Find the latest episode of "The Uncertain Hour" here. Listen
COVID-19

Airlines face their ‘darkest time’ because of COVID-19

Jack Stewart Apr 21, 2020
HTML EMBED:
COPY
Demand for air travel has taken a nosedive amid the coronavirus lockdown. Justin Sullivan/Getty Images
COVID-19

Airlines face their ‘darkest time’ because of COVID-19

Jack Stewart Apr 21, 2020
Demand for air travel has taken a nosedive amid the coronavirus lockdown. Justin Sullivan/Getty Images
HTML EMBED:
COPY

The travel industry has been hit hard by the movement restrictions imposed to help control the spread of COVID-19. This week we’re hearing more about just how bad it is for the airlines and what they’re doing to try to weather this downturn.

United revealed Monday it lost $2.1 billion in the first quarter of this year. Delta, Southwest and American are expected to release their numbers this week.

The federal CARES Act set aside $25 billion for passenger airlines, but that will only keep them going for so long. 

The International Air Transport Association, or IATA, said the shutdown due to the coronavirus is worse for plane travel than any previous event, including 9/11 and the Great Recession of 2008. 

“It’s the industry’s darkest time,” said Perry Flint, a spokesperson for IATA. He said globally, demand will be down 48% for the whole year compared to 2019.

“And passenger revenues will be down $314 billion,” Flint said.

Airlines in the U.S. have started to agree upon conditions for getting billions of dollars in government support. The Treasury Department sent the first $2.9 billion out on Monday. Richard Aboulafia, aviation analyst at Teal Group, said that will tide airlines over, for a while. 

“They look like they’re in good shape for a few months, but of course there are going to be big questions after that if you don’t see additional tranches of assistance,” he said.

Airlines have a lot of fixed costs like payments on leased aircraft, terminals and maintenance facilities, Aboulafia said. The federal money comes with the condition that it’s used to pay employees and not furlough anyone until September 30. 

Dawna Rhoades, professor of strategy at Embry-Riddle Aeronautical University, said airlines are anticipating having to make cuts to schedules, and that could mean layoffs later.

“If they have fewer aircraft, they need fewer pilots and they need fewer flight crews and all the people who support those aircraft,” Rhoades said.

Like the rest of the economy, the airline industry is waiting to see how deep this downturn goes and what the recovery looks like. 

COVID-19 Economy FAQs

What’s the outlook for vaccine supply?

Chief executives of America’s COVID-19 vaccine makers promised in congressional testimony to deliver the doses promised to the U.S. government by summer. The projections of confidence come after months of supply chain challenges and companies falling short of year-end projections for 2020. What changed? In part, drugmakers that normally compete are now actually helping one another. This has helped solve several supply chain issues, but not all of them.

How has the pandemic changed scientific research?

Over the past year, while some scientists turned their attention to COVID-19 and creating vaccines to fight it, most others had to pause their research — and re-imagine how to do it. Social distancing, limited lab capacity — “It’s less fun, I have to say. Like, for me the big part of the science is discussing the science with other people, getting excited about projects,” said Isabella Rauch, an immunologist at Oregon Health & Science University in Portland. Funding is also a big question for many.

What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?

Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”

Read More

Collapse

News and information you need, from a source you trust.

In a world where it’s easier to find disinformation than real information, trustworthy journalism is critical to our democracy and our everyday lives. And you rely on Marketplace to be that objective, credible source, each and every day.

This vital work isn’t possible without you. Marketplace is sustained by our community of Investors—listeners, readers, and donors like you who believe that a free press is essential – and worth supporting.

Stand up for independent news—become a Marketplace Investor today with a donation in any amount.