It goes without saying that COVID-19 is the worst crisis to face the aviation industry. With many aircraft retired or put in storage along with employees furloughed, it’s a dark time to be involved in the aviation industry. Fortunately, with more people getting vaccinated, there’s now more hope that the world will move on from the pandemic. Consequently, it means that air traffic in regional markets (U.S., Europe, and China), is recovering faster than expected despite the Delta variant of COVID-19 spreading all over. This put a ton of airlines in a tough spot already given how many aircraft are retired or in storage. Even though it will still take a while for international travel to recover to pre-pandemic levels, I wouldn’t be surprised if that sector recovers faster than expected. And given that Boeing’s new 777X is expected to enter service in late 2023/early 2024, it adds even more pressure on airlines who made significant cutbacks on their long haul fleet. In this article, I’ll go over how airlines are anticipating the future crisis as well as the potential consequences for the industry.
How Airlines Are Dealing with the Crisis
So when it comes to how airlines need to handle this crisis, let’s look at a similar crisis in the railroad industry during the early to mid 2010s. During that period, not only was the economy recovering, but oil was being drilled from the Bakken Oil Fields of North Dakota, Montana, Manitoba and Saskatchewan and demand for oil was at an all time high. As a result, railroads such as BNSF and Canadian Pacific had to deal with locomotive shortages. It didn’t help that in the winter of 2013-14, there was record snowfall in the Midwest, which resulted in a ton of delays when it comes to shipping freight. As a result, railroads such as BNSF had to reactivate older locomotives as well as leasing them from other railroads to deal with their backlog of traffic.
Sound familiar? Well this is basically what’s going on in the airline industry at the moment. Airlines such as Southwest and Delta are caught off guard by the sudden spike in demand for travel as more people get vaccinated. And while airlines would prefer to get newer planes such as the 737 Max or Airbus A220, unfortunately, it will be a while before new aircraft will enter the fleet. So just like the railroads did in the early 2010s, airlines had to pivot their strategy. One example of how airlines are adapting to this surge is buying used aircraft. Delta Airlines is doing this by acquiring 29 Boeing 737-900ERs and lease 7 Airbus A350-900s all scheduled to enter the fleet by early 2022. This is a good strategy because these specific types are already in Delta’s fleet and they are able to easily configure it to their specifications with their hard product as well as not spending more money to train pilots on new aircraft and allow Delta to focus more on training new pilots. Another option would be to reactivate older aircraft out of retirement. United did this by reactivating some of their older 757s and 767s. Even Lufthansa is hinting at reactivating their A380s for summer 2022. Given that they don’t need to refit them, it would make sense for Lufthansa to reactivate the A380s until more A350s and 777-9s enter the fleet. So while airlines on paper have a game plan for how to handle the crisis, what are the consequences of not handling this potential aircraft shortage?
Consequences of an Aircraft Shortage Crisis
The consequences of airlines not handling this crisis could potentially put more airlines in deeper trouble than they already were then the pandemic broke out. First off, a lot of flights would be cancelled leading to more passengers being more upset with the airlines that they fly on. Combine the aircraft shortage with the lack of pilots, flight attendants and ground personnel because of layoffs caused by the pandemic and you got a perfect storm to a crisis. Already there have been more flight delays, sudden cancellations and longer lines at airports.potentially driving more people away from flying and use other modes of transportation. For example, someone who would want to fly from San Diego to Los Angeles wouldn’t want to deal with the hassle of being stuck at the airport and would rather take the train instead. Another consequence would be the bad PR that airlines would have to deal with on how they treated their customers during this difficult time and in the age of social media, if an airline does something bad, their brand image will forever be tarnished. So for the time being, airlines need to make sure that they are able to rapidly pivot to the unexpected rise in demand.
Conclusion
In summary, airlines are going to struggle dealing with the fluctuations with traffic until mid 2022 at the earliest. Hopefully as more new aircraft such as the 737 Max and A220/A320 enter service, it will assuage the stress on the airlines and things will smoothen out once demand returns to normal. But what do you guys think? How are airlines going to handle this new shortage crisis? Let me know in the comments below and keep looking to the sky!
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