Introduction
Today, the world passes through the hard times because of the pandemic of coronavirus that affects all spheres of human activity. COVID-19, its extremely virulent nature, and the absence of vaccine preconditioned the need for severe restrictive measures to avoid multiple contacts between people and stop the spread of the virus. Unfortunately, for the contemporary globalized society, quarantine measures demonstrate reduced effectiveness because of the availability of various means of transport. For instance, civil aviation is considered one of the major ways in which COVID-19 spread to other states and preconditioned the start of the pandemic. Governments responded to this tendency by limiting flights and closing airports as one of the possible means to avoid the further deterioration of the situation. However, these measures have an extremely strong negative impact on the aviation sphere in general.
Background
Coronavirus outbreak was firstly noticed in China and resulted in the introduction of strict regulations to minimize the movement of individuals and prevent them from entering areas not affected by the disease. Unfortunately, regardless of the measures used by the Chinese governments, multiple other states failed to limit transportation and air travel. In accordance with the ICAO’s report, about 4.3 billion passengers were carried by scheduled services in 2018, and the number continued to increase in 2019 and 2020 (“Effects of Novel Coronavirus”, p. 4). It means that after the appearance of the first patients with COVID-19, the sphere managed to transport several millions of individuals to different states (ICAO, “Economic Impacts of COVID-19”). For this reason, there was a need to stop regular flights to avoid future problems and new cases of the disease. Today, the sphere of civil aviation experiences one of the most complex periods in its history because of existing quarantine measures.
Reduction in Demand
One of the first visible and most significant effects is the considerable reduction in the number of flights and passengers. Statistics show that the most influential and powerful airlines, such as Lufthansa Group, Ryanair, and IAG Group, experienced a drop of about 48% of passengers (Mulfati). For Ryanair, admit the decreased from 10.9 million individuals to 5.7 million (Mulfati). Moreover, Turkish Airlines, Air France, and Norwegian Air lost 52,5%, 58,6%, and 61% of their traffic correspondingly (Mulfati). From the managerial perspective, these numbers can be considered a disaster as they mean that all carriers enter the extremely complex phase characterized by the critical decrease in the demand, substantial financial losses, and the need for effective measures to overcome the crisis caused by the pandemics.
Forecasts
Correctly realizing the complexity of the situation and the negative impact of restrictive measures on the airline industry, international organizations such as ICAO try to make forecasts related to the disease. It predicts the duration and magnitude of the outbreak, duration of containment measures, the degree of clients’ confidence, and the economic conditions as these factors will impact the airlines in the future (ICAO, “Effects of Novel Coronavirus”, p. 3). However, the lack of certainty regarding the spread of COVID-19 results in the introduction of several scenarios depending on the course of the disease. If the first signs of recovery emerge in late May, ICAO estimates that the reduction in seats offered by carriers from 39% to 56% will be observed (“Effects of Novel Coronavirus” 4). It means a potential loss of gross operating revenues around $231 billion (ICAO, “Effects of Novel Coronavirus”, p. 4). At the same time, if the first signs of recovery are seen in the third quarter or later, up to 72% of reduction in seats can be achieved, with the $273 billion of financial losses (ICAO, “Effects of Novel Coronavirus”, p. 4). Both these scenarios indicate an extremely strong impact on COVID-19 on the airline industry.
The strategic importance of the aviation sphere and the high demand from other sectors such as tourism and other industries served as the guarantee of its stable evolution and income. However, because of the complexity of the existing situation, airlines face a reduction in demand. The majority of carriers report a decrease in the number of international passengers from 44% to 80% compared to 2019 (ICAO, “Effects of Novel Coronavirus”, p. 5). Additionally, the collapse of the tourism sector that is closely linked to air transportation preconditioned the one-third cut in revenues (ICAO, “Effects of Novel Coronavirus”, p. 5). For this reason, from the managerial perspective, coronavirus pandemics affect the work of the whole sector and introduce the need for planning and implementation of recovery measures that will be able to realign the effective work of civil aviation.
Financial Losses
The financial losses mentioned above are one of the ssenessentialllenges affecting the airlines at the moment and introducing the need for strategies to overcome the crisis. For instance, Lufthansa Group, a giant multinational corporation providing services to millions of passengers, considers bankruptcy an alternative to state funding as creditor protection would serve as the guarantee that the company will not lose its equity, board seats, and other important elements of its structure under the pressure of government (Mulfati). The scope of the problem is also evidenced by the fact that the majority of modern airlines face similar issues and need solid investments and support to recover after the crisis caused by COVID-19 and limits on air travel.
Carriers also experience significant losses because aircraft stand idle and demand high costs to preserve the working state and avoid problems in the future. A similar situation can be observed with employees as in the majority of countries affected by COVID-19 quarantine measures presuppose staying at home and doing some tasks by using available equipment (“Understanding COVID-19’s Impact”). However, for international carriers, it introduces the need to pay salaries for workers who are not able to perform their traditional functions (“Understanding COVID-19’s Impact”). Regarding the projected 3% contraction in the world GDP in 2020 and the absence of income because of the limit on air travel, airlines face a serious challenge because of the lack of options on how to guarantee that aircraft and specialists will remain in optimal conditions.
Consolidation
The problems outlined above that the bankruptcy, which is considered as one of the possible options by Lufthansa will also become a realistic outcome for other companies operating in the given sphere. It can also mean that hat consolidation as companies might merge regarding their size and available resources to overcome the crisis and preserve the ability to provide clients with services they might need. It is predicted that only large national airlines in the USA and Europe will be able to survive and enter a new phase of their evolution (Mulfati). In contrast, smaller carriers, such as those already consumed by the Lufthansa Group or other giant corporations, can survive only if some significant restructuring and additional investment are introduced (Mulfati). It becomes one of the negative impacts of COVID-19 today.
Safety Concerns
Another significant challenge that airlines face today is the need to guarantee safety to passengers. This concern has always been topical for the sphere; however, today, along with the need for effective anti-terrorist protection, there is also a requirement to guarantee that all passengers will be healthy and no patients with coronavirus will be on a plane, as it will mean a serious threat to the health of other passengers and the high risk of a new outbreak of COVID-19 in distant regions (IATA). The creation of a safe environment of this sort preconditions the need for additional investment and reconsideration of the approach to operations management to align processes in accordance with existing recommendations.
The first attempts to achieve the given goal can be seen today. For instance, all international airports are reorganized to create specific zones to monitor the state of arriving passengers and discover the possible signs of the disease. The staff is also equipped with remote-sensing thermometers and other devices that help to evaluate the state of individuals (“Understanding COVID-19’s Impact”). Another measure presupposes that panes should fly half-empty as it can help to seat passengers in a way that guarantees the appropriate distance between them and reduces the chance of being infected (“Understanding COVID-19’s Impact”). Finally, personal protective equipment might also be needed to guarantee safety to all passengers. The given changes result from the COVID-19 pandemic and also demand serious alteration in the managerial approach as there is a need for new strategies that consider these elements.
Load Factor and Hubs
The reduction in the demand for air travel increases the importance of the aircraft load factor. The fact is that regional and small airports already experience a decrease in traffic that affects the work of companies. Under these conditions, hubs acquire the top priority as passengers should be concentrated to guarantee that corporations will have a sufficient number of passengers. It will also precondition long queues and prolonged waiting times (Aboulafia). The higher levels of clients’ dissatisfaction with this factor can also be forecasted. Airlines will have to align their functioning to these new conditions to ensure that the transportation of passengers to hubs and their further management meet their expectations and guarantee their desire to use these services again (Fauvelle). Moreover, the VIP lounges start to play an essential role as carriers benefit from these facilities as they help clients to enjoy their staying (Fauvelle). The increasing meaning of hubs and the need to create practical approaches to working with clients under new conditions introduce the need for additional investment.
First Class and High-Capacity Aircraft
Finally, COVID-19 affects the management of giant planes and first-class passengers. It is reported that because of the need for increased flexibility and the reduction in the demand for services, airlines start to use medium-capacity aircraft as their profitability can be achieved with fewer passengers, which is vital regarding the current situation (Fauvelle). That is why the need for the improved management of giant planes and their future becomes one of the important parts of modern civil aviation. As for the first-class passengers, the demand for better travel conditions, and a comparatively low level of passengers can promote the development of the business aviation, with the corresponding reduction in the firs-class offers in regular carriers as it will mean the decline in the number of other passengers (Fauvelle). These two aspects become the elements of aviation management that should be considered today.
Recommendations
The existence of the factors mentioned above, and the overall complexity of the situation that can be observed today, introduce the need for supportive measures that will help to avoid the collapse of the industry. Its strategic importance for the globalized world means that governments should play a fundamental role in the alignment of the appropriate work of the sector after the pandemic. One of the possible ways is the introduction of tax relief and loans to airlines that will help them to recover and pass through the complex period and acquire new clients. Another possible option is the financial support provided by governments and agencies to guarantee that companies will not initiate the bankruptcy procedure and preserve their ability to provide transportation services to millions of passengers annually. The collapse of this sphere will mean multiple challenges for the global discourse, which means that there is a need for effective strategies to avoid it.
Conclusion
Altogether, the pandemics of the coronavirus that affects the world at the moment also caused substantial harm to the airline industry. The reduction in the number of passengers, the prohibition on air travel, and the need for additional security measures mean significant financial losses for carriers. From the managerial perspective, it introduces the need for effective strategies that will help to overcome the crisis and restore the effective work of the sector. Moreover, governmental support and investment of other parties can also help to achieve success and avoid the collapse of multiple airlines or their disappearance.
References
Aboulafia, Richard. “COVID-19: Airlines Impact Jan 30.” GLG.
Fauvelle, Lorene. “COVID-19: 7 Specific Impacts on the Future of the Aviation Sector.” Into the Minds.
The International Civil Aviation Organization. ‘Effects of Novel Coronavirus (COVID‐19) on Civil Aviation: Economic Impact Analysis.” ICAO, 2020.
Economic Impacts of COVID-19 on Civil Aviation. ICAO.
The International Air Transport Association (IATA). “IATA Updates COVID-19 Financial Impacts -Relief Measures Needed.” IATA, 2020.
Malfatti, Justin. “Coronavirus News: Regular Updates on COVID-19’s Impact on the Airline Industry.” Apex, 2020.
“Understanding COVID-19’s Impact on the Airline Sector.” Deloitte, 2020.