carriers to reduce cost. It is considered to be the cost cutting initiative taken by SAS. The airline expect to fly from May 17 and have set many guidelines for its passengers. The one with utmost priority will be the mask. All the passengers will be required to wear a mask as they embark on the journey to disembark at their destination. This initiative is taken up to make a safe environment for the passengers.
Czech Airlines
Czech Airlines (CSA) has abolished its long-haul sector and keeps only 5 medium-haul aircraft. To withstand the effects of Coronavirus, CSA is expected to be in need of 55 million Euros. They have requested the government for the loans and to bail them out of the situation but there have been no assurance from the government’s side for the support. Czech Airlines (CSA) will resume part of its operations on May 18 after a six-week interruption because of the coronavirus pandemic, the airline said. Flights to Amsterdam, Frankfurt, Paris and Stockholm will be among those reopened in the first wave. On May 24, the route to Kiev will reopen, followed by Odessa and Bucharest on May 25, CSA said.
Many airlines had hit their rock bottom as they were not able to bear the expense of parking huge number of airplanes and also supporting their employees. Many airlines have cut short the workforce to decrease the cost for the airline resulting in a job massacre all around the globe. Many employees were given an early retirement and many were sent off on furlough and unpaid leaves. This has created a huge problem for the employees. For many airlines international investors and government came for their rescue to bail them out of the huge debts whereas some airline companies thought of merging with other airlines to survive in the market. The merger is said to be a good cost saving method and gives the opportunity of survival of airlines by optimal utilization of resources. Those flights who were not able to any of the above mentioned ways were forced to file for bankruptcy as all their resources had been exhausted.
Solutions or Corrective measures taken by the Airlines/Airports
In these harsh times industry bodies like the Airport Council International (ACI) and its regional divisions, the International Air Transport Association (IATA) and others are working towards providing support to small and large aviation industry. The biggest challenge with Coronavirus is that one cannot see it with their naked eyes and also there are times when a person is the host body and does not know about it. The strong immune system of that person is not causing any harm to him but might cause problem for others around him. It now becomes the responsibility of the airport and airlines to disinfect the surfaces time to time or disinfect the traveler for their own safety. It is no news that aviation industry has been hit hard by the Covid-19 crisis. As we all know airport revenue generation is directly linked to traffic levels. The flight bans and cancellations are leading to less flights, hence less aeronautical revenue coming in. Unlike other players in the aviation industry, when traffic demand falls, airports have limited ways of reducing costs. The cost of operating airport infrastructure remains the same, and airports can’t close down or relocate terminals and runways. The other aspect to consider is non-aeronautical revenues, which are necessary, as aeronautical revenue alone cannot cover all airport operations and capital cost. To withstand the whole situation the following measures can be taken-
1. Enhance cleaning at all the levels- In these times it is of utmost importance that the sanitation is taken well care of. The airports can enhance their sanitization process by using high level cleaners (Alcohol based) to fight the virus and can have multiple rounds in a day after specific hours to increase hygiene levels. Then stickers on the floor have been put to encourage two meters distancing at all passenger touch points including arrivals, check in, passport control, security checkpoint and self-service gates. These measures are feasible at this time of low volume but cannot be a long-term solution once traffic approaches pre-COVID levels.
2. Installation of sanitizer booth- To increase the hygiene level of the employees and the travelers booths that will release sanitizers must be installed at all levels of an airport. This will insure that the passenger is safe for all the other passengers around him.
3. Usage of Masks and PPE kits- It must be mandatory for all the travelers and employees to wear PPE kits and mask to avoid any kind of physical touch. Avoiding any physical touch will help break the chain hence there will be less chances of transmission of the disease. Gloves can also be used along with masks to avoid the spread of the virus.
4. Usage of APIs (Application Programming Interfaces) - For any airport the entrance and the exit points are the most essential places. It is important to detect any host body at these points itself to avoid the situation getting any worse. The airport at Uruguay adapted this technology of API which was a risk assessment system integrated with Advanced Passenger Information (API) and Passenger Named Record (PNR). The sole reason to install these machines was to check if a person is a host body or possess any threat to the fellow passengers. This shall also help in reducing the cost of human labor. There are times when a flight has a stopover at an airport which might have many active cases. In that case when the flight reaches the final destination, the passengers are asked to go through APIs again to ensure they are not carrying any virus with them and if they do then with the help of that system, the authorities can immediately find out where the passenger was seated and who all were sitting around him, near him or in his row. This will help in saving time and giving more time for the authorities to take further action.
5. Demand stimulation and preparing for the future: Airlines would do well to be ready when demand returns. They must be ready with attractive offers to stimulate demand. Packages, promotions and deep discount plans must be prepared in advance for leisure and business travelers. For instance some airlines are offering deep discounts right now in US for flights to Hawaii and that sector is observing a lift in bookings. How much should yields be relaxed to stimulate demand? What kind of offers will work for specific destination and categories of travelers? This can be done using revenue management controls. Airlines could reach all travelers who made future booking cancellations with personalized offers based on the revenue management systems’ adjustments. Most important of all will be the ability of the airline to push new booking sales to the back end, once demand returns. One of the most powerful tools currently available to manage demand, digital assets and content is the Adobe Experience Manager (AEM) suite. Airlines that use these types of tools will be able to draw travelers with the exceptional experience they offer. COVID-19 is likely to reset the industry and customers will not necessarily return to the airlines they have been loyal to. Instead, they will opt for airlines that focus on keeping their passengers healthy, safe and engaged with great experience from booking to refund (where necessary).
6. Flight checks- Each flight must be checked and must be certified as “ready to fly” after every flight is completed. To achieve this certification the flight must be properly sanitized after each flight to ensure the new passengers feel completely safe to travel with the airline.
7. Self-check in and automated baggage handling- The Self-check in counters will help reduce the chances of transmission of the virus. Sanitization of the cargo and baggage must also take place to ensure no spread of virus takes place. To further reduce the chances of transmission, automated baggage handling can be used to ensure the safety of not only the employees but also of the passenger.
8. Checking of the runways and taxiways- Currently due to covid-19 maximum aircrafts are parked on the runways and taxiways of different airports. The runways and taxi ways are not meant to be used in that way hence it becomes of utmost importance to do the checks once the aviation industry is ready to fly again. There might not be any damage to the runways or taxiways but it is still important to conduct a proper check to insure the safety of the passengers and the aircraft as well.
Future of Aviation Industry Post Covid-19
The future of aviation sector stand on two legs. One being social distancing and second being passenger screening. This is something which will be able to get aviation sector back in the game. Although most of the experts say that the prospective recovery may take two years to reach the pre-crisis air traffic levels which means we might not see pre-Covid-19 traffic again before the end of 2021. Recovery will surely take a lot of time and will only be possible if there is cooperation and collaboration among all the aviation stake holders, including airports, airlines, air navigation providers, manufacturers, regulatory bodies (Government) and etc. It is believed that technology will help enable the industry to bounce back. Contactless technology which might include self-service technology for passenger to ensure a reduction of spreading of pathogens. These processes will also enable higher throughput of passengers in existent capacity and better passenger experience with reduced operational cost. A study suggests that the outcome of a post-Covid aviation industry might lead to any one of the four situations.
1. Survival of the Safest- This situation will face deep recession and fragmented response in the aviation sector. This scenario will witness passengers’ reluctance to fly which would be further heightened by confusing protocols in different countries, airports and airlines. This scenario will also witness many airlines and airports closing off as they won’t have enough number of passenger to recover from the losses. Those airline or airports which will survive will be the ones who can build the trust of passengers by demonstrating as the strongest with end to end safety methods and procedures.
2. Love in a Cold Climate- This scenario would look as if there is an economic recession but there will be a coordinated response from the industry. Due to financial hardships there would be less leisure travelers but the business travelers and travelers with higher disposable income would feel safer while flying which would eventually lead to a growth in the demand.
3. Hope and Glory- This scenario will witness a strong economic recovery but there will be a fragmented industry response. This shall also witness that the air transport ecosystem will rely on passenger to take responsibility for testing, vaccination, and certification, meaning that air travel demand would return, but revenue would lag due to intense competition.
4. Sealed and Secure- This scenario witnessed economic recovery along with a cross-sectorial approach. In this scenario the industry is basically hermetically sealing the travel experience. This scenario has interesting implications for the passenger experience. It believes to be having a system where You could see that from the point where a traveler makes their booking, they have either an antibody test to demonstrate that they’ve had the virus or (later down the road) that they’ve had the vaccination, but before they get to the airport they’ve already got a certificate to prove that.
These are the possible outcomes of a post-Covid scenario of the aviation industry. It is a matter of time we find out which state does the aviation industry takes up. The sole purpose of this study was to understand how vastly the Coronavirus has affected the aviation industry, what possible solutions could be taken to pull the aviation industry out of the crisis and how it will look after 12-18 months.
Srishti Malkotia [BBA Aviation]
Manager Aviation
AirCrews Aviation Pvt Ltd
srishti.malkotia@aircrewsaviation.com
www.AircrewsAviation.com
V card
Covid-19 also known as Novel coronavirus is caused by a virus named SARS- Cov-2. This virus first appeared in December 2019, in Wuhan, China. As the virus spread all across the globe and the main reason for this spread of virus was considered due to physical contact with a host body. As soon as it gained the title of a pandemic, the movement of an individual was restricted. This restriction has largely hit the aviation and tourism industries. Eventually there had been a significant reduction in the number of passengers travelling resulting to the situation where the scheduled flights flew almost empty. Which further lead to cancellation of flights. These damages were just to prepare them for the big hit. The government announced the first lockdown on 25th of March giving airlines no choice but to park their aircrafts and bear the losses. The maximum money spent by aviation industry is on the fuel consumption. As the aircrafts remain grounded, that cost is saved but the parking charges of so many aircrafts proves to be a greater burden. They forecast a minimum of 5,000 grounded Airplanes by September. With an average of 5.8 crews per plane (medium and long haul combined), that would make more than 70,000 Unemployed Pilots worldwide. All commercial passenger flights have been suspended for the lockdown period. However, cargo flights, medical evacuation flights, and special flights permitted by the aviation regulator Directorate General of Civil Aviation (DGCA) are allowed to operate. Effect on the industry is expected to be more significant than 9/11, the 2008 economic crisis or the volcanic ash cloud that led to the cancellation of flights over much of Europe in 2010. According to IATA, the aviation industry will need up to $200bn in financial support to recover from the crisis. We will now dive in the details of different companies and the challenges faced by them.
Airbus
Boeing
Virgin Australia Airline
Almost a decade ago, Virgin Australia shifted
On 24th April 2020, the aircraft of Virgin was not allowed to take off from Perth. With help of heavy machinery, a car and stair truck the way of the aircraft was blocked at terminal gates to prevent it from taking off. The reason for this behavior was to keep the aircraft as a collateral until the airline paid its outstanding airfield and terminal fees. The airline is collapsing under the strain of covid-19 due to which the airport operator wanted to make sure his debt is paid off. A total of 4 aircrafts were seized but none of them was in service. The airline went into voluntary administration on 21st April, 2020 with more than Aus$5 billion ($3.2 billion) in debt, becoming the largest carrier so far to buckle under the strain of the COVID-19 outbreak.
Australia's government had refused an Aus$1.4 billion loan request to bail out the majority foreign-owned company, which had already made 1,000 workers redundant and stood down 8,000 of its 10,000 pilots, flight attendants and ground crew. It is also believed that old rivalry was ignite again and Mr. Joyce was to one who urged the government not to help out Virgin Airlines (his competition) as he wanted to have the sole monopoly over aviation market of Australia. The Australian Competition and Consumer Commission are investigating on this matter to make sure of Qantas Group (Mr. Joyce) encouraged an anti-competitive behavior. After which Virgin airline filed for bankruptcy but the group can be revived if a personal investor is willing to pay off the debts of the company. The company also are looking up to its foreign partners (including Etihad and Singapore Airlines) who own a total of 90% stake in the company’s shares.
Air Mauritius
Lufthansa Airlines
Lufthansa Airlines is a company owned by a
Germanwings Airlines
Lufthansa will close its Germanwings low-cost airline as part of a broader overhaul including capacity cuts across the group as the group warned it could take years for the industry to recover from the coronavirus crisis. The fate of Germanwings has hung in the balance as the low-cost sector came under pressure, and after a suicidal pilot deliberately flew a jet into a mountainside in 2015, killing all 150 people on board. The group announced that they will be discontinuing the operations of Germanwings to reduce its cost. To slash costs further Lufthansa will also cut capacity at its hubs in Frankfurt and Munich, including reducing the number of aircraft in service for Lufthansa and Eurowings.
Etihad Airways
Emirates
The Dubai-based carrier's net income for the financial year ending March 31 rose to Dh1.1 billion, from Dh871 million a year ago, due to "healthy" demand and cheaper fuel. This resulted in a 21% increase in the annual profits for the company. But annual revenue declined six per cent year-on-year to Dh92 billion due to temporary suspension of passenger flights in March (Covid-19) and the 45-day runway closure at Dubai International Airport. It is believed that the fourth quarter has highly effected by the coronavirus outbreak. Emirates' revenue fell 4 per cent as it carried 56.2 million passengers. The carrier reduced seat capacity by six per cent, leading to passenger load factor of 78.5 per cent, reflecting the airline's "successful capacity management and positive travel demand across nearly all markets up until the outbreak of Covid-19 in the last quarter." The UAE suspended all passenger flights from March 25 to limit the spread of the virus. Emirates currently operates a limited number of passenger repatriation flights and continues full cargo services.
Operating costs fell 10 per cent as the airline's fuel bill declined 15 per cent due to the lower prices of jet fuel. The drop in the energy costs offers some respite as fuel accounts for 31 per cent of the carrier's operating cost. "We continue to take aggressive cost management measures, and other necessary steps to safeguard our business, while planning for business resumption," Sheikh Ahmed said. Emirates is planning to tap the bank market in order to gain liquidity for the first quarter of its fiscal year. It is said to provide a cushion from the impact of covid-19. The government has also pledged to help the airlines. Emirates Group, which includes airport and travel services arm dnata, reported an annual 28 per cent decline in profit to Dh1.7bn, due to the impact of the coronavirus in the fourth quarter. Annual revenue dropped five per cent to Dh104bn. The group will also not pay dividend to its government shareholder, the Investment Corporation of Dubai, due to the "unprecedented business environment" during the Covid-19 pandemic and to protect the group’s liquidity position. The airline believes that it will take almost 18 months to bring back the travel demand back to normal because of which Emirates grounds 38 A380s and cancels all orders for the Boeing 777x (150 aircraft, the largest order for this type). They also "invite" all employees over 56 to retire in order to cut further expenses. Also other 103,000 employees are to receive reduced pay, with many going down to half pay.
South African Airways
South African airways was suffering from net
Finnair
Wizz Air
In these harsh times, Wizz Air is currently
Brussels Airlines
HOP!
The airline was also hit hard by the pandemic. The parent company, Air France is considering to take a bail out of 7.6 billion dollars. Hop believes some exceptions will be made for the short haul flight but still to with stand the impact of the coronavirus pandemic the airline is considering the possibility of reducing fleet and staff by 50%.
IAG
IAG is the parent company of British Airways. It also owns Spanish airline Iberia and Ireland's Aer Lingus. The IAG feels the need to impose a restructuring and redundancy programme until the demand of air travel shifts back to what it was in the year 2019. IAG said: "The proposals remain subject to consultation, but it is likely that they will affect most of British Airways' employees and may result in the redundancy of up to 12,000 of them." British Airways has already put almost 23,000 staff on furlough including about 4,500 pilots and 16,000 cabin crew. The company believes it will take several years for air travel to touch levels of pre-virus demand. IAG says it is grounding surplus aircraft, freezing recruitment, reducing capital expenditure and cutting non-essential IT spending. Personnel are being offered voluntary leave options and the company is also temporarily suspending employment contracts and cutting working hours.
The decision of grounding 56 planes for Iberia airline took place by the parent company IAG. Grounding of 34 planes of British Airways was done by the parent company and everyone above the age of 58 were asked to retire. Air Europa was to be taken over by IAG but this deal was called off as the pandemic hit the aviation industry hard. The calling of the deal cost up to 40 million euros to IAG as a compensation to the company.
It was revealed that the coronavirus has put a great impact on the group’s revenue. In the first three months of 2020 revenues fell 13% to €4.6bn (£4bn). The company further expect first-quarter capacity to be down by 7.5% compared with last year’s figure. IAG’s management team is to remain in place for the time being, to help steer the company through the coronavirus crisis, as it prepares to cut capacity by 75% for April and May.
LUX AIR
Like every other airline Lux airline has been
Ryanair Airlines
Norwegian Airlines and SAS
Norwegian airlines have decided to call off
Scandi Airlines (SAS) initially cancelled its flights to break the chain of coronavirus and stop the spread of it all across the globe. SAS shares have fallen 36% this year as the virus that began in China spread to dozens of countries across the world, curbing airline travel and savaging stocks in the sector. It has also considered reducing the short haul network capacity in order to reduce the expenses. SAS, part-owned by the governments of Sweden and Denmark, said it was pursuing a number of measures to cut costs, including postponing marketing and a hiring freeze, while it was also looking to reduce spending on personnel. This impacted around 10,000 people who lost their job at SAS due to the reduced demand of air travel. The job cuts will impact 90 percent of the airline’s workforce, including pilots, cabin crew, and ground staff.
SAS said it plans to merge most of its Norwegian operations into one air carrier to cut costs and beat price competition in home markets. The Scandinavian airlines will merge with Norwegian carriers to reduce cost. It is considered to be the cost cutting initiative taken by SAS. The airline expect to fly from May 17 and have set many guidelines for its passengers. The one with utmost priority will be the mask. All the passengers will be required to wear a mask as they embark on the journey to disembark at their destination. This initiative is taken up to make a safe environment for the passengers.
Czech Airlines
Many airlines had hit their rock bottom as they were not able to bear the expense of parking huge number of airplanes and also supporting their employees. Many airlines have cut short the workforce to decrease the cost for the airline resulting in a job massacre all around the globe. Many employees were given an early retirement and many were sent off on furlough and unpaid leaves. This has created a huge problem for the employees. For many airlines international investors and government came for their rescue to bail them out of the huge debts whereas some airline companies thought of merging with other airlines to survive in the market. The merger is said to be a good cost saving method and gives the opportunity of survival of airlines by optimal utilization of resources. Those flights who were not able to any of the above mentioned ways were forced to file for bankruptcy as all their resources had been exhausted.
Solutions or Corrective measures taken by the Airlines/Airports
In these harsh times industry bodies like the Airport Council International (ACI) and its regional divisions, the International Air Transport Association (IATA) and others are working towards providing support to small and large aviation industry. The biggest challenge with Coronavirus is that one cannot see it with their naked eyes and also there are times when a person is the host body and does not know about it. The strong immune system of that person is not causing any harm to him but might cause problem for others around him. It now becomes the responsibility of the airport and airlines to disinfect the surfaces time to time or disinfect the traveler for their own safety. It is no news that aviation industry has been hit hard by the Covid-19 crisis. As we all know airport revenue generation is directly linked to traffic levels. The flight bans and cancellations are leading to less flights, hence less aeronautical revenue coming in. Unlike other players in the aviation industry, when traffic demand falls, airports have limited ways of reducing costs. The cost of operating airport infrastructure remains the same, and airports can’t close down or relocate terminals and runways. The other aspect to consider is non-aeronautical revenues, which are necessary, as aeronautical revenue alone cannot cover all airport operations and capital cost. To withstand the whole situation the following measures can be taken-
1. Enhance cleaning at all the levels- In these times it is of utmost importance that the sanitation is taken well care of. The airports can enhance their sanitization process by using high level cleaners (Alcohol based) to fight the virus and can have multiple rounds in a day after specific hours to increase hygiene levels. Then stickers on the floor have been put to encourage two meters distancing at all passenger touch points including arrivals, check in, passport control, security checkpoint and self-service gates. These measures are feasible at this time of low volume but cannot be a long-term solution once traffic approaches pre-COVID levels.
2. Installation of sanitizer booth- To increase the hygiene level of the employees and the travelers booths that will release sanitizers must be installed at all levels of an airport. This will insure that the passenger is safe for all the other passengers around him.
3. Usage of Masks and PPE kits- It must be mandatory for all the travelers and employees to wear PPE kits and mask to avoid any kind of physical touch. Avoiding any physical touch will help break the chain hence there will be less chances of transmission of the disease. Gloves can also be used along with masks to avoid the spread of the virus.
4. Usage of APIs (Application Programming Interfaces) - For any airport the entrance and the exit points are the most essential places. It is important to detect any host body at these points itself to avoid the situation getting any worse. The airport at Uruguay adapted this technology of API which was a risk assessment system integrated with Advanced Passenger Information (API) and Passenger Named Record (PNR). The sole reason to install these machines was to check if a person is a host body or possess any threat to the fellow passengers. This shall also help in reducing the cost of human labor. There are times when a flight has a stopover at an airport which might have many active cases. In that case when the flight reaches the final destination, the passengers are asked to go through APIs again to ensure they are not carrying any virus with them and if they do then with the help of that system, the authorities can immediately find out where the passenger was seated and who all were sitting around him, near him or in his row. This will help in saving time and giving more time for the authorities to take further action.
5. Demand stimulation and preparing for the future: Airlines would do well to be ready when demand returns. They must be ready with attractive offers to stimulate demand. Packages, promotions and deep discount plans must be prepared in advance for leisure and business travelers. For instance some airlines are offering deep discounts right now in US for flights to Hawaii and that sector is observing a lift in bookings. How much should yields be relaxed to stimulate demand? What kind of offers will work for specific destination and categories of travelers? This can be done using revenue management controls. Airlines could reach all travelers who made future booking cancellations with personalized offers based on the revenue management systems’ adjustments. Most important of all will be the ability of the airline to push new booking sales to the back end, once demand returns. One of the most powerful tools currently available to manage demand, digital assets and content is the Adobe Experience Manager (AEM) suite. Airlines that use these types of tools will be able to draw travelers with the exceptional experience they offer. COVID-19 is likely to reset the industry and customers will not necessarily return to the airlines they have been loyal to. Instead, they will opt for airlines that focus on keeping their passengers healthy, safe and engaged with great experience from booking to refund (where necessary).
6. Flight checks- Each flight must be checked and must be certified as “ready to fly” after every flight is completed. To achieve this certification the flight must be properly sanitized after each flight to ensure the new passengers feel completely safe to travel with the airline.
7. Self-check in and automated baggage handling- The Self-check in counters will help reduce the chances of transmission of the virus. Sanitization of the cargo and baggage must also take place to ensure no spread of virus takes place. To further reduce the chances of transmission, automated baggage handling can be used to ensure the safety of not only the employees but also of the passenger.
8. Checking of the runways and taxiways- Currently due to covid-19 maximum aircrafts are parked on the runways and taxiways of different airports. The runways and taxi ways are not meant to be used in that way hence it becomes of utmost importance to do the checks once the aviation industry is ready to fly again. There might not be any damage to the runways or taxiways but it is still important to conduct a proper check to insure the safety of the passengers and the aircraft as well.
Future of Aviation Industry Post Covid-19
The future of aviation sector stand on two legs. One being social distancing and second being passenger screening. This is something which will be able to get aviation sector back in the game. Although most of the experts say that the prospective recovery may take two years to reach the pre-crisis air traffic levels which means we might not see pre-Covid-19 traffic again before the end of 2021. Recovery will surely take a lot of time and will only be possible if there is cooperation and collaboration among all the aviation stake holders, including airports, airlines, air navigation providers, manufacturers, regulatory bodies (Government) and etc. It is believed that technology will help enable the industry to bounce back. Contactless technology which might include self-service technology for passenger to ensure a reduction of spreading of pathogens. These processes will also enable higher throughput of passengers in existent capacity and better passenger experience with reduced operational cost. A study suggests that the outcome of a post-Covid aviation industry might lead to any one of the four situations.
1. Survival of the Safest- This situation will face deep recession and fragmented response in the aviation sector. This scenario will witness passengers’ reluctance to fly which would be further heightened by confusing protocols in different countries, airports and airlines. This scenario will also witness many airlines and airports closing off as they won’t have enough number of passenger to recover from the losses. Those airline or airports which will survive will be the ones who can build the trust of passengers by demonstrating as the strongest with end to end safety methods and procedures.
2. Love in a Cold Climate- This scenario would look as if there is an economic recession but there will be a coordinated response from the industry. Due to financial hardships there would be less leisure travelers but the business travelers and travelers with higher disposable income would feel safer while flying which would eventually lead to a growth in the demand.
3. Hope and Glory- This scenario will witness a strong economic recovery but there will be a fragmented industry response. This shall also witness that the air transport ecosystem will rely on passenger to take responsibility for testing, vaccination, and certification, meaning that air travel demand would return, but revenue would lag due to intense competition.
4. Sealed and Secure- This scenario witnessed economic recovery along with a cross-sectorial approach. In this scenario the industry is basically hermetically sealing the travel experience. This scenario has interesting implications for the passenger experience. It believes to be having a system where You could see that from the point where a traveler makes their booking, they have either an antibody test to demonstrate that they’ve had the virus or (later down the road) that they’ve had the vaccination, but before they get to the airport they’ve already got a certificate to prove that.
These are the possible outcomes of a post-Covid scenario of the aviation industry. It is a matter of time we find out which state does the aviation industry takes up. The sole purpose of this study was to understand how vastly the Coronavirus has affected the aviation industry, what possible solutions could be taken to pull the aviation industry out of the crisis and how it will look after 12-18 months.
Srishti Malkotia [BBA Aviation]
Manager Aviation
AirCrews Aviation Pvt Ltd
srishti.malkotia@aircrewsaviation.com
www.AircrewsAviation.com
V card
https://srishtimalkotia.
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