It seems I hit a nerve with my previous post about COVID-19 impact on the airline industry. It seems many of my readers think that the cyclical nature of the industry is normal and that furloughs and layoffs are the standard.
First, it is worth noting that the airline industry has historically had such low margins that it had been always the butt of the investors joke
Be that as it may, with the majority of the airlines being able to post a profit over the past few years. Profits doesn’t mean cash at hand, I am no economist, but read here.
The Airline industry made a revenue of 885 in 2019. The profits are a meagerly 3%. 29 Billion seems like a large amount of money, until you think that the airlines had to carry 925 Million passengers to make them.
That’s a profit of $30 per passenger. That’s a good year!
Now this is how much profit the airline made over the past period. Now the charts below shows that COVID-19 cost the airlines the equivalent of ten years of profit!
So the airline industry finally got a good decade and made money for its owners, shareholders, investors, public, etc.. Now that is all swept away. This doesn’t take into consideration the month of may.
My colleagues in the US and Europe, it is essential to understand how the picture looks in other parts of the world. Unions have for years made sure that the Airline industry is looking at the staff as the only disposable cost.
When unions have been tough and adamant to fight for their members, the airline has seen this as unnecessary cost that they need to shed. There are places…
where layoffs are the last resort
Singapore Airlines has asked its pilots to take unpaid leave for up to seven days each month, starting 1 April.
For Etihad, the troubled carrier in the Capital City of Abu Dhabi, UAE Executives, pilots and engineers will be paid half their basic salaries and cabin crew would be paid 25% less in April, the email said
Emirates has sent an email to its staff, which our colleagues have sent to us and it says the same will befall its staff.
A senior executive in Emirates told me, on condition of anonymity, that the strategy of the Airline requires having a pool of reserve pilots and it cannot afford to layoff many pilots. Replacing them to the standard acceptable to the Airline is not cheap or easy
Royal Jordanian, a smaller but certainly influential airline in the Middle East has also announced 50% reduction in salaries across the board. A memo that askapilot saw from their Flight Operation VP assured pilots that layoffs are a last resort. The pilot community in many parts of the Middle East are restricted from unionizing.
The VP who didn’t reply as of publication told pilots that the government announced a holiday and thus they will still be on paid leave until the official lock-down changes.
Khalil Wahhab, Vice President of the Independent Trade Union of Air Transport Workers in Jordan told us that the trade union, which represents some 300 workers is actually following up individual cases with some airlines whom are thought to be violating the local laws.
However, he acknowledged that Royal Jordanian is actually paying the full salaries of March. The slowdown due to government imposing restrictions on travel is officially labeled as paid leave up-to the end of March
The government in Jordan seems to be more hands-on and some experts we spoke to can confirm that layoffs and furloughs are not allowed as per the latest decree.
Pilots are essential to have airlines flying and they are essential in driving the airlines forward. However, depending on corporate culture and tone, they can be seen as part of the problem or part of the solution.
How does the novel Corona Virus COVID-19 affect your work?
This, or a close variety something that I get asked very often these days.
This is a rather long answer, but if you just want the effect on pilots scroll to the bottom
The Corona Pandemic is affecting the global economy in a major way. I would want to believe that 1% shrinkage of the economy is the expected outcome. However, I would think that this is not even the beginning of it.
Airline and Travel Industries
The travel industry however, is probably the most impacted and the airlines are feeling the hit
Europe is probably a prime example, as the countries agree to shutdown connectivity in order to contain the virus. The chart above is from Euro-control. Simply put, Euro-control is the Air Traffic Control agency for Europe. Europe has seen a drop of up-to 88% versus a year ago
In layman terms, these are the people who tell the us where to go and how to get there.Climb, descend, turn left, turn right, cleared for take-off, clear to land. That sort of thing.
They would know how many airplanes to expect based on seasonality, day of week, etc. They also track how many airplanes actually flew and what types because eventually, they would need to charge the airlines for their services
The phenomena is worldwide, though I don’t think it has peaked yet, many countries are maintaining connectivity while others are simply shutting down their airspace.
If a country experiences an influx of cases coming from abroad, this usually results in shutting down the airspace.
American Carriers are in there as well. They have lead the drive to cut capacity as the demand fir seats has all but faltered, during the past 2 weeks as Corona started becoming more mainstream in the US.
Data from the U.S. Transportation Security Administration showed about 180,000 passengers went through airport security checkpoints on Sunday; by comparison, checkpoints processed more than 450,000 passengers the prior Sunday and more than 2.5 million on the same day a year ago.
Business Travel News Article
Find the article here. Yes, these number are catastrophic and nothing the aviation industry has ever seen before. 82% reduction in passengers (granted, many are cancelled with some loads) is not something Airlines saw for more than a few days in their history.
I am certain that this is the biggest hit that Airlines took. Full Stop. Ever!
While the American Government and Congress are rushing to save the American Carriers, many governments in the world will feel compelled to do the same
So to sum up while airlines in the US might be running empty airplanes to benefit from the government subsidies, just like the European airlines were doing to preserve slots. The governments
How it affects us?
Pilots like all airline employees will feel the heat immediately. After 9/11, 2008 slowdown, deregulation, etc. Airlines have playbooks for disasters. The first thing is to assess how much of their staffing is disposable and to start immediately, furloughing pilots, delaying hiring, firing staff, etc..
Just like American carriers sent their K street cronies to the hill, to demand money after telling us that they will never need it. The same will apply to every airline from the top 10 lists.
This doesn’t mean that we are saved. However, many of the specialized groups of workers in the airline industry get a furlough. These employees are invariably well trained and specialized that airlines would like to able to call them back when things start picking up. They don’t want to keep them on the payroll, however.
A furlough is basically: “Go home and we will call you when we need you, also, apply for a new credit card as you will need it!”
This places many of those people in uncertainty, some are sick of how many times they have been furloughed. It seems that every economic downturn in the airline industry is immediately impacting them and their families. They move on to a different route and leave their dreams behind. Others wait until recalled and many pick up random jobs on the way.
Finally, those who are still flying, especially internationally, are sometime being put in harms way, whether or not a pilot can avoid contracting Corona when flying into an airport or city that has an outbreak is questionable.
Whether the sanitizers, wipes, masks and gloves can lower the risk is not doubtful. What is doubtful is the fact that pilots and cabin crew have to work in close proximity to each other. NY Times ranks pilots close to nurses in terms of proximity but not in exposure of course.
This is more of a long term thing, but whenever the economy was booming pilot unions were quick to point out the deficiencies in their contracts and seek better conditions. However, whenever there was a slump, airlines were quick to seek newer contracts with unions that reduce the pay and benefits. This COVID-19 disaster is almost certainly going to take airlines down that route as demand for pilots has softened locally and internationally for the first time
To sum up, this is not the best time to be looking for a career in aviation or to be employed in Aviation. However, I am hopeful that the world understands the impact on the economy of the Airline industry and the growth potential that the Airlines sustain.