Airline industry braces for prolonged recovery from coronavirus crisis

By Jamie Freed

SYDNEY (Reuters) – A full airline industry recovery from the coronavirus looks prolonged at best, analysts said, as new data showed international seat capacity had fallen to 23% of last year’s levels and around half the world’s airplane fleet is in storage.

Carriers including United Airlines Holdings Inc and Air New Zealand Ltd have warned they are likely to emerge from the crisis smaller, and there are fears others may not survive.

“It is likely that when we get across to the other side of the pandemic, things won’t return to the vibrant market conditions we had at the start of the year,” said Olivier Ponti, vice president at data firm ForwardKeys.

“It’s also possible that a number of airlines will have gone bust and uneconomic discounts will be necessary to attract demand back,” he said in a statement.

ForwardKeys said the number of international airline seats had fallen to 10 million in the week of March 30 to April 5, down from 44.2 million a year ago.

Data firm OAG said several years of industry growth had been lost and it could take until 2022 or 2023 before the volume of flyers returns to the levels that had been expected for 2020.

Cirium, another aviation data provider, said around half of the world’s airplane fleet was now in storage.

“While many of these will be temporary storage, many of these aircraft will never resume service,” Cowen analyst Helane Becker said in a note to clients. “We believe the airline industry will look very different when we get to the other side of this.”

Planemakers are looking at drastic cuts in wide-body production amid a slump in demand for the industry’s largest jetliners, manufacturing and supplier sources said.

Deliveries of long-range jets like the Boeing Co 777 or 787 and Airbus SE A350 or A330 have been particularly badly hit as airlines seek deferrals and many withhold progress payments.

British Airways said on Thursday it has struck a deal with its unions to suspend more than 30,000 cabin crew and ground staff in one of the airline industry’s most dramatic moves yet to survive the coronavirus pandemic.

With global travel in turmoil as the virus takes hold around the world, BA’s owner, IAG , said it would also cut capacity by 90% in April and May, and scrap its dividend, in a desperate bid to survive the worst crisis in its history.

Southwest Airlines Co said on Thursday it intends to apply for U.S. government aid to help it ride out the sharp drop in travel demand.

“We still don’t know the severity of this situation. We still don’t know how long it will last,” Southwest Chief Executive Gary Kelly said in a video message.

Vietnam Airlines will lose 50 trillion dong ($2.12 billion) in revenue this year as most of its 106-strong fleet have been grounded due to the coronavirus, state media reported on Thursday.

Up to 10,000 employees, or half the company’s staff, will have to stop working while others’ salaries have been cut, Tuoi Tre newspaper cited the Chief Executive Officer Duong Chi Thanh as saying.

(Reporting by Jamie Freed; additional reporting by Tracy Rucinski in Chicago, David Shepardson in Washington, Tim Hepher in Paris, Kate Holton in London and Khanh Vu in Hanoi; Editing by Lisa Shumaker)