Billions in revenue lost and jobs cut as planes remain grounded

Nicu Calcea 3 June 2020 (Last Updated June 3rd, 2020 11:28)

Air traffic in countries hit by Covid-19 has been reduced to a trickle — and the industry might find it difficult to take off again.

Billions in revenue lost and jobs cut as planes remain grounded
Credit: Shutterstock

A stunning fact emerged from the UK government this week: over the entire month of April 2020, only 112,300 passengers arrived in the country by air – a 99% decline from the same month in 2019. More than half of those passengers were UK nationals returning home.

It is hard to overstate the impact of Covid-19 on the aviation industry in countries like the UK. At one point – on April 14 – just 1,900 passengers landed in the country. There were over a third of a million arrivals by air on April 14, 2019.

The number of passengers landing in the UK has collapsed

International business travel — an important economic driver for a country like the UK — has ground to a halt. Leisure tourism has all but disappeared. And it isn’t just the UK that is seeing fewer planes over its skies.

Singapore, France and Spain have seen even bigger decreases in the number of scheduled flights in the last weeks of May compared to last year, with just one in 10 flights still going as planned. Italy and Germany are not far behind. Even flights that are going ahead are far from full.

Scheduled flights have dwindled in some countries

Japan and South Korea — which have taken a different approach to dealing with Covid-19 — have seen more modest fall-offs. China has recorded just 31% fewer flights.

Overall, global air traffic is half what it was at the start of the outbreak. The number of commercial flights is roughly a third what it was in February.

Globally, there are three times fewer commercial flights

Aviation industry in crisis

Compile any list of the industries hit hardest by Covid-19 and aviation will be near the top. The International Air Transport Association (IATA) estimates that 4.5 million flights have been cancelled this year, resulting in $314 billion in lost revenue.

Experts expect a large number of airlines to go bankrupt this year, which may accelerate an already ongoing consolidation of the industry. Other airlines will retire some of the older planes on their fleet to save on maintenance costs.

Several airlines — including easyJet, Virgin and Scandinavian Airlines — have already been forced to lay off thousands of employees. Airports in the UK alone have axed expansion plans worth £1 billion.

A breath of fresh air

The silver lining for the environment – if not the industry – is that levels of carbon dioxide released by planes may have fallen by 80% in April compared to January.

An analysis of OpenSky Network logs revealed that the amount of time planes have been in the air — and subsequently how much fuel they are using, and how much CO2 they are releasing — has been steadily falling since the beginning of the year, with a particular sharp drop in April.

CO2 emissions from planes are released higher in the atmosphere, which is thought to have a greater greenhouse effect than the CO2 released at sea level.

The potential environmental benefits of temporarily grounding planes could be even bigger if more flights were cancelled, as some of the planes remaining in the air are flying empty or nearly empty.

There are many reasons that can happen: some flights are transporting key workers to the regions they are needed the most, some need to transport the aircraft crew somewhere else and some planes simply have to fly to get to their assigned overnight parking spaces, even if there are no passengers.

Several airlines are already planning to resume up to 40% of their flights in June. Flying the planes, even if they’re empty, means the companies aren’t legally required to refund passengers the cost of their tickets.

Airlines also have to keep flying planes in order not to lose the slots they have been awarded at airports. While the EU has temporarily suspended the slots, it is yet unclear how long will the measure be in place.

What’s next?

Italy, one of the first countries to go into lockdown as a result of the outbreak, announced it would take over Alitalia, the flag carrier of the country, since the company couldn’t survive on its own.

Other countries are considering nationalising airlines as well. The German government claims it is ready to take over Condor and a group of Belgian experts were tasked with examining ways to nationalise Brussels Airlines.

It is yet unclear when air travel will return to some form of normality. British Airways expects a return to “meaningful service” in July at the earliest and convincing passengers it is safe to fly being at the heart of the issue.

We may see fewer touchpoints in airplanes too. Passengers may enjoy less food and beverage service on their flights as well as have fewer human interactions inside airports.

Airport lounges, shops and restaurants may also see fewer customers in the future. This might force airports to charge airlines more which, in turn, may increase ticket prices.

The Covid-19 pandemic has also changed how business is conducted. Video conferencing tools may now replace some of the business trips conducted in the past. In the past, business and first-class trips accounted for a third of the aviation industry revenues.

A recent survey of industry professionals showed that the most likely outcome of the pandemic will be a “survival of the safest” scenario, where a deep recession and a fragmented approach to regulation will lead to a significant reduction in the number of passengers for the next ten years.

The next few months will be a test for the entire aviation industry. Some airlines, airports and their suppliers will fail or be bought out; those that survive may need to significantly rethink their approach.