How The Airline Industry Will Transform Itself As It Comes Back From Coronavirus
The world's commercial airlines and other aviation businesses face significant financial stress and perhaps bankruptcy in the coming months from the unprecedented, unexpected, and broad shutdown of travel due to the rapid spread of Covid-19. Airlines in most regions only have two to three months of cash to cover their operations, according to IATA, but this hides huge variation in the financial strength of individual carriers. The best airlines generate more profits and have stronger balance sheets than in 2008, but most airlines remain financial walking wounded.
Within this backdrop, the industry faces massive pressure on cash flow from extraordinary travel restrictions and a tremendous drop in passenger demand. For example, according to the privately maintained COVIDAirlineTracker, as of Saturday over 117 airlines had grounded 90% or more of their capacity and over 167 had grounded at least 40%. On March 24, TSA counted a more than 87% decline in travelers in the USA vs. the same period last year.
Where the airlines go, the value chain will follow. For example, according to data from Rotabull, aircraft parts transaction volumes fell 7% for each of the first two weeks in March. Internet travel agencies and global distribution system bookings will also decline. Although aircraft order books haven't changed for now, orders and deliveries will certainly slow dramatically in the coming months as airlines find themselves awash in unused capacity. If Boeing got permission for its 400 or so grounded 737 MAX jets to fly, would any airline want or need that capacity?
