In early March 2020 the world took on a "strangeness" that only the most pessimistic science fiction writer would have considered. although, looking back at certain movies the wearing of masks has already been predicted.
The past 30 years have been something of a mixed blessing for the airline industry. In 1985, I flew People Express from NYC to Paris -- ticket price about C$600 for a round trip leaving in early June. Gasoline was cheap and (trust me) salaries were lower than in 2020. People Express launched (yeah ok Braniff before them) the cheap and cheerful direct flight to Europe from North America (Iceland Air with a stopover in Reykjavik was even cheaper!).
This was the massive change that was expected by the FAA deregulating the airline industry. If you could buy or lease an aircraft and find a willing airport operator you could start your airline. The US (still dominant market) was not ready, main airlines treated their passengers "poorly" with no option, costs were high and load factors were low -- airlines were operating as true oligopolies -- maximizing yield by sacrificing load factor, a typical outcome.
20 years later 9/11 occurs and once again the cards are scrambled - the airline industry (in North America) shuts down for 30/50 days. I was living in Asia then, and flew from HK to Singapore on the 12th of September 2001 with no apparent changes to the business. New systems were implemented in airport increasing the passenger's stress, bot otherwise things got back to normal (international flights first, domestic flights later -- and the later never fully recovered)
Since then, airlines' business model has changed dramatically, gone were the 20,000 different fares on any one flight (ok I'm exaggerating), and a simple fare structure ensured that the cabin revenue yield was optimized. Airlines started selling preferential seats, and other amenities. In 2000, the average IATA load factor was around 65% for major operators and around 85% for discount airlines and charters. By the end of 2019, the average load factor for the major operators was around 85%, whereas the charter was around 99%.
Airlines got serious about yield optimization and getting the very last dollar -- because for clients the difference between economy on Air Canada and Air Transat is the price (in economy) and nothing else. Major airlines understood this situation and adapted. Making lounge access harder (rightly so) or more expensive, and providing the service the clients "really wanted" like getting your boarding pass on your iphone. Buying your seat and maybe some food onboard.
March 2020 arrived and it took everyone by surprise, although European and North American airlines had to deal with Covid-19 risk in early January -- a byproduct of operating international flights to China. Still, the shutting down of borders of stoping flights and by enacting massive confinement had a terrible impact on the airline industry that is still being quantified -- Losses this year will be in the hundreds of billions -- serious money for businesses that are already heavily leveraged.
As of September 2020 there appears to light at the end of the tunnel and it possible that by the end of 2020 things will return to some level of normality, maybe. However, the risk of outbreaks and of border shutdown will remain a problem and is more than likely to change attitudes to international travel. It appears more than probable that travel will restart domestically and then after a period of time internationally. However, certain habits have changed and are unlikely to return, especially for business travelers. Sure you still have to meet a client face to face, but do you have to do it every month, can a videoconference that takes 60 minutes to replace a flight from NYC to London? Many business leaders are finding that travel grew to fill a void that may not be necessary
And here lies the catch, it is the front 3rd of the aircraft that generates 100% of the airline's profits, the back of the bus only pays operating expenses (break-even), it is the front of the aircraft that keeps the system "profitable"
finally, if international never fully recovers, then what for the large body aircraft business? Boeing is unequal there, the B787 and B777 are great wide-body aircraft, but the B737MAX is grounded and maybe some time -- especially since the European agencies will "double-check" the work performed by the FAA. Airbus already saw massive write-offs with the A380 (fun aircraft but an insane bet), now they are left with the A350 (widebody) and the A320NEO aircraft -- the real winner here...once things get back in order.
The Chinese have been itching into getting into the European and North American skies but have several safety issues that need to address (the most important are "fake parts" which are endemic to the Chinese procurement system.
However, for the manufacturers the problem is even more serious than what will be the next aircraft they purchase, it will be what to do with their current fleet. Between 50% and 80% of the world's aircraft fleet is currently parked; airlines don't need new aircraft they have to figure out what to do with their current fleet.
Many challenges
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