Airline industry braces for prolonged recovery from coronavirus crisis

Credit: REUTERS/Nick Oxford

By Jamie Freed and David Shepardson

SYDNEY/WASHINGTON, April 3 (Reuters) - International seat capacity has dropped by almost 80% from a year ago and half the world's airplanes are in storage, new data shows, suggesting the aviation industry may take years to recover from the coronavirus pandemic.

Carriers including United Airlines Holdings Inc UAL.O and Air New Zealand Ltd AIR.NZ have warned they are likely to emerge from the crisis smaller, and there are fears others may not survive.

"It is likely that when we get across to the other side of the pandemic, things won't return to the vibrant market conditions we had at the start of the year," said Olivier Ponti, vice president at data firm ForwardKeys.

"It's also possible that a number of airlines will have gone bust and uneconomic discounts will be necessary to attract demand back," he said in a statement.

ForwardKeys said the number of international airline seats had fallen to 10 million in the week of March 30 to April 5, down from 44.2 million a year ago.

Data firm OAG said several years of industry growth had been lost and it could take until 2022 or 2023 before the volume of flyers returns to the levels that had been expected for 2020.

Cirium, another aviation data provider, said around half of the world's airplane fleet was now in storage.

"While many of these will be temporary storage, many of these aircraft will never resume service," Cowen analyst Helane Becker said in a note to clients. "We believe the airline industry will look very different when we get to the other side of this."

Planemakers are looking at drastic cuts in wide-body production amid a slump in demand for the industry's largest jetliners, manufacturing and supplier sources said.

Deliveries of long-range jets like the Boeing Co BA.N 777 or 787 and Airbus SE AIR.PA A350 or A330 have been particularly badly hit as airlines seek deferrals and many withhold progress payments.


Vasu Raja, American Airlines Group Inc AAL.O senior vice president of network strategy, told Reuters that U.S. domestic demand will remain weak into May, citing the lack of bookings.

The airline is cutting between 70% and 75% of domestic flights in April and about 80% in May. For both months it is cutting nearly 90% of its international flights.

British Airways said on Thursday it has struck a deal with its unions to suspend more than 30,000 cabin crew and ground staff in one of the airline industry's most dramatic moves yet to survive the coronavirus pandemic.

With global travel in turmoil as the virus takes hold around the world, BA's owner, IAG ICAG.L, said it would also cut capacity by 90% in April and May, and scrap its dividend, in a desperate bid to survive the worst crisis in its history.

Southwest Airlines Co LUV.N said on Thursday it intends to apply for U.S. government aid to help it ride out the sharp drop in travel demand.

"We still don't know the severity of this situation. We still don't know how long it will last," Southwest Chief Executive Gary Kelly said in a video message.

U.S. Treasury Secretary Steven Mnuchin on Thursday confirmed investment bank PJT Partners Inc PJT.N will advise the Treasury on negotiations with passenger airlines over a stimulus package worth up to $50 billion, half in loans and loan guarantees and half in payroll cash grants.

Many Democrats and airline labour unions are urging Mnuchin not to exercise the right to demand equity or warrants in return for the grant portion, as they seek to ensure carriers take the funds and pay workers.

"We need to get this done quickly," Mnuchin said. "We'll make sure that we strike the right balance ... taxpayers get compensated."

"We want to keep our airlines intact."

United to keep staff until Sept. 30 but warns airline may still shrink

Airlines plan furloughs; Air New Zealand sees smaller carrier in a year

Planemakers brace for sharp cuts in wide-body output - sources

BA suspends more than 30,000 staff, owner scraps dividend

Southwest Airlines to apply for U.S. government aid as demand craters

(Reporting by Jamie Freed and David Shepardson; additional reporting by Tracy Rucinski in Chicago, Tim Hepher in Paris, Kate Holton in London and Khanh Vu in Hanoi; Editing by Lisa Shumaker and Jane Wardell)

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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