The global financial crisis caused by the coronavirus (COVID-19) pandemic could cost European airlines as much as $89 billion in lost revenues and put the jobs of nearly 7 million people at risk, the International Air Transport Association (IATA) said in a statement on 23 April.
Since the beginning of the coronavirus outbreak, passenger planes across the world have been left grounded. As the outbreak grew into a pandemic, the airline industry around the world began to suffer great losses due to the suspension of flights and growing economic crisis.
IATA (International Air Transport Association) has called for governments across the globe to offer tax relief to airlines and airports amid the ongoing crisis.
Dr Konstantinos Kalligiannis, Managing Director of K.K. Aviation and Head of the aviation manage programme at KSU University has shared his views on the matter.
Sputnik: According to IATA, national lockdowns have impacted 98% of flights. How has this influenced the aviation industry overall? How did the coronavirus change the rules of the game?
Dr Konstantinos Kalligiannis: National lockdowns and the existing situation – it’s going to be short term. You don’t expect that this 98 percent will last forever. We’re going to see when naturally the travel restrictions will be gradually lifted, then travel will also recover gradually. Of course, there will be a very important financial effect in the medium- and long-term in the airlines and naturally also aviation industry stakeholders.
Sputnik: Germany has recently unveiled a plan for “post-coronavirus” flights such as obligatory masks during flights and social distancing at airports. What new restrictions and rules will passengers and airlines face on the post-coronavirus flights? How will all this be implemented and regulated?
Dr Konstantinos Kalligiannis: Definitely. So what happens usually after a crisis in the aviation industry, there is new legislation. That’s what happened with Lockerbie and the restrictions, the legislation regarding unaccompanied bags. That happened after 9/11 with additional security measures. So definitely I’m expecting that there will be new legislation regarding checks for passengers.
Sputnik: The Emirates airline recently launched testing for all passengers before boarding. How high are the chances that we might see similar measures from other major companies?
Dr Konstantinos Kalligiannis: I think this is something that legislators are currently looking at. My feeling is that in order to protect from coronavirus or any similar new virus situation in the future, you will have this type of processing required by legislation.
Sputnik: There is also the issue of a lack of space for all the grounded planes – 16,000 airplanes, which is almost 70 percent of the world’s aviation capacity. Some planes are even being housed on military bases. How can this problem be managed during the crisis? Were companies ready for this situation?
Dr Konstantinos Kalligiannis: Definitely. Airlines and airports and all other aviation stakeholders were not ready for such a situation. It was not possible to be ready because this type of scenario was not predicted. It could not have been predicted. I have been involved in several projects looking at potential different scenarios that will have an impact in the future of aviation and although many of them were quite pessimistic and catastrophic scenarios – none of them actually took into consideration geographical coverage – as the global geographical coverage of COVID-19 – and actually also in terms of the dimension that it will last so long. So definitely this is something that none of the aviation stakeholders could have predicted based on the knowledge we had so far.
Sputnik: How can airlines convert from carrying out passenger flights to, for example, shipping cargo? Is this difficult to do?
Dr Konstantinos Kalligiannis: What a lot of airlines have done – they’ve actually converted, provisionally converted – either they moved the seats or they have actually reduced the space of the seats in order to be able to transport cargo. Also on commercial passenger aircraft. However, this cannot replace the capacity that can be offered by cargo aircrafts. Fifty percent of air cargo, of global air cargo is transported by dedicated pure freight aircraft and the other 50 percent is transported on passenger aircraft. So what the airlines have done is that they have actually, even with a passenger aircraft configuration, that have either removed the seats or reduced the space usually occupied by passengers to transport a particular type of cargo.
Sputnik: How will the price of tickets change after this pandemic is over? How will prices be altered because we’ve also seen suggestions that the middle seat on planes should be left empty or will non-refundable tickets be cancelled to prevent a sick passenger from boarding a plane just so they don’t lose the money for their ticket?
Dr Konstantinos Kalligiannis: The airline industry is one industry known as operating very, very small profit margins. According to IATA, at least from 2 to 5 percent, but there have been years actually just three years ago, the overall profitability of the airline industry was less than 1 percent. So that’s the reason why it’s an airline, it’s a business that requires a huge capital and to actually operate in this very small profit margin. And that’s why we only have a couple two-three months of cash flow availability without any additional revenues. There are many reasons for that increase competition, especially one of them. So what will happen? It will depend on the effect in terms of the structure of the airline industry. Because there are some important factors that we cannot actually predict at the moment. The most important one is which governments and how much they will subsidise aviation.
So this will play a key role in how many airlines will remain in business. Considering that a lot of airlines will go out of business and a lot of them are reducing capacity and maybe some additional legislative measures will be actually to decrease the capacity within existing aircraft, like, for example, leaving the middle seat empty, which in practice for the aircraft will have approximately 66 percent capacity available – that means that actually the average yields will lead to increase significantly.
Sputnik: So that means there will be more government regulation?
Dr Konstantinos Kalligiannis: One will be actually regarding yes, there will be the subsidisation. So if you see a lot of governments have already been – in the US, you have the Trump administration who actually already provided a huge amount of subsidies for airlines, was actually quite close to the estimated loss of airlines for this year. And you see the different governments around the world have already provided government support or have actually announced that it will provide government support to airlines and aviation stakeholders.
So one will be like the financial, direct and indirect subsidies that those airlines will receive. And the other one is actually what would be the new legislation. The other thing is actually airports themselves – with social distancing rules – that could actually affect significantly the space required by airports in terms of the facilities. So airport planners will need to revisit existing airports and try to reconfigure and add new additional processing like, for example, self-checks that you may have new equipment for self-checks of passengers and the other one actually would actually be available space per passenger.
This is expected to have a huge effect in the terminals, and how the space is better utilised. But overall, the aviation industry has always managed to recover, to bounce back stronger, and continue that trend in the long term. Of course there will be a very huge short term effect, but from the medium term, you’ll start having traffic recovery and in the long term, I strongly believe that the traffic growth will continue the same trend as before.