The airlines plunged by pandemics are rebuilding for 2021 and trying to keep jobs in the industry alive, while strategically streamlining and hanging bottom rates in the hopes of getting customers back.
From aviation industry to lifeline, the aviation industry had one of its worst years in 2020, a radical comedy to a profit that took place to coronavirus lockdown.
“By the third week of February, airlines were at a record year of record earnings. They then, like Thelma and Louise, went over a cliff when the pandemic struck,” said Bob Mann, an aerospace industry analyst at the consulting firm New York, based. RW Mann & Company, told NBC News by email.
Passenger volume, according to TSA checkpoint statistics from early March 2, dropped daily from more than 2 million at the beginning of March to a low of about 90,000 in mid-April as home bookings and travel restrictions hit. Although the number has since recovered, passenger volume was even less than half of the busy holiday season a year ago, with 1.2 million people on December 27, up from 2.6 million last year.
Although it is too early to determine what impact Christmas travel will have on coronavirus infection rates, experts fear an additional rise, as recorded after Thanksgiving. Economic recovery for airlines and other industries depends on a health recovery, and on trying to put the latter before the former eventually endangers both.
“Air travel gives people hope,” Helen Becker, Cowen’s airline analyst, told NBC News. “But you can not travel if nothing is open.”
Airlines received $ 25 billion in government assistance through the CARES Act. This requires them to keep employees on the payroll. After funding ran out, airlines had to be forced to consider staff costs, encourage early retirement and voluntary leave, negotiate costs with unions, and apply plans and layoffs for the remaining gap.
The industry received an additional $ 15 billion in funding for the new coronavirus relief package signed by President Donald Trump on Sunday night. The bill contains a few strings: Airlines must start repaying, reimbursing the limit, and making no dividend payments from December 1st.
Internationally, some carriers see opportunity in the crisis. Michael O’Leary, the outspoken chief executive of Irish discount Ryanair, told the Financial Times his airline could pick up routes and airport locks through some of its competitors. He also predicted consolidation in the industry and placed orders for the Boeing Max jet which he predicts will be a ‘game changer’ for capacity and fuel efficiency.
“We were constantly planning to recover fairly quickly and were constantly disappointed,” he told the Financial Times. ‘What has changed is the vaccines that are arriving … The problem for our industry is that recovery is in May or August? We just do not know. ”
The Boeing 737 Max is back in service in the US this month after flight equipment was refurbished to address safety and regulatory issues, after two accidents with only a few months between them that killed everyone on board. Although the return of the Max was welcome news for the industry – the debacle cost Boeing at least $ 20 billion – customers need to be trained and seduced to get back on board. Trust will take time to earn back.
The North American airline industry is expected to drop nearly $ 46 billion by 2020, according to estimates by IATA, an airline trading association. Assuming that the national vaccine distribution is in the second half of the year, the profit for 2021 is forecast at $ 11 billion.
Those who have been vaccinated or are willing to risk a flight will find savings in enticing them to board.
“Consumers will experience lower real travel costs as airlines will continue to significantly reduce ticket prices to stimulate demand,” IATA reported, based on surveys of airline chief financial officers.
Tickets are sold at a strong discount. Uninterrupted airfare from NYC to Orlando or Austin, Texas, is on sale for about $ 50 per ticket, says Scott Keyes, founder of discount ticket website Scott’s Cheap Flights, and Denver to Los Angeles, $ 71. Although international fares are rising for next summer , there are still offers. A summer 2021 return from Phoenix to Tokyo can currently be found for $ 579, with return flights from most U.S. cities to Puerto Vallarta available for less than $ 300.
Airline will have to adopt new technologies and retire older, less fuel-efficient aircraft to stay afloat, refurbishing some of its long-standing business models, according to a report by consulting firm McKinsey and Co. operations, more dynamic pricing, and the use of advanced analysis to adjust cruising speeds and gate allocations to make it easier for passengers to make close connections.
The industry has been strongly committed to adopting new cleaning and safety protocols to reduce coronavirus risks during air travel, install high-performance air filtration systems, disinfect aircraft, and train personnel. Passengers must wear masks and may be placed on non-flight lists if they do not comply. Some airlines are now offering Covid-19 tests before flights to or at airports, and Delta announced a partnership with the CDC this month on contract tracking for international passengers.
It’s still going to be a long winter and a cold spring.
The number of routes between cities has dropped and airlines are not going to build new ones unless it is immediately profitable.
“We expect smaller cities and even medium-sized cities to lose service within two or even three hours of driving from a major airport,” Becker said.
Airlines have built up cash reserves at the start of the crisis, but this will be extended until 2021. The hope is that if they break down, get skinny while being flexible to rush up when demand returns, they can take a ride on the expected surge in pent-up demand when safety re-emerges and resume widespread travel .
“The challenge is to get to that date,” John Grant, airline analyst at airline firm OAG, said in an email. “The industry and airlines will return, not immediately stronger, but eventually reformed, redesigned and ready to face the new challenges.”
Analysts do not think there will be significant further consolidation in the industry unless the vaccine goes according to plan.
“If the pandemic continues, we are likely to see bankruptcies” in the second half of 2021, Becker said.
In a Dec. 21 letter to employees, Scott Kirby, United chief executive, and President Brett Hart thanked staff for their hard work, saying that while the vaccines offer promise, expanding wage support in itself is likely not the big gap will not bridge to the passenger. demand is expected to resume by the end of 2021.
‘We just see nothing in the data that shows a big difference in discussions over the next few months. Therefore, we expect the recall to be temporary, ”they wrote. “But as we have said before, we see the light at the end of the tunnel.”