COVID-19 Is Over: Reliving March 2020-2021 Part 1

COVID-19 Is Over: Reliving March 2020-2021 Part 1
Photo Credit: Adrian Olstad/AviationSource

The World Health Organization (WHO) stated that COVID-19 is no longer a global health emergency. Let’s take a look back at how the pandemic affected the aviation industry.

In March 2021, AviationSource released a book called “Aviation & COVID-19”, where we documented what the effect of the pandemic was on each individual segue of aviation.

The book particularly looked at the time period of March 2020-2021.

Over the course of today, each Chapter from the book will be released for our audience to read for free.

Without further ado, let’s get into it!

Aviation & COVID-19 Chapter 1: The Calm Before The Storm…


COVID-19 Is Over: Reliving March 2020-2021 Part 1

This chapter dubbed The Calm Before the Storm, is deemed to be relevant because of the amount of growth aviation has been subjected to after the financial crash of 2008 up to this pandemic.

But even in the last twenty years, the industry had been shaken twice, being the 9/11 attacks and the financial crash itself.

Before we talk about this calmness and much-enjoyed success, such events should be reflected in this study to establish such disruptive motions of the industry.

The first was the September 11, 2001, attacks on the United States.

9/11


American Flight 11 and United Flight 175 both hit the World Trade Centre, with American Flight 77 hitting the Pentagon as well as United Flight 93 failing to hit the U.S. Capitol.

In all, it killed 2,977 innocent civilians as well as the 19 Al-Qaeda terrorists responsible for carrying out such atrocities (Stempel, 2019).

What followed was what those in the industry dubbed “organized mayhem” (Mola, 2007).

After such attacks occurred, the U.S. Department of Transportation immediately began a mass shutdown of American airspace through the U.S. National Airspace System, which saw all civil flights at its 460-controlled and 15000 non-tower-controlled airports be suspended all within one hour (ibid).

17500 air traffic controllers directed some 4300 tracked airborne targets back to the United States as well as 120 inbound overseas aircraft to Gander and Halifax in Canada.

Commercial operations remained dead until September 13, when partial reopening of airspaces was approved before it resumed. to full operations by September 18 (ibid).

For the industry itself, it caused a period of uncertainty, with airlines in the U.S., such as Midway Airlines, filing for bankruptcy.

Even though Midway’s financials at the time put them on the brink of bankruptcy, 9/11 was the final nail in the coffin for the carrier, which resulted in tens of thousands of jobs lost.

Carriers such as US Airways and United also felt the pinch as they filed for Chapter 11 bankruptcy proceedings in order to save themselves from full-blown insolvency (Makinen 2002, p. 9).

Such volatility in the industry because of 9/11 forced the U.S Government to generate a $15 billion package, consisting of $5 billion in short-term assistance and $10 billion in loan guarantees (ibid).

From a general perspective, away from the industry ever so slightly, around 430,000 jobs in New York City were lost, with around $2.8 billion in lost wages over the three months after the attacks (Dolfman & Solidelle, 2004).

GDP for the city dropped by $30.3 billion over that period as well as all of 2002.

After the effects were felt from the attacks, it is understood that up to a financial loss of $190 billion was revealed, which would have shaken the aviation industry itself to its core (Price & Forest, 2016).

Reasons such as consumer confidence to fly in the aftermath of a significant terrorist event would have created low levels of demand.

Hence such airlines filing for Chapter 11 bankruptcy in the U.S. or going into liquidation completely.

And even during this process, it also forced the airlines in a strong and viable way to make some changes.

Lack of passenger input and output canceled flights, and an increased cost to security procedures forced airlines to go back into negotiations with labor unions as well as lay off large levels of employees, noticeably American Airlines, who had to lay off around 7000 employees (Logan, 2018).

Even with many bankruptcy proceedings and job cuts being made in the aftermath of the attacks, scholars argue that the response of the Federal Government was “swift” in order to avert “a collapse in the industry” (Blunk et al. 2006, p. 11).

However, the research in Blunk’s paper also stated that “the detrimental impacts of the attacks were not temporary”, which is why it would have taken a substantial amount of time to recover the money lost as well as require such financial intervention from the state too (ibid).

Like with any major catastrophic event like this within aviation, there is always an unfortunate, necessary trait followed where the industry looks back on events such as this to solidify the framework and infrastructure needed for the future.

This was evidently seen in changes to security policy within aviation. It is why we see airlines recommending that passengers turn up for domestic flights up to two hours before departure so then they have enough time to get through security checkpoints, with the potential to be “randomly selected for additional screening, including hand-searching of their carry-on bags, in the boarding area” (Blalock et al. 2007, p. 5).

While at the time, these lost airlines billions of dollars in revenue due to such inconveniences taking place, “several studies conducted since 9/11 have found that passengers are willing to accept some additional inconvenience and/or higher prices in order to feel more secure” (ibid, p. 8).

This highlights an important theme that will be seen throughout this book, and that is consumer confidence.

A terrorist attack such as 9/11 would scare a lot of people from wanting to fly as there was always the possibility that it could happen again.

In the context of 9/11, this was an important thing as “the crisis in consumer confidence…supposedly pushed the economy into recession”, although this has been widely disputed by critics due to leading motor vehicle sales in October 2001 (Makinen 2002, p. 14).

As the report states, “A crisis in confidence supposedly leads consumers to refrain from purchasing durable goods”, which in the case of the automotive industry did not (ibid).

Makinen also argues that the crisis in consumer confidence was short-lived as “effects were not long-lived, for the data… show[ed] that economic growth resumed in the 4th quarter” of 2001 (ibid).

Away from the economic side of the cause, consumer confidence is psychological in nature, as humans respond either positively or adversely to change.

A study from NYC.gov found that up to four years after 9/11, citizens were still dealing with such psychological trauma, including using alcohol to suppress such pains (NYC.gov, 2021).

To link it towards flying, such psychological traumas will, of course, produce a fear of flying, which could, in terms, reduce the revenues of airlines operating out of the New York area and beyond.

This was one of the many factors in requiring further regulation on security in and out of airports, to both acknowledge that lessons had been learned from the attacks and also to reinforce confidence going into what were the future years ahead.

Before COVID-19: The Financial Crash of 2008


The Financial Crash of 2008 was devastating not just for the aviation industry but for the entirety of the global economic infrastructure. As the economic crisis broke out in 2008, this resulted “in the largest revenue decline and capacity reduction since 9/11” (Xu 2015, p. 9).

As a result, and again relating to consumer confidence, “consumers pulled back on discretionary spending, canceling or downsizing planned vacations; businesses tightened their belts and cut corporate travel expense accounts” (Borko, 2018).

For U.S carriers, they felt the pinch as well, losing a collective $24 billion worth of money because of the financial crash (ibid).

This, alongside the rising oil prices in 2010, resulted in airlines being forced into bankruptcy as their losses could not be controlled.

Notable carriers at that time, such as XL Airways, Oasis Hong Kong, Aloha Airlines, and Zoom Airlines, amongst others, became the victim of such financial pressure and problems (FlightGlobal, 2008).

For the industry, “a strong decrease of transport demand because of less transported passengers and goods”, “a dramatic reduction of supply (e.g., through bankruptcies and reduction of frequency)”, “changed transport flows (e.g., through mergers of routes and loops)”, amongst other factors represented some of the dire consequences for the industry at that point (Macario & Van de Voorde 2009, p. 7).

India is a big example of experiencing a boom in its economy from aviation to then experiencing the largest downturn it had suffered at that time.

A few years prior to the crash, “Six new carriers launched while established airlines laid on new routes and bought new jets,” as well as having “400 Boeing and Airbus jetliners worth about $37 billion” on order (Lakshman, 2009).

When the financial crash hit, carriers across India experienced losses of over $2.5 billion, which accounted for just over a quarter of the total predicted losses made by the International Air Transport Association (IATA) (ibid).

Air India, which, even to this day, is struggling to grip its finances at that point, reported annual losses of $1bn and had around $3.5bn in debt commitments (ibid).

The more staggering statistic listed by Lakshman about the carrier was overly concerning for the Indian market:

“Air India alone accounts for 10% of the total projected losses for the global airline industry this year — even though it carries just 0.35% of global traffic.”

It was figures, facts, and statistics like that which began to present the damaging consequences of what occurred in 2008 and was even beginning to take hold of the purse- strings going into 2009.

Over in China, China Eastern Airlines, at that point, had determined the current conditions as “grim”, with “the company’s operations and finances are under tremendous pressure” (AP, 2008). The airline’s bailout had raised to $1bn because of the continued downturn from the financial crash (ibid).

Consolidation was evidently a big thing to arise due to the financial crash. In 2008, we saw the likes of “British Airways finally coming to the altar with Iberia, Lufthansa taking out SWISS and Brussels Airlines” as well as “all three of the major [airlines] trying to consolidate further the transatlantic alliances” with the prospect at the time being that “90% of… services will shortly be provided by three ATI approved joint ventures of oneworld, SkyTeam and Star Alliance” (Aviation Strategy 2008, p. 2).

Why do we refer to 9/11 & The Financial Crash?


We refer to these two events because the COVID-19 pandemic has been seen as up there in terms of the devastation to the sector as well as it features similar durations when it comes to recovery.

“It generally takes at least five years for the industry to recover after a short-term upheaval” (Sehl, 2020). This has been seen evidently with those in the industry expecting the recovery to take place by 2024 (Wolfsteller, 2020).

Whilst there has been no roadmap for a pandemic of this magnitude, it is “a combined understanding of lessons learned after 9/11, SARS and other shock events [that] will help chart a way forward” (Sehl, 2020).

The significant amount of economic damage caused by previous events gives a good comparison to what could have happened as the pandemic began to take its grip around the world.

Data from the International Civil Aviation Organisation (ICAO) highlights this. In a February 2021 presentation, ICAO said that because of the overall number of seats being reduced by 50% as well as losing 60% of pre-COVID passengers, it attributed to a $371bn loss of gross passenger operating revenues of airlines (ICAO 2021, p. 4).

These losses are expected to reduce to $177-197bn between January and June 2021 but is still going to offer considerably lower numbers than in 2020 (ibid, p. 11).

The 2020 numbers are the most harrowing, with ICAO estimating that in that 12-month period alone, due to the break in international tourism, it produced a loss of $3.3 trillion to governments across the globe in the worst-case scenario of remaining 12 months on a stand-still (ibid, p. 119).

The same rules applied with 9/11, when “Domestic boardings fell to 575.5 million in 2002 compared with 641.2 million in 2000,” and was not until 2005 that it performed better in 2000 (Simpson, 2006). This represents a loss of “$5 billion from the attacks” (Amadeo, 2021).

The same applies to the Financial Crash of 2008, where the then IATA Director General and CEO Giovanni Bisignani “stated the global economic crisis has cost the industry two years of growth” (CAPA, 2009).

Overall, it is therefore key to note that those two events should be significant comparable motifs when looking at aviation and the COVID-19 pandemic.

The Calm Before the Storm…


Before the COVID-19 pandemic shook the core of the aviation industry, the years before were an enjoyable set for all aspects of the industry.

The rebound that was seen in 2011 highlighted 2,529 orders received from both Airbus and Boeing, compared to 1,269 seen in 2010 and just 573 in 2009 (Statista, 2021). This was all a pre-COVID-19 boom.

The highest peak for the two manufacturers was in 2014, when 3,346 orders were secured between them, and even continued to average out at around 2,000 orders per year until 2020 (ibid).

Orders maintained at the same average each year as profits were rising, with it growing from $18.4 billion in 2012 to $58.6 billion by 2016 (ibid).

Growth seemed to be on everyone’s mind at that point, especially with Indigo Partners, which owns Volaris, Wizz Air, Frontier, and JetSMART finalizing a $50 billion order for 430 additional Airbus A320neo aircraft back in December 2017 (Airbus, 2017).

In 2015, the International Air Transport Association (IATA) “announced global passenger traffic results for 2015…was the strongest result since the post-Global Financial Crisis rebound in 2010 and well above the 10-year average annual growth rate of 5.5%” (IATA, 2016).

This trend was evidently seen, with the number of passengers traveling increasing between 2010 to 2020 (pre-COVID). 2010 saw around 2.7 billion people board scheduled flights, with it more than doubling to 4.7 billion by the beginning end of 2020 (Statista, 2020).

Obviously, to cater to such increases, more aircraft are needed to operate more routes on a multiply frequented basis.

At that point, the industry had no concerns whatsoever about any potential downturn that may have followed the years after with the COVID-19 pandemic.

But what this book will end up presenting is that the COVID-19 pandemic is one of the many events it had misrepresented in terms of severity or concern before it was too late.

James Field - Editor in Chief 19 Min Read
19 Min Read
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