[Mises] The economic impact of the COVID-19 pandemic has reached all productive sectors. The massive spread of the virus and social distancing measures have led to a dramatic decrease in economic activity.The aviation industry, vital for tourism and business, has been hit hard. Investors and analysts state that this crisis could be worse than the one that followed the SARS outbreak in 2003 and the one after 9/11.
In this article we will describe how the future of airlines looks and explain how bad the current situation is.
THE IMPACT ON THE AIRLINE INDUSTRY
The airline industry necessarily requires intensive social contact and is directly affected by travel restrictions. Therefore, it has been one of the industries that has suffered most from NPIs.
According to a Wall Street Journal report, the financial implications of the canceled flights and routes are immense. Statistics from Flightradar24...show a 73 percent fall in the number of commercial flights per day from the beginning of March to the second half of April....
Layoffs as a result of the shutdowns are already happening. The WSJ report notes that Cathay Pacific and Asiana Airlines have asked thousands of employees to take unpaid leave. Hong Kong Airlines announced that it would lay off four hundred employees, and its president said that it was a matter of survival. According to a CNBC report, Delta Airlines cut capacity by 70 percent, United Airlines by 65 percent, and American Airlines by 50 percent. Norwegian, SAS, and Lufthansa suspended most of their operations, and similar cuts are expected in other airlines.
The CEO of American Airlines, Doug Parker, stated that this is the worst crisis in the history of the industry.
CONCLUSION
In a nutshell, the economic impact of the COVID-19 crisis on the aviation industry is enormous, and the situation could get even worse.
After all, it is not only about the ruin of the airlines or how they will manage to recover (if they survive). The aviation industry represents 3.6 percent of global GDP. Its crisis will have a wide impact on the economy as a whole.
Today the industry supports 65.5 million jobs worldwide, and 25 million of them are now at risk.
This is not the time to stop worrying about industries’ performance. The global recession could have more devastating effects than the virus itself, and the example of the airlines put things in perspective.