Industry Reopening: Airlines

Even before stay-at-home orders were implemented, which led to large swaths of American industries shutting down, the airline industry was feeling the pressure of the COVID-19 crisis. By mid-March demand for flights started to fall, as many realized that the COVID-19 outbreak would be a prolonged event. With demand for flights completely bottoming out in April, airlines have started to look at when and how customers will return. 

COVID-19 Impact

The airline sector is one of the industries most impacted by COVID-19. Entering the third month of its biggest crisis in history, airlines are expecting their revenues to fall as much as 95% in May compared to the previous year. Airlines for America CEO Nick Calio stated that US airlines are “burning through $10 billion of cash per month” and averaging 17 passengers per domestic flight and 29 passengers per international flight.

Looking towards Reopening

The return to business for airlines is complicated by state mandates that require a 14-day quarantine for visitors, as we have seen implemented in Maine. Beyond state restrictions airlines currently have a huge PR problem: how do they convince customers that flying is safe?

On May 4 the US Travel Association submitted a report to the White House and state governors outlining the necessary guidelines for a safe return to travel. Among these recommendations are:

  • Modifying public areas to keep employees and customers safe, including hand washing and sanitizing, personal protection equipment, physical barriers such as screens between customers and employees, and online ordering and curbside pickup
  • Implementing touchless interactions, when possible, such as online ticketing, touchless ID check, and virtual check-in
  • Enhancing sanitation procedures specifically designed to combat the transmission of COVID-19
  • Promoting health-screening measures for employees and isolating workers with possible COVID-19 symptoms

Airlines have already started introducing their own safety and health requirements. Starting May 11, American Airlines is requiring all their customers to wear masks, and enhancing cleaning procedures both on aircrafts as in airports. Southwest introduced their Southwest Promise program, which relies heavily on cleaning and hygiene procedures such as HEPA filters and disinfectants. 

Even when customers decide it’s safe to fly again, experts expect it will take at least 2-3 years before we see the same demand for flights as we saw in 2019.

Reopening Concerns

Beyond the logistical concerns of setting up new hygiene and safety regulations in tight spaces such as aircrafts and airport gates, the airline sector is largely dependent on others in the travel sector. Customers deciding to fly, whether for business or leisure, are also taking into account the safety of taxis, hotels, airports, and restaurants when arriving at their destination. Thus, to guarantee safety for both customers and employees close coordination between all players in the travel industry is essential.

The return of travel also brings the risk of spreading COVID-19 to areas currently untouched or where infections had already subsided. Researchers have recently discovered that many of the outbreaks in the US can be traced back to people travelling to and from New York City. To prevent such spreading by visitors, airports or airlines could implement stringent screening of passengers, including temperature and symptom screenings.

Assistance

The CARES Act is helping prop up the airline industry with $60 billion in financial assistance. This relief package, passed in late March, included $25 billion in loan and loan guarantees for passenger airlines, $4 billion for cargo airlines, and $25 billion in grants to pay employees through September. However, airlines did have to meet several conditions to receive federal aid. Among other requirements, airlines accepting aid are not allowed to lay off or furlough workers through the end of September, to buy back shares for a year after the loan is paid off, or to issue dividends to shareholders while receiving aid. Also, airlines receiving aid are required to continue servicing all airports they flew to before March 1.




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