Airlines have played a central role in both the spread and the containment of the COVID-19 outbreak. Few industries have suffered more, given the impact of travel restrictions implemented by governments and the enormous reduction in people willing to travel.
As the world watches the airline industry desperately fight for financial support and the wider travel industry also showing concerns for the ricochet effect, the industry will fly high again.
The questions at the top of everyone’s minds are around what will change, what will remain the same, where should the industry look to and whom should they follow.
The list of external risks are controlled by the national and global authorities as well as the traveling public and cannot be controlled by the airlines themselves. We will see the authorities start to loosen travel restrictions as we see the curves bending positively and the rate of infections reduced, but to what degree and when travel will return is still uncertain. Even after these restrictions are lifted, it’s not clear whether people will feel safe enough to travel again. Nor is it clear which airlines will survive to serve them.
Teams across flight operations, commercial planning and corporate sales are all assessing the variables they can control. Since our purpose here at Cirium is about supporting the industry and helping each business play to its individual strengths, we’ve rounded up some of the important internal factors impacting an airline’s situation.
Please note: this is just the start of further discussions and insights, and not an exhaustive list.
6 internal factors influencing recovery
It is not possible to define a single path for how the industry recovers. Analysts have already deemed this event more severe than any previous industry crisis. How each airline addresses their situation is unique to their business planning, their priorities, and their strengths.
Here we review which of those strengths — characteristics and environmental factors – help position an airline to control their recovery.
Geographic Dependency
With no sure way to predict where the recovery will happen first, airlines, and every other business tied to air travel, has to plan for uneven recovery, as highlighted in a recent Forbes piece. Airlines with a mix of domestic and international reach, have the greatest flexibility in how to respond. Based on the country by country handling of travel restrictions, short-haul flights mostly run by low-cost carriers and domestic flagship carriers, can be first-to-market when restrictions lift.
For example, Chinese domestic flight activity has already shown signs of resurgence. Via Cirium data displayed in our Coronavirus Aviation impact project, we tallied approximately 5,400 domestic flights per day at the end of March compared to 1,800 per day in mid-February. Our most recent insights from Ascend by Cirium show from March to April that number has shifted closer to last year’s activity from 44% to 22% lost seats in the Chinese market.
In the U.S., infection rates and risk to passengers varies widely – even state-to-state. The majority of restrictions have been placed on international flights versus domestic, as an added complication of the fragmented situation for schedule planning. With New York stated as the global epicenter of the virus and thus the nation’s current hot spot, the global impact falls heavily on the major US carriers with hub operations at one or more of the NYC airports.
Availability of Staff and Crews
Early retirements, furloughs and lay-offs threaten the ability of airlines to meet future capacity demands. This can have a downline impact on which aircraft can be flown, based on which pilots are still on staff.
In any country where government support for airlines is conditioned upon a commitment to forego furloughs and layoffs, there will be a quicker means to bring employees back to work as needed to meet the demand.
However, those measures extend payroll support for a limited time – through September 30, 2020, in the U.S. Airline employees have to be feeling insecure in their future employment beyond those deadlines, and may already be seeking alternatives with a brighter outlook or considering early retirement.
