Airlines Are Struggling. Here’s Why You Should Care

It’s obvious that travel is one of the most hard-hit industries during the COVID-19 pandemic. As Americans remain fearful of contracting the infection, in addition to stringent protocols for traveling domestically and worldwide, Americans are preventing flying incomparable style to the Sept. 11 terrorist attacks. After September 11, it took practically 3 years for flights to spring back to numbers seen in August 2001.

Some professionals in the travel industry are approximating the COVID-19 slowdown may net even worse outcomes than the terrorist attacks. As more businesses are sending staff members to work from house, and the overarching question of whether employees really require workplace or face to face conferences, there is a chance that flight demand might never ever return to similar levels pre-pandemic.

Delta Air Lines CEO Ed Bastian said in a July 10 interview with CNN that it will take “2 to 3 years” for the airline companies to go back to a sense of normal. Additionally, the airline company industry contraction will lead to a “smaller” industry post-COVID.

In 2019, U.S. airline companies brought approximately 925 million guests– a record number according to the Bureau of Transport Data (BTS). In 2020, it will be a sliver of that. However regardless if you are a regular flyer with top-tier elite status, or have only flown a couple of times in your life, this greatly affected the organization sector affects everyone. From countless lost jobs to deflated stock values, airlines are a lot more integral part of our financial ecosystem than one may believe.

Airlines Receive Billions in Bailout Funds

In March 2020, President Donald Trump signed the CARES Act into law, giving the airline companies $50 billion in bailout funds. Half of the funds were contingent on keeping employees through Sept. 30. But since the pandemic continues to damage air travel numbers, the airlines are lacking alternatives that do not involve a reduction in personnel levels.

White Home Chief of Staff Mark Meadows said in an interview with Politico on Wednesday that the choice of executive action was viable if Congress can not pass a 2nd stimulus bundle.

Meadows expressed his frustration saying, “Due to the fact that if Congress is not going to work, this president is going to get to work and solve some issues. So ideally we can help out the airlines and keep some of those staff members from being furloughed.”

American Airlines revealed 19,000 furloughs and layoffs on Aug. 25 as the Sept. 30 due to date methods. The very same day, Delta Air Lines revealed nearly 2,000 pilots will be laid off on October 1. In early July, United Airlines announced 36,000 layoffs amidst the ending of federal funding. Southwest Airlines Co. has said enough staff members opted into early retirement and leave that no furloughs are planned through the end of 2020.

While a 2nd stimulus bundle remains in limbo, Doug Parker and Robert Isom, the chief executive, and president of American Airlines, sent out a letter to employees specifying their dissatisfaction with the federal government. “We must get ready for the possibility that our country’s management will not have the ability to discover a way to more support air travel specialists and the service we offer, specifically to smaller communities”, they stated.

Why The Airlines’ Struggle Matters To Everyone

Even if air travel isn’t a part of your routine, the airlines struggling is an issue for everybody. From 10s of thousands lacking work to plummeting stock prices, this affects our economy at a grander scale than just getting business and leisure tourists from point A to point B.

Tens Of Thousands Losing Jobs, And Millions Impacted

10s of thousands in the air travel market will be either furloughed or laid off as a result of the pandemic. That is just the very first layer of the economic interruption. According to Airlines.org, business air travel drives over 10 million jobs in the United States consisting of many jobs that aren’t a tourist or travel related. Worldwide, the airline market lost over $200 billion in passenger revenue between January and July 2020.

As tourism has nearly stopped in America, billions in profits from taxes have been lost. In 2019, the United States hosted nearly 80 million worldwide visitors. This figure represents tremendous financial power that has almost collapsed, with no end in sight.

Customer Impacts

Prior to the pandemic, commercial airline companies assisted in moving more than 58,000 lots of freight. And with over 2,000 planes currently grounded, there are fewer chances for freight to be moved where it requires to go, driving the rate of goods up. In a CNN report early in the pandemic, it was reported that chartering an industrial airline to transport freight had doubled in cost. This resulted in several airlines transforming a number of their guest planes into freight airplanes as the number of guests fell by up to 90% in the spring.

Plummeting Stock Costs

As millions of Americans invest their retirement funds into the stock exchange, they count on the performance of American companies to help grow their nest egg. A variety of the largest funds and indices, including the S&P 500, including air travel based business. And while your quantity of flying might vary, the performance of these companies straight affect the worth of the stock market.

Here’s how their stock rates have fared throughout the pandemic.

These losses represent numerous millions in declined and have trickled down to American’s portfolios.

Where Do Airlines Go From Here?

With all of these realities considered, here’s what the future holds for airlines.

First, the airlines will be without any responsibilities in regards to CARES Act funding starting on Oct. 1. This will enable airline companies to lay off staff members as they see fit. Since the due date is quickly approaching, airline employee labor unions are pushing to extend the payroll-support arrangements of the CARES Act through March 31, 2021. This would include $25 billion for passenger airlines to the brand-new aid package being discussed in Congress. Nevertheless, the funds would particularly be designated for payroll requirements and not other expenses.

This struggling sector is going to push Congress for additional action towards a second stimulus plan. While there are arguments on both sides for funding/not funding the airlines, this leaves Americans in a similar position to bailing out the auto companies throughout the 2008 housing crisis. Should taxpayers help private companies bail out of a bad monetary situation? The moral hazard argument might look good on paper, however, when jobs are at stake the realities are a lot more nebulous.

AAA approximated that 115 million Americans took a trip for the holiday in 2019. But with the pandemic continuing to rise, it is most likely we will not see anywhere close to that number. A current travel market study reported that only one-third of the respondents had even a tentative trip prepared in the rest of 2020. Even those who do travel are most likely to go to destinations within 300 miles of home, which suggests they are driving, not flying.

While the airlines are not in risk of immediate collapse, it will be years before they totally recover, if they ever do. Between the employment impacts and the hit to our retirement funds, the airline companies’ grounding will affect all of us.

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