Airline industry braces for lengthy recovery from COVID-19 crisis

Airline industry braces for lengthy recovery from COVID-19 crisis

British Airways
FILE PHOTO: A British Airways plane taxis past tail fins of parked aircraft to the runway near Terminal 5 at Heathrow Airport in London. (Photo: Reuters/Simon Dawson)

WASHINGTON: International seat capacity has dropped by almost 80 per cent from a year ago and half the world's airplanes are in storage, new data shows, suggesting the aviation industry may take years to recover from the COVID-19 pandemic.

Carriers including United Airlines and Air New Zealand have warned they are likely to emerge from the crisis smaller, and there are fears others may not survive.

"It is likely that when we get across to the other side of the pandemic, things won't return to the vibrant market conditions we had at the start of the year," said Olivier Ponti, vice president at data firm ForwardKeys.

"It's also possible that a number of airlines will have gone bust and uneconomic discounts will be necessary to attract demand back," he said in a statement.

READ: Global air passenger demand sees steepest decline since 911: IATA

ForwardKeys said the number of international airline seats had fallen to 10 million in the week of Mar 30 to Apr 5, down from 44.2 million a year ago.

Data firm OAG said that several years of industry growth had been lost and that it could take until 2022 or 2023 before the volume of fliers returns to the levels that had been expected for 2020.

Cirium, another aviation data provider, said about half of the world's airplane fleet was in storage.

"While many of these will be temporary storage, many of these aircraft will never resume service," Cowen analyst Helane Becker said in a note to clients. "We believe the airline industry will look very different when we get to the other side of this."

Planemakers are looking at drastic cuts in wide-body production amid a slump in demand for the industry's largest jetliners, manufacturing and supplier sources said.

Deliveries of long-range jets, such as the Boeing Co 777 or 787 and Airbus SE A350 or A330, have been particularly badly hit as airlines seek deferrals and many withhold progress payments.

READ: Coronavirus empties airlines' cash drawers, knocks US$157 billion off share values

"Governments need to ensure that airlines have sufficient cash flow to tide them over this period," said Conrad Clifford, Asia-Pacific vice president at the International Air Transport Association.

Such support could include direct financial support, easing the way for loans and loan guarantees and backing for the corporate bond market, he added.

Polish national airline LOT is working on a rescue plan and will likely need state aid as air traffic has been suspended because of COVID-19, Jacek Sasin, the country's minister of state assets said on Friday (Apr 3).

FLIGHTS CUT, STAFF FURLOUGHED

US domestic demand will remain weak into May, Vasu Raja, senior vice president of network strategy at American Airlines Group Inc, told Reuters, citing a lack of bookings.

The airline is cutting between 70 per cent and 75 per cent of domestic flights in April and about 80 per cent in May. For both months it is cutting nearly 90 per cent of its international flights.

US Transportation Secretary Elaine Chao said that the government should not ground domestic flights during the crisis and that it was up to the airlines to make commercial decisions on flight destinations.

READ: Emirates to resume limited passenger flights after suspension due to COVID-19 outbreak

READ: British Airways temporarily lays off 28,000 staff

In Europe, budget carrier Ryanair said on Friday it expected to carry minimal if any traffic in April and May due to widespread government flight bans and restrictions. It is operating fewer than 20 daily flights, which is 99 per cent less than usual.

Ryanair said it expected to take a 300 million euro (US$324.93 million) charge in the financial year starting Apr 1 on its fuel hedges now that the oil price had fallen.

Hong Kong's Cathay Pacific said on Friday it would further cut passenger capacity after carrying just 582 passengers one day this week, a load factor of 18.3 per cent, compared to 100,000 customers on a normal day.

Air New Zealand carried just 165 passengers on its 89 flights on Thursday, underpinning its decision to make further cuts to its schedule while the country is in lockdown due to the virus, Chief Revenue Officer Cam Wallace said on Twitter.

Southwest Airlines said it intended to apply for US government aid to help it ride out the sharp drop in travel demand.

The stimulus package for airlines is worth up to US$50 billion, half in loans and loan guarantees and half in payroll cash grants.

Many Democrats and airline labour unions are urging US Treasury Secretary Steven Mnuchin not to demand equity or warrants in return for the grant portion, as they seek to ensure carriers take the funds and pay workers.

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Source: Reuters/lk

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