Prospects of the Aviation Industry
By Ahmed Elkhwad ‘23
The aviation industry isn’t flying high right now. The industry, which accounts for more than 5% of US GDP and supports nearly 11 million jobs, has been one of the most affected by the pandemic. United Airlines, one of the “Big 3” airline companies in the US (the others being Delta and American), recently announced plans to put over 16,000 workers on involuntary, indefinite furlough at the start of October unless the government passes another aid relief bill for the aviation industry. Back in the spring, the aviation industry received over $25 Billion in aid through the CARES Act. As a condition of the aid, airlines were prohibited from laying off staff. However, the aid money and job protections expire at the end of the month, which is why United is announcing this drastic action now. Once these cuts take place, United will have slashed over 25% of their workforce. However, they aren’t the only ones. American Airlines recently announced 19,000 furloughs and Delta has slashed their workforce by over 20%.
Spring was an absolutely dismal time for the aviation industry. Revenues for the industry plummeted by about 90%. Half of the total air fleet was completely grounded, leaving 3,000 planes collecting dust in airport garages. The flights that were still operational were oftentimes almost entirely empty. Airlines took drastic sanitation measures to restore consumer confidence in the safety of the air travel experience amidst the burgeoning pandemic. Some of the measures taken included social distancing in check-in lines, leaving the middle seat in each aisle empty, thoroughly cleaning aircraft interiors by using electrostatic cleaning, and requiring masks aboard aircrafts. These initiatives, along with the relaxing of stay-at-home rules and increased social frustration amongst Americans, led to a slight rebound for the industry over the summer. American increased their flights in July to 55% of total flight routes (up from 20% over the spring) and United, Delta, Southwest, and Spirit increased their flight schedules by an average of 27% from May to June. This slight summer recovery, however, hasn’t done much to stem the annual revenue losses for the aviation industry. In a recent conference call with shareholders, United predicted that it’s annual revenues for this year might be down a whopping 87% compared to 2019.
So where does the industry go from here? Speculation abounds that Southwest and other domestic airlines could recover faster than the Big 3- who are much more reliant on corporate and international travel as a source of revenue. Indeed, Southwest recently announced that they plan to have all of their previous flight routes restored by the end of the year. Frontier, Alaska, and Spirit Airlines are also expecting to have their previous flight routes fully restored by the end of the year or early next year. However, this doesn’t necessarily mean that revenues will be fully restored due to the likely fact that most flights will still not be filled to capacity. The Big 3 have, and will continue, to take the biggest hit- since international and corporate travel might take years to fully recover from the pandemic.
