How Is the Aviation Sector Facing Its Worst Hit in History?

Published March 19th, 2020 - 04:00 GMT
How Is the Aviation Sector Facing Its Worst Hit in History?
Millions of flights have been suspended across the world devastating the aviation sector. (AFP/Hong Kong)

As the whole world suffers grave consequences of the novel coronavirus outbreak, airline carriers and aircraft makers seem to receive one of the hardest hits in its history.

Governments all over the world are taking more and more severe measures to limit their citizens' movements in order to stop the spread of the deadly virus as much as possible. 

Months after many countries suspended flights to and from China, where Covid-19 first originated last November, measures have been expanded to include many Asian and European countries where more people are losing their lives due to the respiratory disease.

Borders have been shut between most European and Middle Eastern countries and thousands of flights have been suspended across the world, devastating the aviation sector and forcing executives to make very hard decisions to try and minimize their losses over the next months, and possibly years.

In an analysis published by Reuters, the alarming risk of the coronavirus has wiped about 41% of share values of international airlines, which is estimated by $157 billion. Experts fear that the aviation sector will not be able to have a quick recovery even after an anticipated end of the virus outbreak, especially after the US President's recent warning that global economy might suffer a long-term rescission if the crisis continues to plague the world.

Airlines have already started to offer flight waivers and adopt flexible cancellations and changing policies, including Oman Air, Etihad Airways, and many others. Hence, board decisions have also included unpaid leaves up to 12 months and massive layoffs, as in the cases of Emirates Airline and Qatar Airways.

Trying to provide strategic guidelines that can help airlines survive, the International Air Transport Association (IATA) has called on governments to support their airlines with about $200 billion.

In response to that, officials in Australia, New Zealand, and Taiwan have promised millions of dollars in aid to airlines. Moreover, the Scandanavian carrier SAS has been supported by the governments of Sweden and Denmark by about $300 million.

In the US, where flights from China and Europe have suspended indefinitely, United Airlines announced capacity cuts by 60% next month, including 85% on international flights. US Airlines have also reported its need for about $50 billion in grants, loans, and tax relief.

Aircraft manufacturers have also had their share of financial losses. Boeing has requested to get access to about $60 billion in liquidity and loan guarantees. While its competitor, Airbus has warned that it may soon apply for government support if the disease continues to spread over the next few months.

The hotels' sector has also been under a lot of pressure since the beginning of the crisis, with many hotels and accommodation services offering clients the option to cancel their reservations for full refunds, most notably in Airbnb's latest announcement.

As the coronavirus makes its way to take more lives across the world, most businesses brace for acute consequences and are preparing for unprecedented losses that will be hard to recover from.


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