The impact of COVID19 on the Airline Industry

The Corona Virus has officially taken the Mr.Worldwide title from Pitbull and has reached all corners of the world.

From Wuhan to New York, Spain to Tokyo. The world is feeling the brunt of the infamous COVID19. Although it is far from claiming the worlds largest pandemic - it may claim the title for the most economically impactful.

In an attempt to understand the scale of the impact lets deep dive into an industry to develop our understanding of the following:

1. What has the impact been so far?

2. What would be needed for the industry to remain in the air?

3. Why are the impacts long-lasting?

Today's Industry: Airlines

Let's get ready to take off!

The impact of COVID19 on Airlines so far:

The airline industry has been chained to the ground by global lockdowns and travel restrictions. With over 100 countries either enforcing a partial or full lockdown since March 2020 - a huge impact on every airline on the tarmac but also on the tourism industry itself.

Within the month of March, air traffic reduced by nearly 70% worldwide. Have you noticed fewer lines in the sky over these past weeks?

To make a comparison - London Heathrow recorded 1,615 flights on the 27th of March 2019, fast forward a year into 2020 and it has dramatically reduced to 525 flights.

Tourism has always been a strong suit for the UK, with the Royal Palaces, the Lake District and various other destinations.

Tourism in the UK attracted almost £2.3B in 2019 alone. Helping businesses such as hostels, hotels, tour companies, airlines, restaurants etc.

The worry now is that the lockdown will extend into the summer period - the prime time for a good time worldwide.

If the lockdown lasts from March to July - the UK economy could miss up to £955M in 2020! That is a significant amount of cash flow that is not reaching UK businesses and the economy.

The growing challenge for airlines is to remain operational as their expenses eat into their liquidity - especially as the lockdown has dramatically reduced their revenue streams. Will furloughing their staff be enough, will the airlines have to make more dramatic cuts?

What is needed for the airline industry to survive?

You can imagine how many companies are hoping for a government loan or bailout...

The reality of it is that the government cannot help all airlines and will be critical in choosing which organisation is worth helping. Some qualifying questions would be:

• Which airline has planes in high demand destinations?

• Which airline has enough liquidity to survive the coming months?

• Which airline requires the least loan against projections?

Will we see equity capital and loans being given out? Will the government have a more active role in these industries?

Future Impacts:

The economy and the stock market are already falling from the skies. With no clear solution in sight, we should expect to see headlines of well-known companies going under by May.

The GREATEST impact of all is COVID19s impact on globalisation. The economic repercussions of developing countries addressing COVID19 will last for many years to come. From enforcing partial or national lockdowns to managing their healthcare capacity. These are the challenges that even the best economies are facing.

The impacts of COVID19 in these regions will impact flight routes and flight frequency depending on how each government manage the crisis across their healthcare, businesses and economy.

The uncertainty of developing countries and the ashes of the airline industry will impact the industries ability to reach full capacity for years to come... we may see a different dynamic of airlines available to us. Far fewer options and far fewer flights.

Some questions to ponder on:

• With fewer competitors, will the stock value of airlines be on the up?

• Will the uncertainty of international flights impact the industry?

• Will airlines charge even more for luggage and seat allocation to recoup for this time?

• Will people be comfortable flying?

In the aftermath of COVID19, we will see record numbers of unemployment worldwide. Will the airline industry play a key role in helping boost the economy? I believe so!

Stay tuned for the next episode of BREXIT, COVID19 and Government Bargain Buys!