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 2: The Airlines
This chapter will look specifically at how airlines have been affected by the COVID-19 pandemic and at the time of writing, what actions have been taken to curb any more financial damage than has been inflicted already.
We will look at four case studies within this chapter, British Airways in Europe, Qatar Airways in the Middle East, and Southwest Airlines in the U.S. for Commercial and UPS for the cargo perspective.
British Airways began the COVID-19 pandemic when “two baggage handlers” became “infected with the coronavirus”, which at the time added “two more to the 163 cases in the UK” (Airways, 2020).
A couple of days after, Alex Cruz, the then CEO and Chairman of the airline told its staff via video that it “is set to suspend routes, park aircraft and cut jobs in an unprecedented threefold move” (Airways, 2020a).
This came in the appearance of services out of London City, London Gatwick, and London Heathrow all being cut, and most, if not the entirety, of its fleet being grounded overnight.
Just one month after, the airline “announced it will cut 12,000 jobs”, representing “around 28.5% of the 42,000-strong people that work for the airline”, on the grounds that the airline needed to “implement a restructuring and redundancy program until the demand for air travel is similar to that of next year” (Field, 2020).
In that same month, the airline announced at that point that services to Gatwick may not resume, which put around 4,300 pilots at risk of no job.
On the topic of job security, by June, the situation had worsened, with the airline threatening “up to 19,000 staff with potential dismissal notices unless they accept worse pay and conditions”, with the pay cut expected to be upwards of 60% and beyond (Field, 2020a).
The end of June 2020 saw British Airways receive its first Boeing 787-10 Dreamliner, even despite job cuts, which those in the industry were confused and angry about.
A lot of questioning was surrounding how the airline could afford to pay Boeing for a $338 million jet and still cut jobs that way.
Whilst delivery schedules are normally a fixed thing, other airlines were deferring throughout the pandemic.
Another fight BA ended up starting a fight with was the UK Government, where the airline Ryanair and easyJet launched legal action, requesting “an expedited review into the 14-day quarantine rule”, joining the likes of Michael O’Leary dubbing the rule as “absurd” (Beall, 2020).
July was the beginning of a better time for the airline, with it announcing plans for its restart with a limited network of the following routes (Macca, 2020):
More certainty was given to staff at Gatwick as the services to Barbados, Kingston, and Bermuda would operate from the airport (Budai, 2020).
But in July, the lay-offs scandal came back into effect once again when a move, which had been supported “by over 100 members of parliament”, was pushed to remove valuable slots from British Airways due to the layoffs (Lyons, 2020).
This forced the airline’s hand with the British Airline Pilots Association (BALPA) to tentatively agree “on a job package, potentially saving over a thousand jobs” (Field, 2020b).
The day after that deal was announced, the carrier stated it would “keep most of its headquarters near London Heathrow Airport empty” and encourage the majority of its staff to work from home (Marrero, 2020).
By August, more job losses were prevented as pilots agreed to new additional terms that while it sacrificed 270 jobs, it would bring the wage cuts down significantly, beginning at 20% before declining to “eight percent in the next two years and zero in the longer term” (Villamizar, 2020). In the same month, the airline confirmed it was halfway through such cuts.
Another way the airline approached making cuts for better financial stability was to look at its fleet. August 18 saw the airline retire the first of its 31 Boeing 747-400s, a decision later taken that would see the entire Queen-based fleet retire (Field, 2020c).
September 16, 2020, was the next stage of the job cuts saga as Cruz was summoned to the UK Government’s Transport Select Committee.
In the amount of scrutiny that the airline received over job cuts, Cruz revealed to the committee as a way of trying to bring negative public relations to a lower level that, he had “taken a pay cut of 33%…from the original £805,000 that he received in 2019” (Field, 2020d).
By October 2020, the future of Gatwick was once again hanging in the balance, with the airline being set on further shifting “operations… while focusing on an increase in vacation flights to Barbados” (Foster, 2020).
November saw the next lockdown announced by the UK Government due to the COVID-19 pandemic getting out of control, with British Airways limiting its winter schedule dubbing it “a failure without hope” (Ongaro, 2020).
As BA continued to put pressure on the government about quarantine, it announced “the launch of an optional COVID-19 testing trial on selected flights from the United States to London Heathrow” with American Airlines (Huston, 2020).
This was to “scientifically demonstrate how COVID-19 testing can reopen international travel and remove the need for passengers to quarantine on arrival” (ibid).
With limited services in effect already, BA was wounded once again leading up to the Christmas period with the termination of the following routes (Huston, 2020a):
- Kuala Lumpur
- Abu Dhabi
- San Jose
Finally, we come up to today (At the time of writing). The airline has “completed talks on two funding agreements to raise the liquidity of the airline by £2.45bn” (Villamizar, 2021).
This, of course, is due to set the airline up over the next five years, when the loan is due to be repaid.
What can be said is that British Airways’ behavior throughout the pandemic has been suitable in action but negative in explanation and appearance.
Whilst Cruz had to make the hard decision of cutting such jobs, the manner that it was done could have easily been prevented and more understandable.
A knee-jerk reaction may have occurred as such job cuts were announced only a month into the pandemic, where other airlines were able to hold off before making that decision.
On the PR front as well, the airline could have potentially deferred the delivery of its first 787-10, especially if the airline were running on a limited schedule anyway, meaning they would not need the aircraft at that point.
Either way, the airline’s focus for 2021 and up to 2024, when recovery is slated, is to ensure the level of domination it had in the market, especially on a post-BREXIT basis when trade and passenger movement is going to be vital for its success.
Qatar Airways’ handling of the COVID-19 pandemic has been one praised by many in the industry, especially its ability to keep going despite the problems the planet has been dealing with recently.
March 2020 saw the airline require government support from the State of Qatar as, at that time, Qatar Airways was “poised to run out of cash” despite vowing to continue flying (Airways, 2020b).
By May, British Airways and other carriers around the world warned “of substantial redundancies as it struggles with a collapse in demand”, but at that time, gave no information into numbers (BBC, 2020).
By June, it looked as if Al Baker’s gamble on continuing to operate through the pandemic was beginning to pay off, as the airline “established itself as the biggest operator during the…pandemic,” operating over 15,000 flights which repatriated over 1.8 million people (Robortaccio, 2020).
The airline also announced in the same month that the airline “will not take delivery of aircraft for the next two years and aircraft due to be delivered within the next two to three years will be pushed back by up to ten years”, in an effort to keep costs as low as possible (Harrison, 2020).
On top of that, the airline pressed ahead in the U.S. market by announcing an expansion of its flight network to include “adding Boston, New York, Los Angeles, and Washington DC to the existing Chicago and Dallas-Fort Worth” routes (Harrison, 2020a). This move was to be the first of many as the airline aimed to increase its presence in the country.
Like with British Airways, Qatar Airways addressed its current fleet portfolio with the option of simplifying it as much as possible.
It had unveiled that it’s Boeing 777-200LR and 300ER fleet would be retired by 2024, with the focus being on the Airbus A350 and Boeing 787 models it has in the fleet currently (Bakke, 2020).
On top of that, the airline also revealed that the 10 Airbus A380s it has in its fleet may not be back in the skies until 2022, with Al Baker expecting them to be in the fleet until 2028 at the latest (Foster, 2020a)
Throughout the Summer of 2020, frequencies within the carrier began to increase exponentially, with the aim of bringing some level of normality back to the industry.
By November, the airline had surpassed all expectations by operating to 100 destinations across 700 weekly flights, with Al Baker stating at the time of expectation to increase that number to 125 by the end of December (Thomas, 2020).
The airline did not hit 125 by the end of December, but 110, with the aim to get to 129 by March 2021 (Aircraft Interiors International, 2020).
By December, the airline had announced another move into the U.S. market with flights to Seattle (Caswell, 2020), which launched at the beginning of 2021 and will utilize its newly established relationship with new oneworld entrant Alaska Airlines (Caswell, 2020a).
The airline entered 2021 by announcing a resumption of flights to Atlanta by June 2021 on a four-times per week basis using its Boeing 777-200LR aircraft (Curran, 2021).
It remains evidently clear that the airline’s target for this year is to keep on flying and expand where possible.
That is why the airline has also invested in the IATA Travel Pass Digital Passport initiative, which is a confidence booster to get the industry kicked off again (Caswell, 2020b).
And such confidence is rife in the airline, as back in February 2021, it had written a letter to “pilots made redundant during the coronavirus crisis that they should apply to re-join the airline as it plans to increase services” (Beasley, 2021).
What this ultimately tells us about Qatar Airways is that despite the financial downturn it had experienced, Al Baker made the right decision in keeping the airline flying, especially when it came to repatriation.
That level of loyalty to people all around the world will be something that will resonate with those who were stuck in completely different countries around the world.
The next steps for the airline are to continue on that brand loyalty, especially as the next 18 months will see the airline preparing a build-up towards the 2022 FIFA World Cup (Kumar, 2018). Whilst it seems to have abandoned its original goal of 250 destinations by then, it can give it a go.
Southwest Airlines has been considered to have operated relatively successfully during this pandemic, continuing with its people-first approach to business.
The airline started the pandemic flexing its financial position, stating it had “witnessed stronger revenue and capacity outlooks as the worst of the COVID-19 pandemic” hit the United States (Field, 2020e).
By July, the financials began to bite a little heavier than CEO Gary Kelly would have liked, who announced: “that 28% of [Southwest] workers agreed to take temporary or permanent leaves” (Marrero, 2020a).
In the same month, the carrier announced a net loss of $1.5bn, excluding special items.
But despite that, the airline did say in a letter sent to employees “that the airline will not furlough employees on October 1, nor will it cut pays or benefits”, with the October 1 date referring to the expiration of government subsidies at that point (Budai, 2020a).
This was welcomed incredibly by the industry, as it was providing significant short-term relief to workers. Unlike British Airways, the carrier looks to use cuts as an absolute last resort in the business, but again it determines the cultural difference in dealing with a crisis.
Moving ahead, the airline, in the interest of safety under The Southwest Promise, vowed to “keep its middle seats empty for the Fall until November 30” to ensure better hygienical safety onboard (Field, 2020e).
The theme of people-based focus continued well towards the end of the year, with the carrier making “concessions with labor unions for the first time…to avoid layoffs amid substantial losses”, thus keeping its promise to employees (Marrero, 2020b).
As the month of October continued, the airline slowly began progressing further in its route restarts, relaunching and inaugurating new services in order to bring back the revenue streams it has lost over the course of the pandemic.
Then in November, the airline was forced to issue “its first furlough notice to 42 parts inventory workers, as it aims to reduce its US$1bn overstaffing costs” (Field, 2020f). This was the first issued in the 49-year history of the carrier.
That theme then continued as the industry was approaching the Christmas period when a further “7,000 workers” were notified “that they could lose their jobs if labor unions do not accept certain concessions” (Marrero, 2020c).
But in a turn of events by the U.S government due to the Payroll Support Program being extended, Gary Kelly was able to give staff good news stating that “there will be no furloughs or pay cuts throughout 2021” based on that package itself (Marrero, 2020d).
The final update at the time of writing was the airline, of course, reporting its first annual loss in its 49-year history, with the loss amounting to $3.1bn following a Q4 loss of $908 million (Lester, 2021).
The loss from Southwest Airlines does not reflect on its own brand as a whole, as the COVID-19 pandemic has completely decimated its revenue streams.
But what can be taken out of this is the successes it had before the pandemic and what it will have when we enter recovery in 2024.
As mentioned by Gittel (2004, p. 1), even “in a highly volatile industry, Southwest has been profitable every year except for the year in which it was established.”
“That means [that] by 2003 [for example], Southwest [had] been profitable for 31 years”.
In an article on the AviationSource website, Southwest’s success in the time its existence has been done to its forever emerging presence in the low-cost market. And this is going to be key to their post-COVID strategy.
As Harvey & Turnbull (2010, p. 230) mention, in order “For low-cost subsidiaries to survive and prosper, ‘matching’ models of human resource management predict that they need to create a low-cost employment system, which will be very different from that of the parent company” (Harvey & Turnbull 2010, p. 230).
This basically means that Full-Service Carriers (FSCs) such as British Airways may need to follow in the footsteps of Ryanair, Southwest, easyJet, and others as COVID has reduced people’s incomes, which may force a hand in choosing Low-Cost Carriers (LCCs) over FSCs.
The same could effectively apply to Qatar Airways in the future as well, as income spending is going to be less than it was in 2019.
Airlines like Ryanair and others have been well-averse to placing airports against each other but need to go that one step extra to include a more people-based approach to their customer care.
It is airlines such as Southwest that have been ahead of this trend for five decades, and even during a global pandemic, they will continue to do so for many years to come.
UPS & The COVID-19 Pandemic…
UPS, as a cargo carrier, is much different compared to the passenger carriers, who have been flying now more than ever as it assists in the delivery of COVID-19 tests, PPE, vaccines, and much more.
The airline entered the pandemic with a new CEO of the name Carol Tome being announced. While current CEO David Abney will be in his place until June 1, Abney will be essentially passing the baton of the pandemic over to Tome to take charge of one of the U.S.’ most important air cargo firms (STAT Times, 2020).
In April, the carrier began the ramp-up in deliveries of Qiagen’s COVID-19 test kits in order to get people tested and diagnosed with the virus as much as possible.
This was easy for the carrier to achieve, especially as it had “invested $2 billion in its network and services” (STAT Times, 2020a).
Another area where the airline began to help out was Project Air Bridge, which was set up by the United States Federal Emergency Management Agency (FEMA) “to expedite the delivery of medical supplies and PPE” (Green, 2020).
It started off initially with 25 flights before expanding rapidly to “over 200 company-owned and chartered air freighter flights” (Arabian Aerospace, 2020)
An indicator of success now not just in the U.S but in its biggest branch office in Cologne came from Frank Sportolari, the Head of UPS Germany, who stated how important the infrastructure is to the globe (Airport-Business, 2020):
“Even though these are challenging times, we are continuing to meet our customers’ needs. Through the services we offer, we provide the infrastructure to facilitate trade and ensure a reliable supply of goods. Our Air Hub at Cologne Bonn Airport is one of the largest and most important hubs in the world for particularly urgent express shipments and international deliveries.”
It is also clear that UPS is thinking not just of COVID-19 but of the future in case the industry ends up in the position it is in again. The shipping giant “has partnered with German start-up Wingcopter to develop delivery drones that could autonomously fly packages to customers” (Cuthbertson, 2020).
This is beneficial for two reasons. Such an announcement came “amid a huge surge in demand for home deliveries”, especially with countries shutting down due to the virus continuing to spread. (ibid)
Second, with the E-Commerce market growing exponentially due to high street stores closing because of COVID-19, this will be an investment for the future which will save money from the shipping perspective, but if another pandemic were to arise, this will help to keep workers and customers safe as no socializing with workers will be needed.
However, if the Wingcopter ends up having a much stronger presence than the conventional methods of delivery, then there could be job losses because of such automation.
Such high demand for cargo was eventually shown in the airline’s third-quarter results in October 2020, when it recorded a 15.9% increase in consolidated revenue to $21.2bn and operating profits rising 11% to $2.4bn (Huston, 2020b).
Such increases were seen heading into the Winter, with UPS Public Relations Manager Jim Mayer mentioning such an increase in flight activity (Villamizar, 2020a):
“Our flight activity is way up. There are around 380 to 390 take-offs and landings on an average day. Right now, we are already at more than 450. And we’ll probably be over 500 when we get closer to Christmas”.
Such confidence over their successes even resulted in UPS and FedEx telling a congressional panel in December 2020 “that they believe their companies can handle domestic distribution of the COVID-19 vaccine entirely without needing to call on US passenger airlines that have spent recent months preparing to transport the vaccine” (Huston, 2020c).
As times got closer to Christmas, the airline took delivery of a brand-new Boeing 747-8F aircraft, which was the 20th out of 34 it had ordered in total as it continued to bolster up more of its operations globally.
The airline had also delivered “the first patches of the Pfizer- BioNTech COVID-19 vaccine in Saudi Arabia”, which marked “a breakthrough milestone in the ongoing response” to the pandemic (AviationPros, 2020).
In terms of fleet renewal, the airline has obviously been taking deliveries of the 747-8F aircraft but has been putting time and money into its older aircraft, like the Airbus A300- 600F.
February 2021 saw the airline receive “the first of 52 Airbus A300-600s operated by the international air cargo carrier scheduled to receive advanced new communications, navigation, and surveillance systems with the Honeywell Primus Epic integrated avionics flight deck upgrade” (Bellamy III, 2021).
Ed Walton, the Director of Engineering for UPS, stated to the media that the entire fleet of A300s will be upgraded by late next year, with the possibility of having another 15 years of life on the aircraft, having taken delivery of the types between 2000 and 2006 (ibid):
“We have no concerns at all about the airframes being able to go to 2035 and beyond. [The original flight management computer’s navigation database] worked ok for the first decade. Even though we only fly the airplane in North America, we were pretty much having to be very stingy with the navigation database that we put into the airplane and had to eliminate a lot of airports.”
Whilst it may have cost additional funds in terms of such retrofits, UPS considers the upgrades to be long-term investments, so over the next 15 years, the company will be likely to receive such investment back in the forms of profits from cargo revenues.
Airlines have been forced to adapt during the COVID-19 pandemic. Whilst some strategies have been more effective than others, the clear goal is financial proficiency at a time when the industry is struggling. Of course, this remains to be the case for cargo airlines such as UPS, which are doing positively well. And that is not surprising.
The domination of the E-Commerce market post-COVID is going to open up new market opportunities and revenue streams that will continue to grow the company not just from a successful aviation business but an even larger conglomerate in the future.
For the passenger side of things, it remains clear that it will not be on the same wavelength as the cargo side for a long time to come, which is why they have been contributing to cargo flights through the conversion of passenger aircraft.
All the industry has to hope for over the next few years is for as few bankruptcies as possible and a quick path to recovery as fast as it can go.