Paper Sample on Covid-19: Airline Industry Needs Reshaping for Long-Term Survival

Introduction

The corona pandemic has posed serious challenges to the airline industry, the airports, and all other related ecosystems. Considering the long-term impacts of the pandemic, there could be changes needed in terms of investing in new technologies and also radically reshaping the airline industry at large (Jones, 2020). The pandemic has caused an increase in huge uncertainty for the business hence the need for stakeholders to expect a decrease in the traffic and ensure that more investment goes to digital and technological advancements.

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Changes towards better technology were meant to happen, but the corona pandemic has accelerated it, forcing many industries, including airlines, to rethink their ecosystems and also shift towards the adoption of new technologies. U.S. airlines have begun adding flights in an attempt to stem the loss of revenue experienced throughout the months where they were closed (Jones, 2020). The addition of flights is to respond to the increase in traveler demand for the summer season and stem the slowdowns caused by corona.

The big concern about the crisis is that when it happens, the airline industry needs to rest and restart, but the question is how the rest of the world is impacted. It is challenging to reassure people that they can get on the plane and get to their destination without being infected by coronavirus. In the event where people do not start traveling again in reasonable numbers that bring revenue to the airline industry, it is going to have a huge impact. U.S. Airlines are beginning to add flights amidst the COVID-19 crisis; however, recovery of the airline industry will take years to come.

Literature Review

The economic circumstances in terms of the worst-case scenario for the airline industry are that the pandemic may cause a disruption that will trigger an economic chain reaction. In this case, that will send the world into an economic situation of recession or depression that may last a couple of years (Mai, 2020). It is difficult to predict the outcomes of such a scenario because it will cause major long-term changes.

In the scenario of economic depression, the airline industry may not survive if there is no intervention of government assistance. The result will be that the governments are forced to choose the airlines that will continue to stay in business as well as those that will go out. In such a case, the choice of the government will be for the large airlines that are deemed “too big to fail” or prefer those airlines that are at the point of national pride.

The low-cost carriers may find challenges in looking for a government that will save them, especially if they serve the European market (Mai, 2020). Generally, there will be a decrease in the global supply of air travel because there will be many airlines going out of business. Similarly, the surviving airlines will look for a strategy that involves scaling back their operations.

The airports that serve as major hubs for connecting will likely lose such status, and many of the smaller destinations may find themselves having to lose their scheduled flights. Businesses in these destinations are left with fewer choices for air travel. This way, it results in longer times used for travel, and the cost of employee travel is also high.

The majority of city pairs that are connected by non-stop flights will have to lose them. The passengers are, in turn, forced to make connections that consume a lot of time. Another economic impact of the pandemic is that there would be a decrease in the rate of competition for the airline industry on many routes (Mai, 2020). This way, it will lead to a high cost for airline fare for travelers.

These costs are also likely to increase a lot more if the low-cost carriers are made to go out of business. These carriers have a significant responsibility in the airline industry to drive down airfares according to their respective markets (Ciliberto et al., 2019). The effect of major depression or recession for business is that it would likely reduce the travel budgets as well as make replacements for many meetings that need to travel with those that are virtual.

The airline industry will be affected strongly if there is not a strong safety culture that is resilient enough to bear the financial hardships of the pandemic. Coronavirus pandemic is likely to cause a deep multi-year depression that would cause financial stress to the airline industry (Mai, 2020). What is likely to preserve safety standards is the professionalism of airline employees as well as national regulators for most carriers. There is the possibility of the financial pressure that will cause standards to slip for some of the carriers. It will be necessary for the government to save small businesses rather than letting them drown in the financial pressure that will continue to incur more debts.

Economic Analysis

Airlines are among the cynical industries, and that makes them quite vulnerable to financial recessions. The case of COVID-19 pandemic will cause significant financial hardship for airlines that would make those airlines that were still in vulnerable financial positions before the pandemic to have difficulties in surviving. The willingness of the government to provide financial support to these airlines will likely decrease after the pandemic. Similarly, those airlines that have been financially healthy even before the pandemic will likely emerge in a stronger position compared to how they were before.

The daily passenger traffic for airlines will not go back to the initial levels as fast as expected because it will take more time to get the economy to where it used to be. The effect of the pandemic puts business travelers under keen observation. It is because they will have to keep a close eye on the financial health of the airlines that they prefer to avoid getting stranded by airlines that will be out of business. The economic impact of the recession will threaten the safety of travelers hence a constant stagnant of the passenger traffic. Airlines are required to maintain strong safety standards through the economic crisis.

Statistics

The adding of flights in the U.S. has happened in a number of States. An example is Hawaii that has started to serve Seattle, but the odds are that the flight is not running with many passengers. Hawaii has remained closed to visitors, but the fact that it is a remote island makes it need a certain number of flights (Leigh, 2020). Hawaiian airlines have maintained service to Los Angeles as well as San Francisco all through the pandemic.

Another airline that was set to add flights from June was United. It resumed seven routes in June as more have continued to follow throughout summer. The routes that have been added since June include Newark to Paris, Shanghai, and Tokyo, San Francisco to Beijing, Chengdu, and Frankfurt, among others (Leigh, 2020). The bulk of these presumptions are to China, which has indicated extremely few cases of coronavirus in recent months.

Another instance is that of Qatar Airways that continued to be active in providing airline services throughout the crisis. Qatar Airways catered to the demands that remained after many airlines in the U.S. shut down completely (Leigh, 2020). However, its operations have only been a small percentage of their regular schedules because of the guidelines imposed by the World Health Organization on how to handle the public.

The airline strategized to resume services to Delhi, Amman, Johannesburg, and Moscow since May. Qatar continues to provide services to other cities in the U.S. such as Dallas and Chicago (Leigh, 2020). Avianca had shut down because of the coronavirus pandemic since March but started reconnecting its hub cities with international destinations gradually since May. Bogota came back online from June with services to cities such as Washington, D.C., Miami, and New York.

Conclusion and Brief Summary

COVID-19 is a worldwide pandemic that has caused the devastating impact, more so on the airline industry. It is for the fact that it will take years before things go back to normal because there has been a complete disruption of the economy (North et al., 2019). Companies will have to figure out how to implement changes in technology. The reduction in passenger traffic will mean that stakeholders should strategize to set aside more funds for the development of other projects such as drones and autonomous vehicles that will serve the whole ecosystem better.

In the best-case scenario, there is hope that the authorities will do everything possible to contain and also eliminate the virus worldwide within a few months (Josephs, 2020). However, the case relies on the economic impacts of the pandemic being temporary and quickly reversible. However, that is almost impossible because it has been more than four months now, and there have been no permanent ways to contain the disease. There are more cases in the world for COVID-19. Under such circumstances, the airline industry will not effectively pick up in the same strong position as it was before the crisis.

The pandemic is now in the worst-case scenario that its effects have started to manifest in terms of people finding it hard to keep up with lives without work. Businesses have encountered hard times while trying to still be active despite the crisis. The faster the government implements stronger plans to deal with the pandemic, the faster the business is likely to resume because the recession will only be moderate.

References

Leigh, G. (2020). Airlines Are Adding Flights Again: Here’s Where They’re Headed. Retrieved 2020, from https://www.forbes.com/sites/gabrielleigh/2020/05/04/airlines-are-adding-flights-again-heres-where-theyre-headed/#754078874dee

Ciliberto, F., Watkins, E., & Williams, J. W. (2019). Collusive pricing patterns in the U.S. airline

North, M., McCuan, S., Mohammed, T., Irving, N., Turner, R., & Richardson, R. (2019). A Perspective Exploration of the Airline Industry. International Management Review, 15(2), 5-89. Retrieved June 17, 2020, from http://americanscholarspress.us/journals/IMR/pdf/IMR-2-2019/IMR-v15n2art1.pdf

Josephs, L. (2020, May 19). U.S. airlines see glimmers of demand, a turning point in the pandemic. Retrieved June 17, 2020, from https://www.cnbc.com/2020/05/19/coronavirus-travel-southwest-shares-climb-on-signs-of-improving-demand.html

Mai, H. (2020, June 7). U.S. Airlines Add Flights As Demand Increases, But Recovery Will Take Years. Retrieved June 16, 2020.

Jones, D. (2020, June 10). You aren’t the only one itching to travel: Airlines are slowly adding flights. Retrieved June 17, 2020, from https://www.washingtonpost.com/travel/2020/06/10/dont-look-now-us-airlines-are-adding-flight-routes-summer-travel/