This is a very different article to one I might have written just three months ago.
Our highly interconnected planet, one that isolates nobody, accelerated by the power of electricity and the jet engine, is about to see one of those two fundamental industries transit from the worst crisis in its history to what?
Yesterday I read a report from two separate aviation analysis organisations, and their separate but nearly identical conclusion was that every airline currently flying, if it remains grounded to the end of May, will be bankrupt.
Inevitably that is going to be the outcome for some. Those that have chosen to shut down now, much like those countries that did the same and are coming out of the other side of the pandemic slowly but surely, they will be there to come back later.
There are times for caution, times for compromise and times for absolute commitment to the most difficult decisions, without question and with utter ruthlessness.
This is one of those times.
Airlines still flying need to stop, lay off their staff, protect their people by keeping them at home, let governments pickup the financial safety net for those people. They need to tell their lease holders to lay off and when the time comes, in 8-12 weeks, when this thing retreats they can restart the business and build back up to meet demand.
Anything else is suicide. Risking crews – people – without absolute necessity is not acceptable. Keeping flying isn’t an option.
When the time comes to bring back staff, to bring back normality, remember their sacrifice, recall what they did for your company and thank them and pay them to the best of your ability, not to the lowest point you can get away with.
Across the world many airlines will come back to a very different world. It’s going to be 18 months before this virus has worked its way to a level that enables full open border air travel to resume. Old aircraft and aircraft too large to be useful because demand doesn’t justify them, are doomed to scrapyards or deep storage. 744,748i, A380, A343, A346, older 773/772 may find their lives drastically shortened.
Airlines are going to be pushed to cancel or defer indefinitely new aircraft, especially large ones. 777-9 is looking at lot less attractive right now. Nobody has taken delivery, nobody has paid the full sums upfront. It’s not impossible to walk away, and they will.
Smaller aircraft are going to be in greater demand longer term, but in the short to medium frame out to two years, there will be a slow down.
The space that will be left for the surviving airlines all of which will be financially weak to start with, leaves plenty of room for new startups, but the giants will be looking to keep them out. Especially the big groups like the US big three and the IAG’s of this world. RyanAir won’t be willing to let anyone snaffle away one route it thinks it’s entitled too, nor will easyJet.
Elsewhere where there is little competition like Australia and New Zealand, South America, the status quo will be maintained.
However, rely on nothing be the same. Big names may die off, and new airlines will emerge in their place. Much of it will depend on how much governments are prepared to do to prop up the ones that already exist. The future of BA for example isn’t really a British problem, it’s legally Spanish owned. Governments may find it hard to prop up bits of an international group. Virgin Atlantic on the other hand is still majority British owned.
Lufthansa Group and what happens to it will be a matter of much interest – it’s too big to let fail, it’s Austrian, Swiss, Edelweiss, Eurowings and Brussels subsidiary’s depend on its future. But it’s way forward under a mound of debt and repayable government loans is going to retard its ability to compete.
The next three years are going to be quite revealing and transformative. Don’t expect anything to be the same again, familiar yes, but different.
Stay safe. Stay well.