The unprecedented collapse of airline traffic across the world has left many carriers on the brink of bankruptcy. Parking lots of commercial jets are scattered across the globe as carriers reduce flights amid travel restrictions due to the COVID-19 pandemic.
Carriers are under severe financial pain, learning how to survive with much of their fleets grounded, reported The Wall Street Journal. In the US, airlines have applied for $25 billion in government funds. The problem is that the bailout might not be able to float the industry for the next several months as consumers will stay away from flying for the time being.
“Nobody’s traveling in the next 30 or 60 days,” said Vasu Raja, American Airlines Group Inc.’s senior vice president for network strategy. “But nobody is really making any plans to go travel in the next 90 to 150 days, either.”
President Trump recently said that his administration is looking into grounding some domestic air travel between cities that are COVID-19 hotspots. Internationally, airlines have been reducing flights for the summer season.
In Frankfurt, Deutsche Lufthansa AG Chief Executive Carsten Spohr said there is a “pause” in the airline industry, and any restart could be gradual.
“I think it’s a stop, reverse the tape, and then restart at a slower speed,” Spohr said. “There will be no reset to normal.”
Spohr has spoken with government officials where his carriers are based, indicating that his airlines, which also includes Austrian Airlines, Brussels Airlines, and Swiss International Air Lines, have reduced its capacity by 94%. He said 700 of its 763 aircraft are grounded.
Spohr said with 700 planes parked for an extended period, there’s a risk that algae will grow in the fuel tanks. He’s been searching for supplies of a chemical that can be put into the fuel tanks that would prevent algae from developing.
As for smaller airlines, one European carrier has kept its planes flying to avoid creditors from seizing the aircraft, a source told The Journal.
“We’re getting many inquiries from airlines about protecting their assets, including protecting from repossession,” said Regina Lee, a managing director at consulting firm Alix Partners.
József Váradi, CEO of Budapest-based Wizz Air Holdings PLC, said operations are being wound down, and salaries have been cut in half.
Váradi has found a new business in these challenging times, one where flying “repatriation missions for governments” has been in high demand for the last several months. He also said his business has transformed into a cargo carrier, shuttling medical supplies from country to country.
It has become evident that many large carriers have grounded a majority of their fleets as travel restrictions persist across the world. Airlines in the US have applied for government bailouts that will bridge them for several months. Other carriers are trying to adapt to survive.
But as Raja said, consumer demand for flights could be two months out, and even then, people have not made plans to travel for the next five months, which could lead to a bankruptcy wave in the airline industry or at least further consolidation.
Mark Cuban told Fox News over the weekend that the pandemic will usher in a massive transformative period called “America 2.0,” where “everything” will fundamentally change about this country. One significant change will be consumer choices, and no American is going to step into an airplane anytime soon.
What could save the airline industry is the ushering of “immunity certificates” to people who have developed resistance to COVID-19. This would allow people who have developed antibodies to the virus to travel freely.