It’s no secret that airlines lost out in 2020. The Covid-19 pandemic put an end to nearly a decade of unbroken profitability for the sector and cut short an industry-wide boom in which thousands of workers were hired, hundreds of new planes were bought, and dozens of carrier networks were expanded.
Though the dust has hardly settled on this disastrous year, US airlines are already estimated to have lost over $35 billion as a result of the pandemic. This includes the first annual loss for Southwest Airlines in more than four decades. Nor do these losses show any sign of slowing down, with airlines continuing to lose $180 million each day in December.
As governments across the world ordered their citizens to stay at home, the resultant fall in passenger numbers forced US airlines to contract some $67 billion in debt in order to keep on maintaining their aircraft and paying their staff. Paying this back will likely hold down the formerly profitable industry for years to come.
And while 2021 may look a little brighter – with passenger numbers starting to climb and a global vaccination programme already underway – the industry is not out of the woods yet. The number of passengers is still down 45% from 2019 and the International Air Transport Association has warned of a further $38.7 billion in losses to the sector in 2021.
Nevertheless, airline bosses remain determined and optimistic about their financial situation. Delta CEO Ed Bastian has predicted his company will be able to turn a profit again by the spring. However, this relies on governments upholding their end of the bargain by reopening international borders. Earlier this week the industry body Airlines for America wrote to Vice President Mike Pence urging his administration to rescind current entry restrictions to travellers from Europe and other regions and replace these measures with a passenger testing programme. Without this kind of flexibility, it is difficult to see how the industry can even begin to recover.
More Than A Number
Airlines lost more than just money this year. Following the end to provisions under the CARES Act on September 30th airlines were forced to furlough some 32,000 workers – despite huge industry and union pressure for Congress to extend its funding.
While additional federal relief did come in December, in the form of a $15 billion payroll support package, by that point many thousands of pilots and other airline workers had already missed pay checks and benefits. And unless the situation is allowed to improve, it is likely that further cuts will have to be made.
As United CEO Scott Kirby hinted in December, workers may only be brought back from furlough “temporarily” as prolongued travel restrictions continue to hamstring the industry.
“the truth is, we just don’t see anything in the data that shows a huge difference in bookings over the next few months” - Scott Kirby
Unless serious restrictions to air travel, such as mandatory quarantines, are removed and replaced with a comprehensive testing programme, it is unlikely that Congress’ relief funding will amount to anything more than a temporary solution, and thousands more workers could be furloughed or lose their jobs.
The End of Business Travel?
A final, less-sung victim of 2020 is the long-term loss of business travel. While the pandemic has stifled passenger numbers across the board this year, the Wall Street Journal reports that between 19 and 36 per cent of airlines’ business traffic base will not return even after the end of Covid-19.
Coronavirus pushed many office workers to see working from home as a permanent possibility, while also accelerating the transition towards online meeting platforms such as Microsoft Teams and Zoom. This inevitably undermined the importance of business travel and the value companies placed on face-to-face interactions.
The importance of this to the airline industry cannot be overstated. According to Airlines for America, business travel constituted between 60 and 70 per cent of airlines’ total sales in 2019. Some airline bosses – including United’s Scott Kirby – believe these sales can be recouped in the long run, as companies rediscover the importance of personal interaction, but even he admits this may take a number of years.
The loss of business travel may seem like a minor footnote in the tragic history of 2020, but it is emblematic of the wider disconnection and depersonalisation brought about by this awful pandemic. A lack of face to face contact will undeniably undermine trust in businesses, just as the loss of personal travel has tested the patience and resolve of many families. And while the wonders of technology have allowed us to weather this storm better than we ever could have previously, it is important that in righting the ship, we don’t lose track of what is really important.