Flightless Fleets are Coronavirus' Collateral
Typically, the beginning of April brings the beginning of the tourist season. Yet, this year the skies remain clear of Boeings and Airbuses as up to 80% of commercial flights have come to a halt in the midst of the COVID-19 outbreak. Already, there is news of airlines asking their staff to take unpaid leave, with WizzAir having fired a thousand employees in the past weeks. The air traffic sector is floundering amidst this pandemic, but what will these flightless months mean for the future of air travel?
Travel restrictions are hitting the aviation industry particularly hard as airlines are required to pay a large maintenance fee regardless of how many tickets they sell or how many of their flights take off. In addition to paying their employees, they also have to calculate with airport rental fees, engineering costs, and in some cases paying the lease for their planes. Even in a “stand-by” mode, there are not many expenses airlines can cut back on. Airlines in the United States have already stopped serving complimentary beverages and snacks on short domestic flights, but these rarely make a difference when compared to maintaining an entire fleet of aircraft.
The United States, New Zealand, Singapore, France, and Norway are just some of the countries who have offered financial aid to their airlines, either in the form of a bailout, or by offering extension to loan repayments. Italy went as far as to offer to buy Alitalia, making it a state-owned airline. Even so, the international trend seems to be for governments to help only airlines integral to the nation’s economy, leaving independent companies out to dry. Worst hit are the independent budget airlines, who not only reinvest most or all of their profits into their companies, but also lease most of their airplanes, leaving them with no liquid nor tangible assets to use during this time of crisis.
The bigger airlines are not safe either; although they will be bailed out by their respective government, there is no guarantee that these measures will be enough for airlines to survive the pandemic crisis. Social distancing measures will probably stay in place for a few months after the pandemic is officially over - several European countries, including Hungary, are talking about limiting international travels until the vaccine is available for COVID -19 - and public distrust towards travel is not likely to go away either. After travel bans are lifted and people reemerge from their homes, it will still take a considerable amount of time until international travel returns back to normal. People might be hostile to foreigners in a fear of them bringing back the virus, or just afraid of traveling in general after the prolonged ‘no travel’ advice. Airlines may have to plan for a longer period than the actual span of the pandemic.
Until flight habits return to normal, there is really nothing airlines can do, other than wait. In the United States, American Airlines has already started to repurpose their commercial flights to carry cargo shipments. However, the profit from these flights is not even nearly enough to replace the 80% of air traffic they have lost due to the virus. There is no real demand for new cargo planes anyway, or at least not enough to fit all of these repurposed planes.
The long-term effects of this travel slump could be the transformation of air travel as we know it. If airlines are struggling to keep up with their lease payments or cannot find other airlines to lease their own airplanes to, a solution could be to eliminate leasing altogether and shift to a renting model where each airplane is only rented for the particular journey. With this approach, airlines would organise flights without having to buy or lease any airplanes, thus avoiding many continuous maintenance payments, and splitting the risks equally amongst airplane owners and the airlines. Switching to renting from leasing might be the only way for budget airlines to survive and avoid getting swallowed up by their state funded competition.
Whatever the outcome, may it be converting to a rental model, or building budget flights back up from the ground again, it will be a long time until flying returns to the cheap and convenient travel alternative we are used to.