If you’ve been to an airport in a major city lately, you are likely to go away with the impression that commercial air travel is crawling back ever so slowly. In fact, during the latest holiday periods, it was frequently hard to tell that air travel is stuck in unprecedented limbo. The lines resembled 2019 and the airport schedule boards looked full. But make no mistake, the airline industry is hurting. Aviation publications say that “economic stagnation threatens airlines’ delicate balance sheets.” The immediate effect could be sharply reduced flight schedules and even a curtailed replenishment of equipment, including new modern aircraft
The fact is that the airlines keep getting pelted with surprises their expensive forecasters cannot foresee in advance. Just when it seemed that the return to “normal” was imminent and air travel would rebound came the Omicron variant and a return to some regulations, including stricter policies on masks and so forth. This is all bad news for the Boeing Company that had to face soaring airline fuel prices, weaker demand, and major new aircraft delays. Boeing was already reeling from the 737-Max fiasco which was grounded after two relatively new aircraft crashed with a huge loss of life. There were also major new plane order cancellations and problems with labor shortages and the scarcity of spare parts.
The airline industry seems to be taking it on the chin even as other parts of the economy figure out how to survive the pandemic. Not being able to predict even its short-term viability is having dire consequences for the airlines, even on the declining value of airline stock prices. Most executives are concerned about several major factors in addition to the unpredictability of the course of the pandemic. For one, they have to be able to calculate their real costs which they have been unable to do because of the constantly rising fuel costs, labor shortages, and even hard to get spare parts. It seems that every time they make a prediction about rebounding, they get hit with another “Covid surprise,” as one executive termed it.
International air travel will likely remain sluggish in the near term as uncertainties over the omicron Covid variant linger, according to an aviation analyst. Brendan Sobie, independent analyst at Sobie Aviation, said omicron has hit passenger confidence in “travel right now because things are changing every day.” Some countries like Israel keep going in and out of restricting travel, creating havoc for travelers and airline schedules.
Passengers who used to enjoy air travel are in general wary about traveling during these Covid times. Due to the ongoing mask policy, there appears to be a growing tension between crews and passengers. Warnings at the beginning of a flight are likely to advise passengers that if they do not wish to comply with mask rules, they may be forced to deplane. Despite scientific evidence that masks do not help at such high altitudes, the requirement to wear them aboard aircraft is likely to remain for 2022. All this while a significant sector of business has not returned, which means that the all-important business traveler is not back. Many businesses throughout the world are still not sanctioning traveling to trade shows, a significant business for the hospitality and airline industry.
Some of the international airlines have also been forced to do away with perks that made them money. For example, some carriers are waiving fees for changed or canceled fees, which used to make up a sizable part of an airline’s income. Delta Air Lines recently gave travelers even more time to use new and existing flight credits, from the end of 2022 to the end of 2024. Those who took advantage of Delta’s vacation packages are receiving a one-year extension to use the packages. Flight credit with American Airlines from travel voluntarily canceled during the COVID-19 pandemic waiver can be used for travel through March 31, 2022. United recently extended the validity of eligible tickets and travel credits through Dec. 31, 2022. Tickets purchased on or after Jan. 1, 2022, have a 12-month validity from the date of purchase.
Despite the shaky climate for airlines in 2021, matters remained relatively stable. No U.S. airline filed for bankruptcy protection and no merger was announced. If 2021 was filled with uncertainty, 2022 seems headed for even more questions. Passengers seem less happy with the airlines than ever before and less likely to travel by air. Airline crews are busy enforcing the mask rules, often putting them at odds with passengers.
The major US airlines are feeling the impact of reduced air travel the most. Where once they had 80% share, they have ceded some 20% to the smaller discount carriers like JetBlue and Spirit. The upshot has been for them to reduce capacity. The Omicron variant has also affected staffing with many scheduled flights being short-handed, leading to further curtailments in airline schedules. Don’t be surprised if you see many large carriers switching from their fuel guzzling widebodies to smaller one-aisle planes. The widebodies, say airline executives, only make sense with the full return of business travel, which for now seems oceans away.
Business seems to have grown comfortable with videoconferencing and Zoom meetings. This is truly bad news for the airline industry. Even sales executives who relied on the eyeball-to-eyeball approach to selling have become very creative with remote selling. Once again, the uncertainty of how business responds to the pandemic is not allowing airlines to properly plan their immediate future. In Europe, some business executives are already predicting that business will somehow return to “normalcy” despite the possibility of another round of variants. “We will learn to live with it just as we do with diseases like the flu,” a French Business Executive said.
When the omicron Pandemic was infecting tens of thousands in Israel, the government decided not to force a lockdown. Many other countries that saw the pandemic spike also resisted lockdowns. There is a feeling that such lockdowns do irreversible damage to an economy, which has all kinds of repercussions including political. Lockdowns are, of course, bad for the airline industry as they are forced to cut back their schedules and limit their presence in different countries.
While turbulence is not new to the airlines, pilots will tell you that unforeseen turbulence is their worst nightmare. That is now the major question for the airline industry: “Are we headed into more unforeseen turbulence?” What is certain is that they do not have the answer!