This is the article I didn’t want to write. About a month ago, I sat down at my computer to lament the fact that Delta’s MD-88 fleet was rumored to be retiring early due to COVID-19. That rumor turned out to be just the tip of the iceberg.
The next few weeks would turn even the most hardened aviation fanatic’s stomach sour. Some reports have stated that passenger traffic on airlines are down 96% from last year. The big four US airlines have massively cut flights, we’ve seen airlines fold, hundreds of planes parked in the desert and a number of types of airliners fly off into the sunset, probably never to fly again.
Classic Airline Fleets Disappearing
In some ways, it feels like September 11th all over again for the airline industry. Shortly after 9/11, classic airliners like the Boeing 737-200, 727 and DC-9 were rapidly retired unceremoniously from fleets as bean counters right-sized their fleet in anticipation of the economic downturn.
In this case too, airlines are beginning to do the same. Delta has stated that they expect to retire fleets early to meet the smaller demand. Although the MD-88s and MD-90s are still flying for now, it is expected that they will retire the famous T-tails sooner rather than later.
American Airlines has announced that they will retire the Boeing 767-300 and 757-200 fleet earlier than expected. With thousands of flights cancelled right now, there are decent odds that both the 767 and 757 have already flown their last revenue flights in American Airlines colors.
Unfortunately, this crisis is way bigger than just some classic planes retiring
The COVID-19 crisis is far worse than watching some great ‘classic’ aircraft retire. There is a real human cost to this crisis. The pandemic is more like an economic tsunami where wave builds upon wave, each more destructive than the last. Most scheduled international service from the United States to other nations has been cancelled. Travel to/from areas that have been hardest hit is just a fraction of what it used to be.
Airlines like JetBlue have consolidated service in major metropolitan areas like New York, Washington DC, Boston, LA, and San Francisco to just one airport in the region. Frontier and Spirit have requested dispensation from the requirements of the CARES act to temporarily stop servicing airports that have little to no traffic right now.
As part of the need for airlines to right-size their labor force to match demand, airlines have cut hours across the board for all employees. Over 600 American pilots have taken early retirement to reduce the chances of furloughs for the remaining crew members. Other major airlines have cut hours to the contractual minimums for both pilots and flight attendants. Ground and support staff are affected by reduced flying along with all of the people who work at the now shuttered stores and restaurants at major terminals across the country and most of the world.
Some airlines have shuttered, stopped all service, or declared bankruptcy
FlyBe, a regional carrier based out of the UK, shut its doors forever last month citing COVID-19 as the final straw. The airline had been struggling prior to the pandemic but the rapid shutdown of the airline caught staff and customers by surprise.
Two US based feeder carriers have closed. TransStates Airlines, a feeder carrier for United and American with roots back to TWA, has also folded. They had planned to conduct an orderly shutdown by the end of the year but moved up the closing date when business dried up in the wake of COVID-19. Compass Airlines, a feeder for Delta and American, also closed in this wretched business environment.
Europe isn’t faring much better. Lufthansa has shuttered discount carrier Germanwings with no intent to resume service post crisis. They have also suspended a majority of their international long-haul service by all of the carriers in their group.
Other airlines have intentionally shut down temporarily instead of flying empty aircraft. Canadian Dash 8-400 operator Porter Airlines suspended service until June.
Canadian leisure airline Sunwing has suspended all southbound service until the end of May. European discount airline EasyJet has also suspended service indefinitely.
Charter operator Miami Air declared Chapter 11 bankruptcy. They have been hard hit by the lack of leisure travel and the suspension of all sports leagues too. The airline will continue to operate during reorganization.
What’s next for hard hit airlines?
The US government bailout bill for airlines will help prevent immediate furloughs and service cuts immediately in most cases. As part of the package, airlines must avoid layoffs before September. They also must continue to operate to all markets (albeit at a reduced schedule) as a condition of the grants and loans. It is interesting to watch as airlines like Alaska has added unique city pairs to ensure they are following the requirements of the bailout while cutting unnecessary flying. Who would have thought that you would see a non-stop flight between Minneapolis and Columbus, Ohio or Dallas and Houston on Alaska metal? Strange times indeed.
Still, it is hard to see airlines bouncing back immediately once the primary crisis passes. Social distancing, a term that is now part of almost everyone’s vernacular, won’t immediately fade. That means that we are likely to see ‘space blocked’ jets with open seats to reduce the possibility of virus transmission. Restrictions on travel, especially international travel, will remain for the foreseeable future. And the economic impact of the crisis will mean that businesses will likely limit air travel to just essential purposes while many hold off of leisure travel in order to save cash.
A smaller industry to emerge
Airline CEOs have publicly stated that their airlines will emerge much smaller from this crisis. Delta’s CFO publicly stated such last month. Large aircraft like the already sunsetting 747 is likely to face an early retirement at carriers like Lufthansa and British Airways. Qantas and KLM already retired the Queen of the Skies in their fleets. The Airbus A380 could also be the odd-plane out. Air France has already retired the fleet. Qantas has shelved all but two of the giant airplanes. Lufthansa has put a sizable portion of their A380 Super fleet off to pasture too.
Airlines that had planned on buying the new Boeing 777X, A220s, A320neos, A350s, and additional 787s will likely seek to hold on to older aircraft. Some already have delayed deliveries of new jets. With less demand, shaky financials, and relatively low oil prices, it just makes sense to fly existing metal versus embarking on a buying spree. Boeing and Airbus’s record production rates have already taken a significant hit. Painful cutbacks on aircraft production is a certainty in the short term. Boeing faces additional challenges with their troublesome 737 MAX too.
Passengers wallets will also likely lose out after this crisis. It is likely that even when the pandemic subsides, airfares will rise as airlines seek to ‘right size’ their available seats to the actual demand resulting in less discounts for the remaining service.
An industry that seemed unstoppable just a few months ago, is now stopped dead in its tracks. The irony of this latest downturn is that just two and half years ago, American Airlines CEO Doug Parker stated that
“I don’t think we’re ever going to lose money again.”
It is ironic that his airline is among the first in line at the bailout window begging for at least $12B of the $50B fund to survive.
The airline industry truly is a boom or bust industry. The good times might have seemed like they would last forever, but sooner or later the party had to come to an end. The ending for the industry this time was more like a screeching halt on a short runway by a newly-hired copilot versus a smooth, graceful touchdown by an experienced grey-haired captain. Let’s just hope that both pilots get the opportunity to fly again sometime soon.