Fee for downtime: why the global airline market could lose more than $ 250 billion

Amid the COVID-19 pandemic, global airline revenues risk falling by more than $ 250 billion. As a result of the massive introduction of quarantine measures from January to September 2020, the global air transportation market may miss 1.2 billion passengers. According to experts, the consequences of coronavirus most hit the aviation sector in the US and Europe in anticipation of the tourist season. At the same time, state carriers and an increase in freight deliveries should help Russian carriers. When the global aviation market will be able to recover from losses.

From January to September 2020, the number of passengers on international flights can be reduced by approximately 1.2 billion people compared to the same periods of the previous years. This is stated in the forecast of the International Civil Aviation Organization (ICAO).

According to experts, amid a sharp decline in demand, the global air passenger flow risks falling by almost two-thirds relative to the initial forecasts. As a result, in the first nine months of the year, financial losses in the revenues of global airlines can range from $ 160 billion to $ 253 billion.

The COVID-19 pandemic and subsequent strict quarantine measures in most countries led to the closure of land and air borders, which provoked a massive reduction in passenger traffic. According to a recent study by the Boston Consulting Group (BCG), airlines around the world decommissioned about 49% of their fleet because they simply have nowhere to fly. The market is quarantined.

At the same time, airlines are still forced to spend money on servicing aircraft, parking aircraft, and paying salaries to employees. In the case of prolonged quarantine amid rising costs, some carriers may be on the verge of bankruptcy.

Almost all aircraft are leased (finance leases), and this is the most serious expense item for any airline. Of course, many board owners are now in the position of their customers and are discussing individual conditions with airlines. Nevertheless, if the situation worsens, then companies will not be able to pay under leasing agreements at all, which will lead to the loss of some fleets and, as a result, to the departure of some global airlines from the market.

Empty airports

According to ICAO experts, North American airlines risk significant losses. First of all, we are talking about US carriers. Currently, the States is the leader in the number of coronaviruses infected, which is why the country’s largest airlines have already suspended up to 90% of scheduled flights.

The US national airline industry is in a difficult position due to the catastrophic decline in air passenger traffic. If large companies still have the resources to ride out the crisis, then small carriers, which depended on charter flights, run the risk of falling by the time the quarantine is lifted.

Meanwhile, according to ICAO, European carriers were in even more difficult situations. According to the organization’s specialists, according to the results of April, occupancy of seats on European flights may be reduced by 92%. At the same time, during the peak summer for the countries of the region, the indicator will also show negative dynamics.

Amid the pandemic, Europe is facing the worst tourist season in decades. In the summer, EU countries were one of the most popular resorts in the world, and local carriers made the main ticket office in these months. Now they suffer record losses. For example, the German Lufthansa loses about € 24 million per day. Before the onset of the crisis, the airline’s reserves amounted to about € 4 billion. Thus, the reserves may last another maximum for six months.

The crisis of the global civil aviation market has also affected Russian companies. The largest national carriers have already stopped selling tickets for international flights, and domestic routes are also being reduced. At the same time, companies began to focus on freight transportation, which could mitigate the impact of the COVID-19 pandemic on the industry.

Russian air carriers are now as difficult as their counterparts abroad. However, key companies have already increased their freight traffic by an order of magnitude to reduce costs due to reduced passenger flights. Also, state support for the industry in the framework of the anti-crisis program of 23 billion rubles has a positive effect. I do not exclude that the industry will still need additional injections from the government, but the funds will help companies wait out the crisis season.

According to analysts, the restoration of the global aviation industry may occur no earlier than 2021. Even in the case of smooth removal of quarantine restrictions, states will not immediately open their borders. As a result, the passenger air transportation market will continue to remain under pressure.

It all depends on the pace of stopping the pandemic and the subsequent lifting of restrictions. Current forecasts indicate that the disease will not recede earlier than the end of summer. As a result, international flights can resume, most likely, only in the spring of 2021.

Graduated from Embry-Riddle Aviation University with a master's degree in aviation science. He began his career as an aviation researcher in local periodicals. Has a pilot license. Now are the author and developer of the Plane Worlds.