Airlines affected by the pandemic are retrofitting for 2021, trying to keep industry jobs on life support, while strategically optimizing and fluctuating lower rates in the hope that customers will return.
From Boeing to bailouts, the aviation industry had one of its worst years in 2020, a radical drop after a profit run until the coronavirus blockade.
“Airlines were operating at the pace of a year of record gains during the third week of February – then plummeted, like Thelma and Louise, when the pandemic hit,” Bob Mann, aviation industry analyst at the consulting firm based in New York RW Mann & Company, told NBC News by email.
Passenger volume dropped from more than 2 million a day in early March to a low of around 90,000 in mid-April, according to TSA checkpoint statistics, according to home stay requests and restrictions have reached. Although that number has recovered since then, even the busy holiday season saw passenger volumes less than half a year ago, with 1.2 million people traveling on December 27, compared to 2.6 million last year.
While it is too early to say what impact Christmas trips will have on coronavirus infection rates, experts fear an additional increase, as was recorded after the Thanksgiving trips. The economic recovery of airlines and other face-to-face industries depends on health recovery, and trying to put the latter before the former ends up risking both.
“Air travel gives people hope,” Helane Becker, an airline analyst at Cowen, told NBC News, “but you can’t travel if nothing is open.”
Airlines received $ 25 billion in government assistance under the CARES Act. It required them to keep employees on the payroll. After that funding ran out, airlines were forced to account for personnel costs, encouraging early retirement and voluntary leave, negotiating costs with unions and implementing licenses and layoffs for the remainder.
The industry obtained an additional $ 15 billion in funding in the new coronavirus aid package signed on Sunday night by President Donald Trump. The account has some restrictions: airlines must start paying retroactively from December 1st, limit clearing and do not make any dividend payments.
Internationally, some operators see opportunities in the crisis. Michael O’Leary, the chief executive of Irish discount airline Ryanair, told the Financial Times that his airline could snap up routes and airport slots abandoned by some of its rivals. He also envisages consolidation in the industry, placing orders for the Boeing Max jet that he predicts will be a “game changer” for fuel efficiency and capacity.
“We have consistently planned for a reasonably quick recovery and are constantly disappointed,” he told the Financial Times. “What has changed is that vaccines are coming … The question for our industry is: is this recovery in May or August? We just don’t know. “
The Boeing 737 Max returned to service in the United States this month, after the flight equipment was overhauled to address safety and regulatory issues, after two accidents with just a few months’ break that killed everyone on board. While Max’s return was welcome news for the industry – the disaster cost Boeing at least $ 20 billion – customers will have to be educated and motivated to get back on board. Trust will take time to recover.
The profits of the American airline industry are expected to fall by nearly $ 46 billion in 2020, according to estimates by IATA, an airline trade association. Assuming a national distribution of vaccines in the second half of the year, profits for 2021 are expected to fall by $ 11 billion.
Vaccinated or willing to risk a flight will find savings to entice them to board.
“Consumers will face lower real travel costs, as airlines will continue to make significant discounts on ticket prices to stimulate demand,” reported IATA, based on surveys by the airline’s chief financial officers.
Tickets are being sold at great discounts. Non-stop flights from New York to Orlando or Austin, Texas are on sale for about $ 50 a ticket, said Scott Keyes, founder of Scott’s Cheap Flights, a discount ticket site, and from Denver to Los Angeles, for US $ 71. Although international rates are rising for next summer, there are still deals to be closed. A summer 2021 return trip from Phoenix to Tokyo can currently be found for $ 579, with flights to and from most US cities to Puerto Vallarta available for less than $ 300.
Airlines will have to adopt new technologies and retire older, less fuel-efficient planes to stay afloat and reform some of their older business models, according to a report by the McKinsey and Co. consultancy. fewer hubs, longer scales to fill. operations, more dynamic pricing and use of advanced analytics to adjust cruise speeds and gate assignments to make it easier for passengers to make close connections.
The industry was strongly inclined to adopt new cleaning and safety protocols to mitigate the risks of coronavirus during air travel, installing high-performance air filtration systems, sanitizing airplanes and training staff. Passengers are required to wear masks and can be placed on non-flying lists in case of non-compliance. Some airlines now offer pre-flight tests with Covid-19 or at airports, and Delta this month announced a partnership with CDC in tracking contracts for international passengers.
It will still be a long winter and a cold spring.
The number of routes between cities has already dropped and airlines will not build any new ones unless they are immediately profitable.
“We anticipate that smaller cities and even medium-sized cities within a two- or even three-hour drive from a major airport will lose service,” said Becker.
Airlines have accumulated cash reserves at the beginning of the crisis, but they will be extended until 2021. The hope is that if they calm down, and are flexible to increase when demand returns, they will be able to hitch a ride on what is expected. an increase in pent-up demand when security resurfaces and widespread travel resumes.
“The challenge is to reach that date,” said John Grant, airline analyst at aviation data company OAG, in an email. “The industry and airlines will return, not immediately stronger, but ultimately remodeled, redesigned and ready to meet whatever the new challenges are.”
Analysts do not believe there will be more significant consolidation in the industry, unless the vaccine does not go according to plan.
“If the pandemic persists, we are likely to see bankruptcies” in the second half of 2021, Becker said.
In a December 21 letter to employees, United CEO Scott Kirby and President Brett Hart thanked the team for their hard work and said that while the vaccines are promising, the extent of payroll support is unlikely, for itself, to fill the license gap until the passenger is expected to demand to begin resuming in late 2021.
“We just don’t see anything in the data that shows a big difference in reserves in the coming months. That is why we expect the recall to be temporary ”, they wrote. “But, as we said before, we see the light at the end of the tunnel.”