‘Reckoning day’ could be ahead for airline industry facing coronavirus challenges
A United Airlines passenger jet takes off with New York City as a backdrop, at Newark Liberty International Airport, New Jersey, Dec. 6, 2019.
The novel coronavirus pandemic has put airlines around the world in difficult positions, as the industry struggles to keep financially afloat while keeping passengers safe.
British Airways owner International Airlines Group has exhausted every avenue to shore up its finances and is burning through cash, its chief executive officer said on Monday, as the aviation industry warned of the fresh damage it would suffer if Britain quarantines international arrivals as part of measures to prevent a second peak of the coronavirus pandemic.
South Korea’s largest airline Korean Air will decide whether to sell up to about 1 trillion won, or $820.24 million, in shares at a board meeting on Wednesday, as finances come under strain from the coronavirus pandemic.
And a major US airline trade group on Saturday said it backed the US Transportation Security Administration checking the temperatures of passengers and customer-facing employees during the coronavirus pandemic.
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Airlines have gone from raking it in to now losing tens of million dollars a day. Passenger traffic is down more than 90%, according to trade group Airlines for America. Among all of the unknowns the pandemic has wrought, the future of airline travel is a significant question.
Josh Solera, a global airline consultant for the advisory firm Egon Zehnder in Houston, Texas, spoke with The World’s Marco Werman about what’s next for the airline industry.
Marco Werman: Aside from getting flights going again, Josh, is there kind of a calendar for survivability? How many more quarters does the industry have to get through before things look like you need a new scenario plan?
Josh Solera: Everyone’s really looking toward Oct. 1. The government has given the carriers a bailout between now and then to continue operating. If passenger traffic doesn’t improve substantially before then, I think Oct. 1 could be a really big reckoning day for the industry.
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And when you say a “really big reckoning day,” what is the industry going to have to kind of face up to on Oct. 1?
A lot of leaders have publicly come out and said we’re going to have to cut jobs, we’re going to have to cut flights. We’re going to have to change the way in which we operate fundamentally in order to continue to be able to survive. For right now, they’re continuing operating flights that are, in many cases, not profitable. And that’s going to have to shift on Oct. 1. They’re cutting down costs, but they can only go so far until Oct. 1.
So I saw a photo of a United flight this weekend that was completely full, despite what the CEOs have said about keeping middle seats open. It’s something that many officials, business leaders obviously need to think about — safety versus the bottom line. Is that how you see it? And should it be seen that way, if the bottom line’s future is also really about safety?
Marco, I really think it’s an “and” rather than an “or,” and I think most leaders I’m speaking to really understand that — whether you’re talking about leisure travelers or business travelers. The future of aviation is going to look different and it’s going to have to make the bottom line work and it’s going to have to make passengers feel comfortable and safe. All these airlines are trying to figure it out. Everyone’s doing it in a slightly different fashion. You’re seeing a bit of a patchwork of what different carriers are doing here versus there. There’s no standard right now. There aren’t standards globally. There aren’t standards between carriers. As carriers innovate and change the way they do things, some may do different things. Some things may work, some may not. But I think at the end of the day, all these airline leaders understand that they’re going to have to make passengers feel safe. And the airline industry has been a safe industry for many, many years in terms of flight operations. This is just a different way of thinking about safety.
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There’s a big difference between international routes and smaller domestic routes. One can imagine that passengers’ decisions about international travel will be taken more judiciously than before in the future. At the same time, you can also imagine shorter domestic routes may suffer because people may just opt to take a train or drive. What routes and what carriers are most vulnerable, do you think?
You’re absolutely right. There are differences between short-haul and long- haul. Getting on a plane from, say, Houston to Tokyo, is going to feel very different than getting on a plane from Houston to Dallas. And you are right, people are reconsidering which routes they’re going to take, whether or not that flight is really necessary and what it’s going to mean. And while you may be able to, say, on a short-haul flight, not have food or beverage service out of safety, that’s really tough on a long-haul international flight. And so carriers are having to think not just about what did they do, but what do they flex depending on their routes. Carriers who do short haul are going to have challenges. Carriers who do long haul are going to have challenges. Those challenges might look a little different. But no matter what — no carrier is immune from this right now.
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Realistically, as long as the world does not have a vaccine, how do you see the future of the aviation industry?
I think you’re actually going to see a lot of innovation. Some of it’s going to work. Some of it’s not. You know, people are blocking middle seats. People are thinking about staggering. People are thinking about how we even change the way seats are fundamentally structured on a plane. In some ways, there’s going to be more innovation in the aviation industry because of this than there may have been in some time. At the same point, you’re likely going to see some carriers continue to struggle. You’ve seen, recently, a couple more declare bankruptcy just in the last couple of days. So it is going to continue to be a hard time. Those leaders who are able to inspire confidence in their employees, who can inspire confidence in the travelers — that they are going the extra mile to make them keep them safe, to keep them healthy and make them have a truly good experience — are going to be the winners in this.
This interview has been edited and condensed for clarity.
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