Planes and a Virus

I doubt the Wright brothers would have ever imagined that a simple creation of theirs would one day be the backbone of the global economy. Of course, you would believe that the airline companies around the world mint money at unbelievable rates courtesy to hefty airfares and unending demand. The reality of the industry however, says otherwise. You see, a simple concept says that to gain market share in any industry requires heavy investment. Hence, to compete in an already competitive market, airlines take on humongous loans and try to gain market share. Their operations, costs, salaries are all supplemented by the demand in the industry. The moment that balance is hurt; the airline goes bankrupt. Closer to home, we see airlines like Jet Airways and Kingfisher who were once leaders in the Indian Aviation Industry suddenly going bankrupt owing to the fact that they were simply not able to pay back the loans that they took on. I mentioned earlier that airlines basically function on the demand in the industry, as every other company or sector. So, what happens during a pandemic which leads to the suspension of all air-travel? the industry crumbles on itself. On the 22nd of March,2020 all incoming international flights to India were cancelled, on the 25th of March, 2020 all domestic flights were halted. Similar steps like The United States of America suspending all air travel to Europe were taken around the globe. The uncertainty of when this crisis will end entails that people will not book any tickets for the future because let’s be honest, who wants to waste money. Even after airlines reducing fares to absolutely throw-away costs, demand remains negligible. Indigo was selling its Mumbai-Bengaluru flight tickets for just Rs.1500/- (about 19USD) despite the route being a popular one with high demand. The Center for Aviation, CAPA said that, “As the impact of the coronavirus and multiple government travel reactions sweep through our world, many airlines have probably already been driven into technical bankruptcy, or are at least substantially in breach of debt covenants, Cash reserves are running down quickly as fleets are grounded and what flights there are operate much less than half full.” Operating and maintaining aircraft and all the equipment that goes along with it involves high costs, to face this slowdown in the industry, airlines are considering mass lay-offs, salary cuts, and even retiring aircraft prematurely-Royal Dutch Airlines stated that it would be retiring its iconic Boeing 747 fleet by April this year due to the steep fall in demand. Airlines around the world have also followed suit and have decided to retire high capacity passenger aircraft like the B-747 and the Airbus A380 before schedule. Singapore Airlines has grounded 96% of its and fleet Lufthansa has suspended all domestic and international operations. Airlines like Southwest, American Airlines, Air Canada and Fly Dubai were already facing losses due to the global grounding of the Boeing 737 Max-8, and to add to that they now have to face a global slowdown in the industry. An interesting, yet simple issue that has emerged due to this is, where will the aircraft be parked? When we talk about a global grounding of passenger aircraft, it’s not just a few hundred aircraft, we are looking at thousands of humongous aircraft around the world that need to be parked safely. Lufthansa holding true to the conception of Germans being unorthodox, parked its fleet of Airbus A330s and Airbus A340s on the runway at Frankfurt airport. Many other airlines have taken to private parking spaces which means more costs to an already crippling industry. Of course, it is indeed true that after all this is over, the industry is going to go back to the way it was and the demand in the sector is set to be restored but when that time comes many small airlines would have spent most of their funds in maintaining and storing aircraft, so much so that they might not be able to cover their own operating costs. Well it is quite uncertain about what’s instore for the industry as a whole. As is, pilot unemployment stands at around 20%-30% in the industry and that number is only set to rise with the COVID-19 crisis. Most airlines have come together to approach their respective governments for aid packages for the industry or tax relaxations to help revive the industry when the crisis subsides, but what the market holds for airlines in the near future about as clear as the cure for COVID-19.