This is the Coronavirus Case Studies series. Every post in this series will talk about how the coronavirus pandemic of 2020 will affect different businesses for years to come. We’re all still processing this massive, life-changing event. This week, we talk about how coronavirus will affect the aviation industry.

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What companies make up the aviation industry?

When most people use the phrase “aviation industry,” they are referring to airlines, airplane manufacturers, and airports. The industry as a whole also includes additional sub-industries such as gliding, ballooning, flight training, and aerial photography.

For the purposes of this post, we will focus on commercial airlines and airports. Airlines, in particular, have shouldered a huge financial burden because of the coronavirus pandemic. This has had downstream impacts for every other kind of business that relies on stable airlines.

Aviation Revenue Went into a Tailspin

As of May 10, passenger air traffic in the United States dropped by 94%. Half of all planes are sitting on the tarmac. Major airlines are collectively losing between $350 and 400 million PER DAY because revenues have dried up.

On top of that, airlines are supposed to save 25% of their revenue to prepare for economic shocks. Airlines didn’t save money, leading to issues with cash on hand as well. On top of that, airlines have a history of collapse and bailouts.

Airlines were doing pretty well prior to the coronavirus, so despite some liquidity issues, we have pretty good reason to believe the business models were sound before the pandemic hit. Nevertheless, airlines need a bailout from the government in order to continue. This leads policymakers to ask probing questions about the nature of their financial crisis.

According to The Conversation, “in any bailout, the key question is whether this is a solvency or liquidity crisis. Solvency means that the airline will be very unlikely to ever remain financially viable. Liquidity means that the airline has a high risk of running out of cash flow but should be solvent soon, if supported. Assessing this is sometimes complex.”

I tend to think it’s the latter. Particularly since airlines have some surprising ancillary sources of revenue such as your beloved SkyMiles credit card and cargo shipping.

Nonstop Flights: Airlines Can’t Stop Running

At this point, you would think airlines would try to cut their expenses as much as possible. One way to do that would be to start cutting routes and stop flying planes with only a handful of passengers on them. Empty seats don’t make money, after all.

Of course, the airline industry is incredibly complicated. The European Union has a “use-it-or-lose-it” law that requires airlines to fly at least 80% of their flights. Airlines that fail to do so might get bumped from major hubs. For this perverse reason, many empty planes are still flying. Losing a major hub can cause massive problems for airlines down the road, meaning that running empty planes is in their long-term best interest.

Of course, in addition to burning fossil fuels, airlines are also forced to burn money, some of which is coming from taxpayers pursuant to the CARES Act. It’s an all-around bad situation for airlines to be in.

The Aviation Industry’s New Destination

Figuring out where the aviation industry goes from here is no easy task. For starters, this is probably the biggest crisis the aviation industry has ever faced. That is a sentence I read from an expert in the Harvard Business Review magazine, which is hardly given to sensationalism.

Much like we said in our hospitality industry post, people just aren’t traveling much right now. Rule #1 of business is to give people something they want. It’s not the aviation industry’s fault that the pandemic dried up demand in a matter of weeks.

Bailouts will probably come in multiple rounds. Airlines are “too big to fail” because they comprise a major part of our nation and world’s infrastructure. Not having air travel is not an option for a developed nation. Yet the public will become increasingly angry with their governments should the airlines prove to be poor stewards of their money.

What a bind to be in!

Next Steps for the Aviation Industry

To move forward from here, the aviation industry will need to either wait or start drumming up demand. Much like after the tragedy of 9/11, airlines will need to go out of their way to give passengers peace of mind.

That may mean implementing all kinds of new hygienic measures like reducing touchable surfaces on a plane. It may means blocking off the middle sit to allow for social distancing. Perhaps the aviation industry will push for a TSA-like agency to fever screen passengers before they board.

Meanwhile, airlines will need to contend with the fact that they will be paying for the lost revenue right now for a long time. In fact, because videoconferencing and eCommerce are growing, there is a good chance that revenue prospects will remain depressed for a long time. This could lead to all sorts of austerity measures.

Airlines might raise the prices of tickets, but I am not so sure about that. Airlines have been pushing prices lower and lower for a long time because that’s what people respond to, even at the cost of amenities. That’s why some airlines charge extra for carry-on luggage and more than 29 inches of legroom.

For this reason, I think amenities such as in-flight entertainment systems and even Wi-Fi might be cut. Airlines will also likely shrink their networks and start cutting bad routes. The days of flying from Chattanooga, TN to Fresno, CA with one stop in between may very well be over.

Finally, as the airlines change, so too will the rest of the industry. Planes will be built as needed by passengers and pilots. Airports will respond to the airlines’ changes.

The next few years will be tough, but perhaps it will lead to a new golden age of air travel. Maybe airlines will even find a way to create enviornmentally friendly planes to reduce fuel costs. Who knows?

What do you think the future holds for the aviation industry? Do you think this article is spot-on or off-base?

Let me know in the comments below. I’d love to hear what you have to say so we can process this together.

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Javier Vallejo · July 10, 2020 at 5:22 pm

I believe that they will go ahead like other companies, with some innovations that will make the services more profitable.

StefanoIceCubeR · July 10, 2020 at 8:25 pm

I’m not Flying anytime soon 😭

RAJESH BANRA · July 10, 2020 at 10:06 pm

Useful information. ..

Paulo Oliveira · July 13, 2020 at 9:30 am

Unfortunately this pandemic will affect many entrepreneurs in the long term, and in Portugal we will resent it

Maria Teresa Fernandez Ferreira · July 13, 2020 at 10:12 am

It will affect them, but they will have to adapt to the new rules and people need to move, so they will not have much prejudice

Andre Mendes · July 13, 2020 at 3:44 pm

Now this is worrying me since I have invested in Aviation Bonds and I am afraid on what is going to happen to this industry. Let´s hope the governments can continue to give them a hand.

Linda A · July 13, 2020 at 6:21 pm

I think airasia will collapse

RAJESH BANRA · July 13, 2020 at 11:47 pm

I think people will be precautious..

    Frankie Pinnix · August 5, 2020 at 6:04 pm

    I think COVID-19 has had a tailspin effect on the airlines industry. Although, I understand why-its just so sad for all the employees. It’s my hope that post COVID-19 everything returns.

Dritan Ikonomi · July 14, 2020 at 5:37 am

Blood corona!

Liz Kilcher · July 14, 2020 at 9:43 am

it sucks not to go anywhere!!

Navaneeth · July 15, 2020 at 10:29 am

very useful info.
Anyway this pandemic has caused us in many ways.. Even though if this situation is passed it is hard to bring the market back..

Sunita katyal · July 15, 2020 at 1:20 pm

Aviation industry will suffer the most due to Covid-19 and will be the last sector to revive as people will only start traveling at Pre-covid levels once they are sure about their safety.

Lavanya · July 15, 2020 at 2:07 pm

I actually never considered this , good stuff

A.S · July 15, 2020 at 4:29 pm

Wow. I knew it would be affected but the way you break it down really puts a face to it all. Great job.

Kristin · July 16, 2020 at 9:03 pm

I think being a pilot or being in a plane is very scary anyways, so being on a plane while the coronavirus is even scarier to me! I think masks are a must for this activity and definitely skipped seats on the plane

Vikram Singh · July 19, 2020 at 8:12 pm

Pretty much spot-on, though I do not necessarily subscribe to the theory of flights cutting down on features to the extent of ridding off of the in-flight entertainment options – some might, but I doubt if the majority will step towards that direction. I believe we might definitely see gradual price hikes, so as not to deter all the immediate flying clientele straightaway; but the lost revenue will definitely be recovered by use of continually increasing air fares, spread across a long-term flying schedule.

Also, really interesting fact about the EU Policy, would’ve loved it more light was shed on that; but a great article you’ve put together here, that amount of diverse data you’ve gathered, and work you’ve put in, really shows through. Would love more scoop on the transportation sector as a whole!

    Brandon Rollins · July 22, 2020 at 9:55 am

    Yeah, I’m hoping that keep the few remaining amenities they have, even if it means price hikes. Planes are already really uncomfortable environments to begin with. I also think a flight price hike could cut down on unnecessary travel that should really be a video call.

    Good idea to do an article on the transportation sector! I’m particularly interested to see what freight shipping / trucking, gas stations, and automotive repair looks like today.

Liz Kilcher · July 27, 2020 at 9:59 am

sad the way covid is affecting travel

Almudena R · July 27, 2020 at 4:36 pm

Aviation and all tourism in general.

Kamile · July 27, 2020 at 9:49 pm

Seems like I’m never going to realize my dream of fly 🙁

donna l holder · July 28, 2020 at 12:06 am

thank you so much

Aromal Joseph · July 28, 2020 at 7:44 am

Thank you so much

Jennifer Raska · July 28, 2020 at 9:10 am

I’m not a flyer perfect to travel by auto, it must be really hard on the workers and everyone else trying to social distance on an airplane.

Jon · July 28, 2020 at 5:13 pm

Airline is not also affected by the pandemic but also the travel and tourism industry as well.

molli taylor · July 28, 2020 at 6:25 pm

aviation is a growing and important industry!

Jessica wallace · July 28, 2020 at 7:36 pm

Interesting read. This virus has changed so many people and businesses livelihood. Scary times.

Frank Stuart · July 28, 2020 at 8:34 pm

This article tells it how it is. They have done excellent research into the matter and come up with the right conclusions.

Cynthia · July 28, 2020 at 9:49 pm

I’m not flying till summer 2021.

Brandy Crabtree · July 28, 2020 at 11:25 pm

This saddens me because I FINALLY went on my first flight at the end of 2019. I loved it! I really hope airlines offer great deals to get people flying again once COVID-19 is under control. I’m ready to fly again!

Gina Stevens · July 29, 2020 at 1:31 am

The aviation industry will get back on it’s feet eventually. They will just have to make some adjustments for the health and safety of their passengers.

HRISTO STOYTCHEV · July 29, 2020 at 3:16 pm

I am afraid to travel myself these days

Dena Akbar · July 29, 2020 at 7:26 pm

Useful information. ..

Margaret Gallagher · July 30, 2020 at 2:05 pm

Your article is spot on – devastating news for the aviation industry – not sure of the way forward but watching closely

ERICA TOMLINSON · July 30, 2020 at 5:09 pm

I won’t be flying for a while need to be sure everywhere is safe x

Tina · August 1, 2020 at 8:02 am

I haven’t flown since Jan.

Patricia Wheeler · August 2, 2020 at 4:47 pm

I don’t ever fry on planes but a really interesting article nonetheless. I learned a lot about what’s going on with planes that I didn’t know.

Esco Garcia · August 3, 2020 at 4:58 am

Este año toca hacer turismo en nuestro pais.

Jayden Cruz · August 4, 2020 at 5:24 am

I’ve never flown on a plane before. I’ve always wondered what it would be like but who knows if I’ll ever get to because of covid 🙁

JAMES SEELNACHT · August 7, 2020 at 1:04 am

The airlines need more economical smaller planes to adapt to the reduced passenger counts

Tonia Booker · August 10, 2020 at 11:27 am

Praying we all can get through this soon together we stand Good Bye Coronavirus

Almudena R · August 10, 2020 at 5:04 pm

Thank you

terrance murphy · August 10, 2020 at 6:36 pm

will be a long time before I fly again

Kristin · August 11, 2020 at 8:03 am

Thanks for the info

Kakhaber Khmelidze · August 11, 2020 at 2:08 pm

In our region, the virus has already dealt a devastating blow to aviation. Perhaps the strongest in the entire transportation industry. And this is very painfully noticeable.

Joe Metzler · August 13, 2020 at 10:59 am

I can’t imagine flying right now unless I had no other options.

Arturas · August 15, 2020 at 12:26 am

We use air deliveries for our products. The prices have already skyrocketed twice or even triple. Freight cost is insane. COVID has broken many airlines but those survived ones dictate the charge.

Harsha · August 15, 2020 at 11:27 am

Spot on !
Diamonds are made under pressure, this situation will force new ideas to overcome problems but there will be setbacks, most of them will not make it.
Interesting read.

Jacquelyn Cannon · August 17, 2020 at 9:21 pm

I didn’t realize the major airlines lost from 350,000,000 to 400,000,000 each day since COVID19.

Maranda Bessey · August 18, 2020 at 12:30 am

Definitely worth reading. Very interesting!! Such a shame how the virus has affected so many things

Nicole Margrif · August 18, 2020 at 10:52 am

I don’t plan on flying until next year.

Jennifer Foster · August 19, 2020 at 12:10 am

Airlines going out of their way to provide customers with peace of mind seems unlikely across the industry, i think it’ll take lots of time to make up the lost ground.

Richard Hicks · August 19, 2020 at 8:08 am

It is going to be a slow recovery. Once this pandemic is over the industry will be back to their usual normal.

Rachel B · August 21, 2020 at 8:17 pm

I think it definitely less traveling

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