The Crashing Airline Industry

blue airplane interior with seats

"If the Wright brothers were alive today, Wilbur would have to fire Orville to reduce costs."- Herb Kelleher

The airline industry at the beginning of this year coasted smoothly up its progressive trajectory looking like it would be impervious to anything and everything. Delta Air Lines CEO, Ed Bastian laid out the potentially phenomenal future that lay ahead for the airline industry during his keynote speech ,making it clear to all and sundry that the airline industry was currently facing a golden period of growth where new innovations and inventions in the field of technology would simply serve as an additional boost to the booming industry.

The airline industry peaked last year in terms of potential with the release of autonomous drones, digital twin technology (which is nothing but a virtual re-creation or replica of the actual living or non-living physical entity which can then be used for a myriad of purposes [unfortunately we haven't quite perfected this yet] ),new advances in the field of AI,VR, in-flight connectivity etc... . But little did anybody expect the current nosedive that the industry seems to be in the middle of.

Previously projected statistics of the airline industry showed an increasing revenue for the entire global airline industry ranging in billions (This is absolutely amazing given the fact that this is typically an industry more closely affiliated with bankruptcies) ,but the past few months have completely overturned this projection upending the entire prospective future of the industry. The IATA (International Air Transport Association) in another blow to the already emaciated industry on the 5th of March revealed that it had doubled its estimation of the effect of the COVID-19 to at least $63 billion - $113 billion in case the disease continues to spread at its current consistent pace.

It is no big surprise that the Asian airline industry took the brunt of this walloping being the epicentre of this crisis but the speed of its decline is still astonishing. According to management consulting firm Oliver Wyman most Asian airlines have cut seat miles by about 23% with more such cuts looming on the horizon for them. However African and Latin American regions where there have been very few reports of casualties have mostly been encountering negligible issues or have remained completely unaffected.

With the falling share prices of the airline industries (nearly 25% since the start) ,the airlines have been increasingly turning to their respective governments for some form of assistance, and while a majority of the governments did respond initially ,we are beginning to see the limits of their powers as well.

It is now pretty much pure and unadulterated Darwinism at play in the airline industry ,where the last indefatigable ones that weather this storm will emerge out more stronger than ever. The airlines are left with no other recourse but to cut costs and wait for it all to blow over given the fact that the negative demand shock is a result of fear and an aversion resulting from it towards flying altogether. However it is also too early to throw our hands up and give up hope in the industry. The airline industry has seen a number of catastrophic events that have threatened the industry in a similar manner. The industry has overcome barriers and walls that looked like they were absolutely indomitable ,the industry has shown us time and again how resilient it is by beating the unbeatable like the 9/11 , 2008 financial crisis etc..

It is also however equally true that the industry has been facing some unprecedented challenges in the form of stringent travel restrictions due to the rapid speed of the virus . The collapse of the UK airline Flybe is a testament to the above made statement ,the airline which has been struggling for while now announced sometime back that they were discussing alternative options with the government and that its investors were placing it on a recovery path, but on March 5 the airline abruptly shut down not only sending its customers into a state of panic but also sending waves of fear that resounded globally.

However the most imperative thing that needs to be noted here is not the fact that the COVID-19 has debilitated the industry, but the fact that the industry has responded as quickly as it has .Once the crisis hit the entire industry went into a full-blown survival mode ,some even anticipated the unpredictable and took risky pre-emptive steps that could just as easily ended up leading to their downfall. The tremendous growth and maturity that this industry has exhibited in the face of a corona-riddled economy is something to be praised and admired.

Written by: Padma Charan

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The Crashing Airline Industry The Crashing Airline Industry Reviewed by EMN on March 23, 2020 Rating: 5

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