COVID-19’s impact on the aviation sector has been vast and the recovery time is likely to be lengthy. The International Air Transport Association (IATA) has predicted that airlines will lose US$314billion in revenue this year – almost three times greater than its original ‘worst-case scenario’ prediction in March 2020.
Airlines around the world typically have a small to large aircraft fleet depending on routes flown and flight frequencies. This may include your popular ATR 72, Embraer 190, Airbus A-330, Airbus A-350, Airbus A-380, Boeing 737 series, Boeing 747, Boeing 777 to Boeing 787 just to mention a few, depending on whether the destinations are short, medium or long haul. To give a general idea of this, please see below:
- Delta Airlines -840 aircraft
- Air France -215 aircraft
- KLM – 116 aircraft
- Qantas Australia- 130 aircraft
- British Airways – 278 aircraft
- South African Airways -23 aircraft
- Ethiopian Airlines -126 aircraft
- Emirates Airlines – 259 aircraft
- Singapore Airlines – 139 aircraft
- Air Maroc -61 aircraft
- Turkish Airlines – 357 aircraft
In the light of COVID-19 that has disrupted our way of living and economies around the world, there is a need to re-think fleet and route strategy. Given that most countries have closed borders to air traffic, most airlines are saddled with aircraft that are not being used and have been parked in storage awaiting their fate post COVID-19. British Airways for instance, has moved some of its Airbus A380 fleet to storage in France.
So what should airlines do going forward to minimize losses in these trying times?
- Airlines need to have a fair mix of passenger and cargo/freight fleets. In the midst of the COVID-19 pandemic, cargo demand has risen dramatically which means airlines like Qatar, Ethiopian, Emirates and Turkish which have a good air cargo capacity are the ones to sail above the stormy waters.
- An alternative for airlines is to buy aircraft that can be easily converted to cargo at very short notice. Airbus claims that the A350 series can be converted to cargo in 2 days. This should be a factor in considering long haul aircraft purchases for example.
- Downsizing the fleet: This is the time to shed off old aircraft that guzzle fuel like A-380, A-340 & Boeing 747 that run with 4 engines. With most airlines needing bail outs/support of some sort, other areas like lease arrangements need to be critically reviewed.
- Another option worth considering is to convert older/bigger aircraft to freighters where there is heavy demand now like the Boeing 747 and 767 or A-340. All things being equal, the charges on freight will make up for fuel costs.
- Airlines need to look at the way they couch aircraft purchase agreements going forward in the light of acts of nature like pandemics so that they can delay purchases or re-schedule deliveries.
- Exploring the option of charter flights instead of leaving aircrafts to lie idle such as, ASKY Airlines and WFP agreement for staff travels within West Africa.
- Play more in the repatriation flights space: Both Ethiopian and Qatar are reaping large here with their fleet being used by other countries to evacuate their nationals to their home countries.
- Diversify fleet: It is clear that aside the need for passenger and cargo mix, one also needs to look at whether to do all Boeing, Airbus, Bombardier, Embraer fleet or have a mix. This will ensure that you are fuel efficient on routes run; be it short, medium or long haul. For that matter, I don’t expect an A-330 Airbus to be used for a route that is only 30 minutes to an hour when an ATR-72 or Dash 8/Q 400 series can run that service. The only exception will be if there is excess demand for such.
- Cut down freebies; like Wi-Fi, snacks, live TV, complimentary drinks etc. At this time given the need for social distancing, most flights will be half full so it would be suicidal to add extra overheads.
- Explore code sharing options: Given the serious impact of COVID-19, one will expect that this would negatively affect route expansion. A cheaper and quicker way to expand routes without airlines committing too much financially is to code share like how Air Maroc and American Airlines signed off in December 2019. Emirates also have a codeshare arrangement with Japan Airlines.
- Fly routes that make economic sense, not prestige: The fact that some airlines fly to a particular destination doesn’t mean any other airline will make profits on the same route. Kenya Airways for example, reduced their New York schedule from 7 to 5 a week after learning the hard way in December 2018. This was after all the razzmatazz with even a brand new Boeing 787 Dreamliner on the route!
The effects of COVID-19 on air transport has a far reaching impact on economies, individuals and businesses. Unfortunately, there is no immediate end in sight for the virus to be eliminated. Nonetheless, life must go on and mankind must fly some way, somehow. Passengers will need to cope with some discomfort and airlines would also have to be dynamic and adapt to fluid situations for the foreseeable future.
Robert H. Waterman a business management expert once said “a strategy is necessary because the future is unpredictable”. Given the COVID-19 dilemma, one will tend to agree with him but who could have predicted something like COVID-19?
Credit/Sources: Simple Flying, Wikipedia and CNN
>>>The author is an avid aircraft enthusiast and has over 21 years of banking experience. You can reach him on [email protected]