The Struggle of the Aviation Industry
Airports globally have become a massive parking lot
The COVID-19 pandemic has forced the global aviation industry to place travel restrictions on nearly 40 percent of the world fleets, roughly 10,500 passenger fleet, according to International Air Transport Association (IATA).
Due to the high volume of passenger planes parked, airlines have an unprecedented challenge of where to store them. Legacy airlines such as Delta and American place their aircrafts close to taxiways, maintenance areas and some unused runways.
In just three months, there has been a 90 percent decrease in travel demand. American Airlines has seen an estimated loss of $1.1 billion, along with an $70 million loss daily in its second quarter.
American Airlines posted worse than expected first quarter of 2020 in comparison with bankruptcy six years ago. American Airlines shares have dropped four percent this year, not only a correlation with pandemic but due to 2019 poor investment in 737 Max planes.
The CEO of Norwegian Air, Jacob Schram, described the impact that COVID-19 has had on the airline industry.
“The turmoil in the capital markets has meant that in practice loans and credits are now closed, which means that it is not possible to finance businesses in a normal fashion,” said Schram.
The pandemic has already placed struggling airlines into a more significant challenge. Smaller Asian airlines compared to more prominent airlines in North America predicted bankruptcy as COVID-19 persists. Due to the heavy blow of low demand for flights, Weak Hong Kong Airlines is already seeking a lifeline from Air China.
“While no one has a perfect crystal ball, everyone expects recovery will be slow and demand for air travel will be suppressed for some time,” said Doug Park, CEO of American Airlines.
Over 100,000 American Airlines employees have agreed to the terms of a reduced work schedule or partial pay leave. In contrast, 4,500 have decided to accept the early retirement package and, at the same time, leave the company permanently along with the retirement of their old aircrafts such as Boeing 757’s and 767’s.
“Never before in our industry have, we faced such a significant challenge,” said Park.
