Already fragile before the crisis, some airlines are on the verge of collapse. Aircraft manufacturers are also being impacted by order books which are gradually being emptied. Airports, most of which are closed, are also suffering, as are the shops that supply the usual daily flow of passengers.
A brutal impact
35 billion is the amount of cancelled air tickets estimated by IATA (International Air Transport Association) due to a 70% drop in air traffic worldwide and 90% in Europe. Connections between continents being completely cut. The impact is estimated at $61 billion in lost revenue over the second quarter of 2020. IATA now forecasts a cumulative decline in airline sales of $314 billion in 2020.
The ICAO (International Civil Aviation Organization) estimates that the destinations most affected by the drop in traffic will be Europe and Asia/Pacific followed by North America with a decrease that could reach 2/3 of passengers over the first three quarters of the year.
Like their fellow tour operators and accommodation providers, transporters offer vouchers to their customers, but some expect a refund. However, the automatic issuance of vouchers does not comply with European regulations. This is a major risk for airlines, which could be forced to reimburse their customers, having a major impact on their cash flow in periods when revenues are close to zero. The subject remains unresolved as on Thursday 30 April, the European transport ministers did not reach an agreement on this issue.
Guillaume Faury, Executive Chairman of Airbus announced in a letter to his employees on 24 April: "Airbus' survival is at stake if we do not act now" preparing them for more drastic measures on the wage bill of the aircraft manufacturer, which has already put 3,000 of its employees in France on short-time working.
Important short and medium-term consequences
Air France will keep its staff on short-time working until the end of 2020 despite a €7 billion loan announced on 25 April by the French government (€3 billion) and banks (€4 billion). "Air France must become the most environmentally friendly airline on the planet," said Bruno Le Maire following the announcement of this loan. Subject to approval by the European Commission, the aid could amount to €11 billion for the Air France KLM alliance.
Air Tahiti, Ewa, Air Calédonie, Air Tahiti Nui, ASL Airlines, Air Saint Pierre, Air Corsica and Air Austral have also been asking for State aid to obtain liquidity on the same basis as Air France.
British Airways announced on 28 April that it was laying off 12,000 employees out of the 42,000 employed by the company. It is the owner IAG who communicated this announcement, arguing that the crisis will have a lasting impact on air traffic. The day of April 28th was punctuated by similar announcements by the companies Icelandair which is parting with 2,000 employees and SAS which is laying off 5,000 people.
On 7 April, Lufthansa announced the definitive closure of its subsidiary Germanwings and the withdrawal of certain aircraft from its fleet. The choice of aircraft withdrawn from operation was based on the least efficient aircraft from an environmental point of view. An outline of the changes to come for the company ? 1/5th of the Austrian Airline fleet has also been put on hold since 22 April.
Carsten Spohr, the company's CEO, announced on 10 April to his employees a loss of EUR 1 million per hour. "Today we carry less than 3,000 passengers a day, compared to the normal 350,000," he said.
The national airline Air Mauritius was placed under state administration on 22 April. It was already in difficulties before the crisis and had set up a Transformation Steering Committee in January to try to overcome the difficulties experienced by the company.
Low-cost airlines need even more volume
Easy Jet has postponed its order for 24 Airbus aircraft, obtained a £600 million loan guaranteed by the British government while optimising its cash flow by using its cash flow possibilities in the USA and taking out two loans to the tune of £400. All this is not enough for the company's founder, who wants to dismiss its current presidents and CEOs.
Michael O'Leary, owner and CEO of the RyanAir company has taken a position that social distancing is impossible for low cost companies.
Hong-Kong Airport is facing a 91% drop in traffic, the airport welcomed in March 12,000 passengers even less than during the SARS pandemic that had hit the world earlier. Frankfurt Airport, a hub for passenger repatriation, handled just over 37,000 passengers during the week of 13-19 April.
What solutions are being proposed by professionals in the sector?
Will air travel remain a luxury in the coming years? Will aircraft have to be more energy efficient? Technologies exist to use less fossil fuels but at costs that were still considered prohibitive before the Covid 19 crisis, will the new situation change and push aircraft manufacturers and airlines to invest more? Who will be in a position to invest such amounts?
While Air France announced on 21 April that it would now provide passengers with masks in addition to cabin disinfection, since 16 April Emirates has been offering a rapid virus detection test for all its passengers. This is a real gesture of reassurance and a proactive approach to encourage the resumption of traffic.
Lufthansa has also announced the mandatory wearing of masks on all its flights from 4 May 2020.
Aéroports De Paris is working with its European counterparts to put in place common protocols that will make it possible to comply with the rules on not spreading the virus but also to reassure future passengers.
One of the solutions considered within the international aviation bodies would be to leave the central seats free by applying the free intermediate seat pricing policy. This proposal is unthinkable for low-cost airlines whose economic model is based on passenger volume. How can the need for physical distance be met when profitability is only possible with density? For "traditional" airlines, the profitability of operating a flight is reached at 75% aircraft occupancy. This is another economic reality at the antithesis of the health rules put in place to stop the spread of the virus.
The interior fittings of the aircraft are gradually being rethought in order to allow for proximity in complete health safety. Some suppliers offer transparent walls or even the reorientation of seats, which are currently all facing the front of the aircraft.
Already signed up? Already signed up? Already signed up? Already registered? Login here!