BBC: Surprising not to see large numbers of airlines go bankrupt
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Civil Aviation Resource Network August 22, 2022 News: In July 2022, more than two years after the outbreak of the new crown epidemic, the global aviation industry is still in the recovery stage.
John Holland-Kaye, the chief executive of Heathrow, one of the world's largest international airports, has come as a surprise when airlines using the airport stop selling tickets this summer. Horan-Kay said in the open letter to ensure that travelers "have a safe and reliable journey and allow their luggage to reach their destination."
To minimise disruption, he also announced a daily cap of 100,000 passengers at Heathrow, 4,000 fewer than usual. Other airports such as Amsterdam Schiphol, Frankfurt in Germany and Gatwick in the UK have implemented similar restrictions.
The months prior to this were marked by a lot of chaos in air travel, with last-minute flight cancellations, long lines of passengers, delayed luggage; major airports and airlines were unable to keep up with demand. Chaos will intensify as many countries enter peak holiday season.
So, will air travel return to normal? BBC International's "Investigation" program invited four experts to discuss this question.
The pain of the terminal
Aviation analyst Sally Gethin said the countries in "crisis" were the UK, the Netherlands and the US, with Australia, Ireland, Germany and Spain also experiencing some problems.
"In the most extreme cases, the airport is completely shut down, passengers can't even get into the terminal, and sometimes they do miss their flight; or, manage to get through the terminal, go through security, only to find out that the flight has been cancelled," she said. , sometimes the luggage doesn’t get on the plane; or, there’s an unexpected delay, which could mean they have to get off the plane again. Some people will continue to experience varying degrees of travel pain as the summer goes on.”
Gesing believes the extent to which travel is disrupted will depend on how quickly a particular destination can lift its lockdown measures. Europe's approach to easing regulations and border restrictions is rather abrupt. The UK is a clear example of what happened almost "overnight" and the aviation industry wasn't given enough notice. Airports and airlines are ill-prepared and overwhelmed after the lockdown is lifted. The way the aviation system works means that flight delays or cancellations can cause bigger problems.
Gesing said the whole system is interconnected, and when something goes wrong, it will have an impact on all services at the airport, and it will also radiate to other destinations. An obvious example is the airport hub and spoke system. There are major gateway hub airports such as Amsterdam's Schiphol Airport, Dubai Airport, London's Heathrow Airport, Paris' Charles de Gaulle Airport, etc. They handle a lot of flight transfers. These are the places with the largest groups of passengers, and there are many regional airlines flying in and out of these airports. These regional airlines can be short- or medium-haul, or long-haul, taking passengers on short- and medium-haul flights, and in some cases, other long-haul flights.
So, "delaying or canceling a flight can mean a missed connection. When those passengers try to transfer and bring their bags on to a new flight, the system is even more stressed."
Airlines need permission from airport owners to land, take off and use the facilities they need to operate their services on specific days and times, known as time slots, and airlines don't give them away lightly. So if one airline cancels a flight, the other airline can't use the slot to ease congestion - and the problems pile up.
There's one more thing we should keep in mind, Gesing points out. That is, it is not just because the aviation infrastructure is not ready. Travelers also play an important role in this. It has long been expected that when aviation demand recovers, the greatest demand will come from passengers visiting friends and relatives. This caused the bubble to burst, floodgates to open, and passenger numbers to surge. Before the pandemic, the numbers would have been more regular and airlines could predict, for example, what to expect during the holidays.
International air travel has been suspended before, including in 2010 when a volcanic eruption in Iceland grounded flights for several days. Volcanic ash was occupying the skies over Europe at the time, posing a threat to the engines. But now this is a whole new situation.
Getsing said it's hard to predict where the next congestion will break out because it's "unprecedented" and "it really depends on how each region responds to the outbreak and what support they give to the aviation sector."
The new coronavirus has not disappeared, so travel restrictions have not been lifted. "Passengers should expect uncertainty about the reliability of their flights, which may ease during the off-season winter, which will give the industry a chance to breathe and catch up," Gesin said.
The burden of cost and grounding
According to Charles Williams, editor of Aircraft Business magazine, it is "surprising" that there has not been a large number of airline bankruptcies.
Airlines did get financial support during the pandemic, but many carriers were already in financial strain before the pandemic.
"The financial position of every airline in the world is severely weakened and drained, and I think airlines are doing everything they can to fix that at the moment," Williams said.
Businesses have learned to adapt to the situation in order to survive. The emergence of low-cost airlines has transformed the industry. It is now common for passengers to pay extra for additional services such as choosing a seat or carrying extra luggage.
"The cost of running an airline has completely changed over the past 20 years, and they've all adopted lower-cost operating cost models. So, to be honest, there's not much they can do," Williams noted.
But it's not enough to just get a plane into the air -- just like a hotel room must be occupied to a certain extent to break even.
That's what the airline industry calls a load factor, Williams said. Load factor refers to the percentage of aircraft seats paid by paying passengers. The standard is about 80%. For a 100-seat plane, you need to fill 80 seats at a reasonable price to cover all costs. In the end it is only four or five passengers who can make a profit. So, it's an industry that's not very profitable. That's why airlines suffer so much when passenger numbers plummet suddenly, as they did two years ago.
So a family missing a flight can turn that flight from a profit to a loss. As airlines still have to pay wages and food, canceled flights can also impact their financial performance.
Early cost decisions also influence current financial challenges. Most airlines don't own the planes they operate, so rescheduling lease agreements is a priority during the pandemic.
“About $600,000 to $700,000 a month for a plane like a Boeing 737 or an Airbus A320,” Williams said. In 2020, they immediately found leasing companies, negotiating grace periods and lower lease terms in exchange for Pay off their arrears over a longer period of time. This greatly reduces their costs.”
Some airlines continue to carry cargo during the passenger travel ban.
“It’s been very important in the last two years. A lot of the wide-body aircraft they use on long-haul routes has a lot of cargo capacity. But during the pandemic, because many wide-body aircraft have been parked and mothballed, there is a lot of space available to transport cargo. The space and the number of planes are down significantly. So you're paying four to five times the normal cost of moving cargo, and it's still at that level this spring. That's one of the reasons why airlines continue to operate," Williams said.
Grounding planes is expensive, and now it's unpredictable.
Williams said that he does not know how long the epidemic will last or how long the aircraft will need to be stored. It might be relatively cheap to put the plane on hold for a month or two. In fact, in the spring of 2020, there was a shortage of parking spaces. It has become very expensive for airlines to park their planes.
Some of the mothballed planes were never flown again.
Restarting a plane is also expensive, and the longer the plane is parked, the more expensive it will be, Williams said. So this will be the "death knell" for a lot of older planes. There were a lot of new planes scheduled to be delivered in the past two years, but suddenly airlines don't need them anymore. So they're mothballed right out of the factory, and it may take two to three months to restart some planes, plus it may be necessary to spend hundreds of thousands of dollars on major maintenance checks.
During the epidemic, many planes were sealed.
Hundreds of planes were suddenly restarted without enough maintenance crews to carry out meticulous maintenance checks, preventing the planes from being used in time, adding to delays.
For planes that can fly, fuel prices have soared. Business seats are not as full as they used to be. Passengers can expect ticket prices to rise.
When one airline shuts down, another emerges. Dozens of projects have been launched this year. However, regaining lost ground will take time and progress will be uneven.
Williams said the entire industry is aware, and everyone understands, that tourism will recover in a specific order. The first will be the US market. The second is the European market. The rest of Asia is currently recovering. Leisure travelers are leading, followed by business, then long-haul, which will be the last area to recover, but it is recovering.
new normal
The sudden rebound in the airline industry has led to months of chaos as the industry struggles to manage its costs and customers. So when will this situation ease?
Laurie Garrow is a professor of civil engineering at Georgia Tech and president of AGIFORS, a nonprofit aerospace research organization. To understand how passenger flights and numbers have changed in recent months, it's helpful to look back at where you were at the start of the outbreak, she noted.
In the spring of 2020, global demand fell by 90% to 95%. Since then, we've seen different rates of recovery around the world. The U.S. is almost back to pre-coronavirus levels. Travel between the U.S. and Europe is also approaching pre-pandemic levels, but the rest of the world, especially Asia, is still only about 30% of pre-pandemic levels.
Overall passenger demand has not returned to pre-pandemic levels, but airports and airlines are already overwhelmed. Gallo compared U.S. delay and cancellation rates from June the year before the pandemic to June this year, highlighting that what's happening now is very special.
Flight cancellations are about the same, she said. In 2019 it was just under 2% and in 2022 it was 2.7%. The proportion of flight delays between the two is also similar, slightly higher in 2022 than in 2019. But the key difference is that a bad operating day in 2022 is worse than in 2019. Right now we don't have that many aircraft restarted, or not all of them are back in service. When hit by adverse factors, such as thunderstorms, it takes airlines longer to get back on track.
"In the past, there were some service barriers that could be controlled, but now that we have many different factors, the problem is more obvious."
"Because we have so much to do... In a way, we don't know where the problem is, and new problems arise."
The broadest of the new issues is job vacancies.
"I think a lot of the delays and cancellations that are happening today are because the airline industry is figuring out how to have pilots in the new normal," Garro said. "That means a lot of things have changed, and in a way, we are now What I saw was something I didn’t expect before.”
Unexpected developments continued. The carbon footprint of air passengers has been under the spotlight for years.
One of the interesting things about the pandemic, Garro pointed out, is that because demand has dropped so quickly, many airlines have decided to retire some of their older aircraft in advance, which means retiring those fleets years earlier than they expected. Older planes tend to be those that are the least fuel efficient or environmentally friendly.
"One phenomenon is that today's air travel system is actually greener than it was before the pandemic, simply because of the early retirement of aircraft," she said. "It's a way for airlines to both improve the environmental performance of air travel and control parts of it during the pandemic. a way of cost.”
Passenger behavior has also changed. Leisure travelers are prepared to spend more than they did before the pandemic. This has forced airlines to rethink routes.
So, during the recovery, airlines have changed where they fly. In the US, for example, there are far more flights to Florida and Mexico than before the pandemic. For now, business travel has not fully recovered. There's also some discussion now about what business travel will look like post-pandemic, or how the new normal of working from home will impact business travel.
Garro said the government could do two things to help restart the aviation industry. “First of all, it’s important to recognize that airlines play a vital role in national security and transportation. For example, at the beginning of the Covid-19 pandemic, the situation was so bad that many governments stepped in to make sure we maintained air service so we could do transportation. , personal protective equipment, equipment, ventilators and other core supplies to be able to fight the epidemic or keep the economy running.”
The second point is to guard against future shocks. "What's happening right now is that we're not just stepping up our operations on the airline side, but we're going to strengthen our operations on the air traffic control side," Gallo said. So it seems to me that investing in new air traffic controllers and helping to modernize the system is something the government can do A big thing to help do."
staff shortage
Back at the terminal of the airport, there was an endless stream of passengers. As the queues grew, another key issue came to light.
Umang Gupta is the managing director of Alton Aviation Consulting. After being grounded for months, millions scrambled to book flights. "The staffing situation is really bad right now. I don't think it's going to improve this summer," he said.
He said the surge in demand was beyond anyone's imagination.
At airports, we'll see check-in staff and cabin crew, but behind the scenes there's a lot of teamwork that becomes a reality on vacations and business trips.
In order for vacations and business travel to function properly, check-in staff and cabin crew need to do a lot of teamwork behind the scenes.
Gupta said, "The baggage handlers, the people who take the passengers from the plane to the terminal in the bus, and the food and drink service, the air traffic controllers, and of course the maintenance staff. The plane is able to take off, There's a huge infrastructure helping it."
Wages are one of the biggest costs for airlines and airport operators. Many employees and contractors have left or been fired during the pandemic, and there are now not enough staff to meet demand.
Convincing people to come back has proven difficult. Many found jobs that were less affected by the economic impact of the pandemic.
Pilots are also in short supply. Some companies have laid off staff, and it takes time to train replacements. An air transport pilot license requires at least 1,500 hours of flying experience.
Whether that time can be shortened is a very hot topic of discussion, Gupta said. If it could, it would definitely get more pilots on board sooner.
Before the pandemic, there was another reason for the shortage, he said. Commercial pilots must retire at around age 65. Many more will leave in the coming years. Others have suggested raising the retirement age to extend the flight time of planes.
“All of these are hot topics of discussion among labor groups, airlines, and governments. They are the regulators that make these demands, so I don’t think these are going to disappear or change anytime soon. These usually require a very thorough and long-term assessment. ...so it's a conundrum."
The mismatch between pilot numbers and passenger demand is putting enormous pressure on smaller airlines.
Gupta also said that the way pilots develop their careers is that they train through regional airlines, and after graduation they go to mainstream airlines such as United, Delta, American, JetBlue and more. So what's going on right now is that the regional airlines have the toughest situation in terms of pilots because most of them have been poached by the big airlines. So you won't see a lot of regional airlines serving smaller cities, it will be a trend as pilots will be working on busier routes, bigger planes, and smaller regional airlines will have to reduce Number of flights, especially to sites with smaller communities.
Employees in the aviation sector are also subject to background checks, which can take months to complete.
At airports around the world, with many emergency job openings waiting to be filled, current employee dissatisfaction with the increased workload has spilled over into strikes — or threats to strike.
"They're also facing a lot of flight delays and cancellations, so there's a lot of angry travelers as well," Gupta said. "These are getting worse and worse. The whole staffing level hasn't kept up. People working in the industry bring a lot of stress and fatigue."
Not what it used to be
So, can air travel ever return to normal?
Our experts think it's possible, but maybe until next year - or even longer for countries that still restrict international tourists. Chaos can also ensue as they restart a new wave of intense demand.
There is no quick solution. Ticket prices are expected to continue to rise. There are vacancies at all levels, but problems with pilot recruitment are deep-rooted. This shortage is already changing the destination of flights.
The current chaos may get worse before it gets better, and the long-term effects won't be seen until the long lines of people at the airport disappear. Times have changed, and it will never be the same again.