Airline Industry in Trouble


The airline industry has been largely affected by the COVID-19 pandemic. Secluding people in a confined space with limited air circulation for hours on end is not a great recipe for containing an airborne disease.

 

airlines that have invested in protocols and protections to keep passengers safe are the ones that will likely survive and flourish after the pandemic ends.

However, airlines that have invested in protocols and protections to keep passengers safe are the ones that will likely survive and flourish after the pandemic ends. In fact, some scientists have found that the combination of cabin ventilation systems, mask-wearing and other safety protocols may help reduce the risk of transmitting the virus while in the air.1

 

Regardless, the airline industry is still fighting for the survival of the fiscally fittest. In the U.S., government aid has kept some airlines afloat with money for payroll, but that stimulus ran out at the beginning of October.

 

The parallel between various industries and our own communities is quite interesting. Some households have remained gainfully employed and are doing quite well despite the economic decline. And yet, next-door neighbors may be suffering because they work in an industry more affected, such as pilots, flight attendants and other airport staff. It’s important to appreciate that while you may live and socialize among others in your same socio-economic status, not everyone is in the same boat. If you know someone in more difficult circumstances who could benefit from our advice and recommendations, we’d be grateful for the referral – and they may be as well.

 

Presently, one in four planes remain out of commission, and economists anticipate that the airline industry will shed 90,000 jobs by the end of 2020. U.S. airlines have lost more than $36 billion this year at a cost of $180 million per day. Some have increased their cargo transportation services and taken on additional loan money – to the tune of $68 billion thus far – in an effort to tweak their business models. While increased debt will make it harder to turn a profit in the future, at least a struggling airline has better prospects than a defunct one.2

 

Much like other industries have found, even following the most stringent protocols cannot tempt certain demographics to resume their normal consumer spending habits. This means that along with reduced revenues, industries such as airlines have had to put their expansion plans on hold. At Boeing, for example, new airplane production has halted and resulted in layoffs. The company expects commercial airplane demand throughout the next decade to see an 11% reduction from pre-pandemic levels, with growth rates not returning to normal until 2030.3

 

Meanwhile, those willing to risk air travel are experiencing more grueling safety protocols than even after 9/11. These may include:4

 

  • Taking a COVID-19 test 24 to 72 hours before flight
  • Facial recognition software for check-in
  • Touchless food vending machines
  • Sanitized bags at loading and off-loading

 

Moving forward, the coronavirus and threat of future infections may expedite the airline industry’s innovation in the use of automation and artificial intelligence. For example, some airports already have adapted “touchless” technology using facial recognition, automation and biometric scanners. American Airlines has been testing mobile ID technology for baggage check-in, and smartphone digital tokens in lieu of physical ID cards.5

 

Some consumers aren’t waiting for a vaccine as a travel solution. Instead, they are eschewing commercial air travel and instead chartering private planes through brokers, or directly with companies such as BLADE, XO and JSX. In some cases, you can book the whole plane for $10,000 or more – which could be comparable to the cost of airline tickets for a large family. Fractional ownership companies such as NetJets and Flexjet permit travelers to purchase a Jetcard that offers a certain number of aircraft hours at a fixed price. Even Costco is selling private jet memberships. The idea is that chartering a private jet for family members or an inner circle is safer than traveling commercial with strangers.6

 

 

1 Tamara Hardingham-Gill. CNN. Aug. 20, 2020. “The odds of catching Covid-19 on an airplane are slimmer than you think, scientists say.” https://www.cnn.com/travel/article/odds-catching-covid-19-flight-wellness-scn/index.html. Accessed Dec.14, 2020.

2 Joann Muller. Axios. Nov. 21, 2020. “Airlines plot course for coronavirus survival.” https://www.axios.com/airlines-plot-course-for-coronavirus-survival-eb3c09d3-aeeb-4224-adf8-b4e184ee8aad.html?deepdive=1. Accessed Nov. 24, 2020.

3 Courtenay Brown. Axios. Nov. 21, 2020. “Boeing 737 Max’s next hurdle: coronavirus.” https://www.axios.com/boeing-737-maxs-next-hurdle-coronavirus-9b1f1d0f-1552-4275-bd5a-ed6c7ff73214.html?deepdive=1. Accessed Nov. 24, 2020.

4 Joann Muller. Axios. Nov. 21, 2020. “The New Airport Experience.” https://www.axios.com/the-new-airport-experience-e582a2a5-b754-4fab-aa32-2d9d7e558003.html?deepdive=1. Accessed Nov. 24, 2020.

5 Joann Muller. Axios. Nov. 21, 2020. “Touchless travel could threaten airport jobs.” https://www.axios.com/touchless-travel-could-threaten-airport-jobs-0c3fb87d-9785-468a-aa3c-9af3c60f9e85.html?deepdive=1. Accessed Nov. 24, 2020.

6 Joann Muller. Axios. Nov. 21, 2020. “More fliers turn to private jets to avoid crowded airlines.” https://www.axios.com/more-fliers-turn-to-private-jets-to-avoid-crowded-airlines-9a59918f-4f96-46d7-a419-eeb09617824d.html?deepdive=1. Accessed Nov. 24, 2020.

 

 

 

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference

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