On a clear night of March an Airbus A340 lowered its landing gear as it entered final approach to Munich airport. Inside the cockpit, captain Jörg Otto received final permission to land from air traffic control. Behind, the cabin was filled to the brim, all seats taken. Silence followed as the aircraft lightly glided down towards the ground. The wheels skimmed the runway perfectly centered, the four engines revving as they applied maximum reverse thrust to halt the massive behemoth, a smooth landing. The taxi procedure to the gate was a somber affair, hundreds of dark empty aircraft lined the sides of the roads as the A340 slowly rolled forward. Upon reaching the gate, the passengers, German citizens recently repatriated, waited for the pilot to speak at last. “Ladies and Gentleman, thank you for joining us on this last international Lufthansa flight, this is not a final goodbye but rather a see you soon, take care.” His soothing words helped, but did not prevent many passengers from becoming emotional as they disembarked. Less than twenty minutes later, the captain finally turned off the engines, leaving the aircraft parked among its peers. Munich airport fell eerily silent.
Before the COVID-19 outbreak, Captain Otto and his colleagues would fly roughly two million people in and out of Germany every month. Unfortunately, recently implemented travel restrictions will leave those numbers in the single digits for the foreseeable future. This story spells a tale of tragedy for the main German airline Lufthansa, but it is applicable to nearly every airline around the world. These low passenger numbers will inevitably translate into significant short-term revenue losses, approximately 30 billion USD from the previous quarter. The International Air Travel Association (IATA) has recently calculated a total drop of 252 billion USD in revenue in 2020 for the whole sector. A dramatic problem for an industry with very high fixed costs, and a crippling blow for its image as a rising star in the increasingly globalized economy. Regardless of flight numbers, airplanes remain a heavy expense even when idle on the ground. Many will be moved into remote storage in American deserts, where costs can be minimized, but many remain parked in airports around the world, racking up high bills that airlines find themselves unable to pay. Moreover, interior travel in most countries around the world has also seen a massive decrease in volume, given that 40% of the world population is under total lockdown. This will further the strain on main national carriers and push many weaker regional airlines to bankruptcy.
Furthermore, financial consequences of the crisis will be felt in the share prices of major airlines. In the last month alone, Lufthansa saw a drop in share price of 50%. Across the pond, American Airlines and Delta have suffered similar fates. This loss in valuation, and subsequent investor confidence loss, will deepen the impending economic crisis, given the rising significance of the airline industry within the overall economy. The main victims of these losses will inevitably be smaller subsidiary companies, operating under the umbrella of those airlines most hit by the shifting of financial market conditions. In an effort to cut costs and consolidate dwindling profits, main carriers will not only cut off those less profitable branches, but also those less widely known, so as to avoid the negative marketing repercussions of mass layoffs. For example, in the past week, Virgin Australia decided to end all its New Zealand flights, closing their local subsidiary Tiger Air. This move will put around eight thousand people on the street, alongside leaving many destinations unoperated, which will inevitably complicate the return to normality of the island nation. Unfortunately, this story of closure has been repeated throughout the industry, leaving thousands of pilots and staff out of a job, with few prospects of finding new employment any time soon.
There are few upsides stemming from the current crisis Covid-19 has placed airlines in, but some are worthy of mention. Less aircraft in the air will inevitably entail a lower carbon footprint during the following months. This could improve air quality and noise pollution around highly populated areas. Incidentally, the improvement of air quality could positively affect the fight against Covid19, given that it mainly damages the respiratory system. Moreover, the crisis has pushed airlines around the world to phase out older aircraft faster. Although aviation fans will be disappointed to see the iconic KLM 747-400 fleet scrapped, these older aircraft have disproportionate carbon footprints, especially compared to newer, more environmentally consciously built models. On the other hand, as the downsides creep in again, financial tragedy and hard market conditions will limit the resources destined to the development and purchase of newer, more environmentally friendly aircraft, slowing down the inevitable transition of the airline industry towards carbon neutrality.
Alternatively, cargo transport airlines remain as strong as ever, maintaining revenue streams, and even generating new ones, due to the chartering of their flights for the import of medical material to help fight the epidemic. These cargo airlines usually operate under the umbrella of bigger alliances, and could help ease the pain of decreasing passenger numbers. However, this help remains constraint to future disruptions in commercial activities, which could also see cargo aircraft grounded, a further nail in the coffin of traditional aviation.
Is there any solution to this catastrophe? A few present themselves, but none come pain free. Italy, given the recent closure of most of its regional airlines, has followed the route of nationalization, outright acquiring its national carrier Alitalia in the hopes of keeping it solvent. This will ensure that once the pandemic passes, regular air routes will be maintained, without a punitive rise in prices. Others will not be so lucky, as more austere nations will let airlines crash, prompting others to take their place, raising prices to maintain the profitability of their routes. Currently, economic recovery plans of various nations look to aid their struggling airlines, either by facilitating credit lines that ensure operations or by giving direct government loans at lower interest rates. Although either solution is viable on the short run, and most likely fundamental to the survival of aviation as we know it, they are beholden to a quick end to the pandemic, which would see passenger numbers climb dramatically again. If not, it will become politically unsustainable to maintain an industry with virtually no revenue on a lifeline.
Ultimately, only the future will tell what the true and final quantitative effects of the current crisis will be on the airline industry, but forecasts remain deeply pessimistic. As we have seen, incoming losses will place an unenviable strain upon airline directives, foreshadowing painful decisions that will leave many without employment, as well as iconic aircraft scrapped. However, there are still some options on the table to ease the pain of the pandemic, with fiscal stimulus packages on the horizon ready to lend a helping hand. One day soon, the pandemic will pass, and once it does, and we are finally ready to leave our homes, Captain Otto and his colleagues will be ready to return to theirs, soaring through the skies.