airline business

14 May 2020

The airline business is getting worse: understand why

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The airline business is an industry that is intimately familiar with failure. However, it is facing a crisis unlike any other. Executives say they have no idea when passengers will return. Yet, devastating as the downturn has been, the future is even bleaker. With much of the world closed for business and no widely available vaccine insight, it may be months, if not years, before airlines operate as many flights. At least as they did before the crisis. Even when people start flying again, the industry could be transformed, much as it was after the Sept. 11 terrorist attacks. 

The current crisis could push some airlines, especially smaller ones, into bankruptcy or make them takeover targets. Consumer fears about catching the virus on crowded planes could lead to reconfigured seating. Carriers may initially entice weary travelers with discounts, but if they can’t fill up flights, they may resort to raising ticket prices.

airline business
The airline business is an industry that is intimately familiar with failure. However, it is facing a crisis unlike any other. Know everything about it! (Source: The Points Guy)

Understand the crisis is the airline business

For now, airlines are preparing for a long, lonely fight for survival. No amount of foresight could have prepared the airline business for the pandemic.

To stem the bleeding, airlines have made deep cuts to every imaginable expense, closing dozens of airport lounges that were once considered critical to attracting well-heeled travelers like investment bankers, freezing hiring and bonuses, slashing advertising and technology budgets and postponing cabin renovations. 

Airlines could slash more flights but have not for a multitude of reasons. Schedules are often set weeks in advance and many flight costs, including those for cabin crews and pilots, are fixed. Still, even with few passengers, airlines are earning some money from the cargo they carry in the bellies of their planes.

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Desperate to preserve cash, the airlines have also aggressively discouraged customers from seeking refunds, offering vouchers for future travel instead. 

After spending the past decade consolidating, paying down debt, investing in planes and technology, and finding new ways to make money through fees and credit cards, the industry was in better shape than ever. Even as they slim down to preserve cash, they are finding ways to make what little money they can.

There’s little indication that a recovery is coming soon. Most airline business analysts and executives expect years to pass before airlines fly as many passengers as they did before the pandemic. The airlines certainly need to get back into business but they’re going to be facing a public that’s going to be scared to travel.

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