COVID-19: Airlines in touch with Mayday realities

 

By the end of May 2020, most airlines in the world will be bankrupt. Coordinated government and industry action is needed now, if catastrophe is to be avoided, writes WOLE SHADARE

Bankruptcy fear

As the impact of the coronavirus and multiple government travel restrictions sweep through the world, many airlines have probably already been driven into technical bankruptcy, or are at least substantially in breach of debt covenants. Cash reserves are running down quickly as fleets are grounded and what flights there are operate much less than half full. Forward bookings are far outweighed by cancellations and each time there is a new government recommendation it is to discourage flying. Demand is drying up in ways that are completely unprecedented. Normalcy is not yet on the horizon.

The fear of the Covid-19 outbreak running amok throughout the continents is one of the big eared elephants in the room. It seems, however, that the pandemic is already having a catastrophic effect on the air carriers, which link the panoply of countries that stretch from Algiers to Cape Town and Nigeria to Somalia.

That the continent’s carriers are in dire straits as a result of COVID-19 is stating the obvious going by what the pandemic has done to carriers globally.

Discouraging outlook

The outlook for the country’s airlines does not look good at all and may most probably remain long after the world sees an end to Coronavirus pandemic. Nigerian airlines are slow starters in everything that has to do with aviation.

The global impact of the disease is already making true of the International Air Transport Association (IATA) projection of over 125, 000 job cut.

Last week, Arik requested 90 per cent of staff to proceed on leave without pay from May 1, 2020 until further notice, adding that this position would be reviewed on a monthly basis and communications on further developments shared by its human resources department as the situation evolves.

The carrier equally decided to implement an 80 per cent pay cut for all members of staff across the entire organisation for the month of April 2020.

 

 

Nigerian carriers in dire straits

The Chief Executive Officer of Arik, Capt. Roy Ilegbodu, said: “While we are not unaware of the challenges that each and every one of us may face during this difficult period, we join you in remaining hopeful that this ugly situation will abate in the shortest possible time and our organisation will come out stronger in the long run.

“We are confident that the steps we are taking now are in the best interest of all and will see us through this difficult epoch in the history of mankind,” he added.

Explaining why the company took the painful decision, Capt. Iloegbodu said a few months ago, it would have been impossible to predict such turbulent and challenging circumstances.

Arik Air is not the only carrier that had furlough, Dana, Air Peace, Azman, Max Air, Overland, state owned Ibom Air, Aero Contractors have either cut workers’ salaries or asked them to go home until situation improves. Technically, the workers have lost their jobs until situation improves.

Other jobs in the country’s aviation sector are hanging by the thread and on the verge of going except something drastic is done. The drastic measures can’t come at a time cash reserves are depleting very fast.

The umbrella body of all domestic airline owners in the country, the Airline Operators of Nigeria (AON), has put the losses so far incurred by domestic airlines since the outbreak of COVID-19 at a whopping N360billion.

This is just as the spread of the disease and the precautionary measures put in place by the Federal Government have led to the grounding of 120 aircraft parked at the various airports across the country.

The AON through its Chairman, Captain Nogie Megisson,  called on the Federal Government to consider an urgent stimulus grant or palliatives for domestic airlines to cushion the negative effects of post-COVID-19 scourge.

Consumers’ confidence

As more countries mull lifting COVID-19 lockdowns, airlines are examining what flying might look like as travel restrictions start to be relaxed.

Carriers are haemorrhaging money and it’s very much in their interests to get planes back in the air. Passenger confidence will be one of many hurdles to overcome, however, with many worried about keeping a reasonable distance from their fellow travellers.

Several airlines are exploring the idea of keeping middle seats empty, to avoid passengers sitting directly beside each other. European short-haul carrier, EasyJet, was the latest airline to float the idea.

Dana Air says it plans to leave all its operational aircraft’s middle seats empty when it resumes flight “anytime soon” in line with the social distancing guideline on Covid-19.

Accountable Manager of Dana, Obi Mbanuzuo, said the airline would commence this initiative when flights resume, maintain it for a while and listen to the feedback from the airline’s customers.

”Majority of our aircraft are configured with mainly three seats in a row, on either side of the aisle, so when we resume flights anytime soon, we will keep the middle seats empty so passengers can sit on the window and aisle seats to ensure some physical distancing onboard all our flights,” he said.

Aviation expert, Mr. Tunde Oyekola, said airlines had to grapple with consumer confidence, stressing that the Chinese were already offering mouthwatering deals to attract travelers, describing it as a demand and supply situation.

To attract customers, fares will have to be very cheap, hinting that when the demand increases, then the airlines can begin to adjust their fares as usual.

The other scenario, according to him, is to keep fares high to make up for loss of passengers and hope that those who must fly will fill up the seats not only at the beginning but for a long time until others come along.

Likely survivors

Some survivors are self evident. Chinese airlines are mostly government-supported, so at least the majors will remain solvent; their share prices reflect this actual and de facto underwriting.

Whereas many other major international airline prices have dropped by 50 per cent and more, the big three Chinese airlines’ shares have lost only a little more than 10 per cent.

Nigerian airlines including many in the continent are not likely to survive because of signs that governments in the region are holding back cash from them.

Last line

Inevitably, once the world exits this tunnel – as it will –  the world will be a different place, even as aviation will be no exception.

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