Covid-19’s Impact on the Aviation Industry

Air travel is an essential method of travel across international borders without the wasting of too much time; however, as flawless as it is, air travel has unfortunately been impacted by the Covid-19 pandemic like never before.

The Covid-19 pandemic has hit the aviation industry like a wrecking ball as flight cancellations, travel bans and restrictions has very literally put the industry to a steaming halt. On top of that, almost every country around have taken drastic measures such as full lockdowns, shutting down airports and completely sealing off borders to “flatten to curve” and contain the pandemic, making air travel limited to a few that are extremely essential.

Airlines have since grounded most flights, causing majority of their shares to plummet drastically, as to the decline seen during the SARS crisis in 2002/2003.

Flight cancellations

Government regulations in Europe and the U.S. require airlines to refund fares for cancelled flights. In many cases, airlines around the world have also opted to give out vouchers or travel credits that MUST be used by the end of the year (some airlines have extended this window to 2022).

By April, over 80% flight movements were restricted across all regions and research shows that the recovery of passenger demand is set to take at most 2.4 years. The Asia-Pacific region has the shortest estimated average recovery time of 2.2 years, followed by North America in 2.5 years, and Europe 2.7 years

Impact on air cargo

The cost of sending cargo across the Pacific Ocean tripled by late March. At the end of March, cargo capacity was down by 35% compared to the previous year: North America to Asia Pacific capacity fell by 17% (19% in the opposite direction) Asia-Pacific to Europe was down by 30% (reverse: -32%), inter-Asia was down by 35%. 

Lagging the capacity reductions, demand was down by 23% in March, resulting in higher freight rates: from China/Hong Kong, between March 2 and April 6, +158% to Europe and +90.5% to North America.

On top of that, international mail has also largely been stopped completely either due to suspension of domestic service or lack of transportation.

Impact on airlines

Due to sudden huge losses in revenue, airlines decided to hold out against refunding cancelled flights and tickets to conserve money, against government regulations. 

By mid-April, the inactive fleet went up to almost 14,400, leaving 7,635 in operation stood: predominantly in Europe, where less than 15% are operating, than in North America (45%) or Asia (49%); and affecting Narrow-body aircraft (37%) less than wide-body aircraft (27%).

By June 2020, the International Air Transit Association (IATA) projected a collective net loss of $84.3 billion yearly for airlines, worse than the $30 billion loss during the financial crisis of 2008-2009, and also projects that income will remain negative through 2021.

Impact on aircraft manufacturers

Manufacturers such as Airbus went through a reduction in wing production in factories in Broughton, Filton and Bremen, and also reduce working hours for its employees. Monthly production was cut to four A220s, forty A320s, two A330s and six A350; Airbus proceeded to deliver just 122 in the first quarter, 40 fewer than the previous year.

Boeing froze hiring and laid off employees due to a high amount of cancellations. On 21 April, Boeing announced a management structure overhaul. On 27 May, it announced plans to lay off 12,000 employees, while it reported zero new aircraft orders in April 2020.

Impact on airports

By the middle of April, the Airports Council International (ACI) observed a 95% fall in traffic in 18 airports in major aviation markets in Asia-Pacific and the Middle East. It was also estimated by the Airports Council International (ACI) that passenger traffic worldwide would amount to less than half of what was previously projected for the year.

Demand for aircraft storage increased to a point where runways and taxiways at airports such as Frankfurt Airport and Atlanta Airport were closed to make room for storage by Lufthansa, Delta Air Lines, and American Airlines respectively.

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