Aviation industry set for “long-term crisis”, expert says

The calamity faced by airlines worldwide after the 9-11 terrorist attacks could be just a blip on the radar compared to today’s coronavirus crisis, says aviation expert Pilar Wolfsteller of Flightglobal, who says a number of carriers will be facing stiff challenges as the pandemic continues across the globe.

Major airlines worldwide issued a joint open letter on Monday asking governments to support their carriers in their time of need, as nations close borders and restrict both domestic and international travel in aid of slowing the spread of the COVID-19 virus.

“The unprecedented circumstances triggered by the coronavirus outbreak pose an existential threat not only to the airline industry but more generally to global trade and commerce, and social connectivity,” said Jeffrey Goh, chief executive of Star Alliance, one of three airline groups including SkyTeam and oneworld which published the letter.

“As airlines stretch their limits to manage the crisis, it is equally critical for governments and stakeholders to avoid further burdens and step up with measures, as some have, that will ensure the future of the travel industry.”

The news comes as major carriers have announced drastic cuts to service in recent days.

American Airlines (American Airlines Stock Quote, Chart, News Nasdaq:AAL) on Saturday said it will be shuttering 75 per cent of its international service up until May 6 and grounding most of its widebody fleet, with British Airways announcing a similar 75 per cent reduction.

Ryanair, Europe’s largest carrier, announced a reduction of seat capacity by 80 per cent.

“It’s going to be a devastating blow to many of the carriers,” said Wolfsteller, speaking to CNBC on Monday. “We’ve got a number of the majors in the United States announcing 40 per cent, 50 per cent, 75 per cent in their international service.”

“Then we also have local carriers such as Spirit and Frontier that primarily have regional networks here in the United States that are going to be running into a lot of trouble because their cash flow isn’t that great,” she said. “So we have a whole bunch of problems running from the regionals all the way up to the international carriers and we’re going to be facing a pretty long-term crisis in the aviation industry.”

Perhaps more dire, the International Air Transport Association, which represents almost 300 airlines, said that the pandemic could cut revenues by US113 billion in 2020 alone and the Centre for Aviation claimed that the coronavirus will bankrupt most of the world’s airlines by the end of May unless governments and the industry work together to address the crisis.

Wolfsteller says not knowing how long the pandemic will go on puts the current crisis in a different category compared to the disruption seen in the airlines industry following the September 11, 2001, terrorist attacks on the United States.

“It’s an open-ended question at the moment,” Wolfsteller said. “After 911, airspace closed for about four or five days before air travel slowly got back to normal, and experts and industry analysts are starting to say, ‘We don’t even know if this is going to be worse than 911.’”

“Just looking at the demand drop-off over the last couple of weeks, we really don’t know where the bottom is on this,” she said.