Aviation Tailspin | An industry on the verge of bankruptcy

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Since the Jet age, aviation has played a major part in civil and cargo transport around the world. The COVID-19 pandemic has affected global aviation to an extent that 4.6 million jobs or 40% of the total workforce is at risk. Both aviation transport and manufacturing have been hit hard as tourism, cargo transport and inter and intra country flights have come to a standstill around the globe. The virus has particularly become a big threat for aviation giants like Bangladesh’s flag carrier Biman Bangladesh.
Global Aviation Industry

More than 58% of tourists reach their destination through air travels. Though nascent compared to the shipping routes; air freight plays a crucial role in supplying goods to the global economy covering 30% of trade value. The pandemic has led to a decreased level of global consumption, state imposed ban on travelling, and an uncertain future for an industry which requires comparatively costly investments on a continuous rate. Faced with decreasing revenue, higher maintenance costs, and mounting debts, the aviation industry around the world is projected to return to pre-COVID level in 2024.

Governments around the world inject heavy subsidies to their flag carriers in order to save them from competition. But mounting debts and repeated cancellations have been particularly difficult for medium to small size aviation entities. Repeated flight cancellations compel the aviation companies to refund large amounts of credit, rendering operation very expensive. The International Air Transport Authority (IATA) estimates losses are more than 250 billion USD. Before the virus, schedule reliability around the world was close to 90-95 percent, but that’s not the case today. So keeping the pilots, crew and maintenance facilities working in time has become a big problem.

Lockdown was the first measure that proved quite effective to contain the virus. Naturally airlines couldn’t take a year long pause hoping the lockdown would be lifted. By mid 2020, only one third of the European, Half of North American and 70 percent of Asian airliners were in operation. Most of the major airlines around the world reduced their fleet size to 50% to 60% by the end of 2020. Only major exceptions being Air China, China Southern and China Eastern; unlike other airliners they somehow managed to clock positive growth by the end of 2020. As of 2021, about half of 16,522 airliners remain in storage. In 2020 alone, 4.5 million flights were cancelled.

The problem with airliners isn’t limited to the jets itself. For example, airports require airliners to pay for their slots on a regular basis and if the slots aren’t used, they can be cancelled by the authority. As the global aviation industry ground to a halt by April last year, Airliners continued to fly empty planes to keep their slots available. However, rising airliners of this kind of operations has led to different rearrangements; still keeping an airworthy fleet remains a problem. At least, European Union has relaxed their slot requirements for this purpose.

An interesting mode of recovery has become evident in some places. As international flights have become more complex given the issue of quarantine and strict health regulations, many airliners are now focusing on domestic flights and cargo transport along with chartered business. Chinese airliners are reported to be operating more than 90% of their aircrafts, mostly on domestic routes. Same suit is being followed by their Mexican counterpart AeroMexico. However, these are only short time measures and can’t compensate fully for the losses that are mounting up every day.

International Air Transport Association (IATA) states despite all the efforts, in 2020 alone 90 thousand people connected to aviation industries have lost their jobs. Many like South America’s largest Airliner Latam have declared bankruptcy, risking the jobs of its 41 thousand employees. In the United States, one in every four airliners is at risk of closing down. Other major airliners like Dutch KLM, German Lufthansa, Air France and AIitalia, all are looking for government bailout packages or subsidies which may amount to more than 50 billion USD. From a global level, the total civil aviation industry might require more than 200 billion USD bailout to keep them from bankruptcy.

Manufacturers in A Bind

The top five manufacturers of civil airliners: Boeing, Airbus, Bombardier, Embraer and United Aircraft Corporation all have reduced production of aircrafts as the aviation industry lis looking at an indefinite future. Boeing was going through problems beforehand; mainly because it had to ground the Boeing 737 Max fleet for repeated flaws in design. This had already created a demand for narrow bodied aircrafts. European giant Airbus also had to cease operations in many of its factories. About 70% of the Airbus employees are at the risk of losing their jobs. Experts predict that wide and narrow bodied aircraft production will be reduced 40 to 60 percent in coming months. British engine manufacturer Rolls-Royce is also struggling and plans to cut more than 9,000 jobs.

Other major aircraft manufacturers: Brazil’s Embraer, Canada’s Bombardier and Russia’s United Aircraft Corporation seek to maintain a balance among decreasing output and employees though it may be problematic. After the failure of UAC’s Sukhoi Superjet and Embrarer’s failed bid to export its aircraft medium size aircraft manufacturers were already in a vulnerable position beforehand. The pandemic might just be the last nail in the coffin. However, optimists hope that demand for new jets will increase by 2024 and small to medium regional passenger jets may see a spike in near future; the only hope left for aviation manufacturers.

Bangladesh Aviation

Biman Bangladesh, Novoair, Regent Airlines and US-Bangla; there are four airliners that provide passenger services in Bangladesh. About 5 million passengers use these services every year. A total of 45 aircrafts carried at least 150 flights per day in and out from Bangladesh. The COVID-19 pandemic has stalled almost all the airliners activity in Bangladesh. Last year, all four airliners conceded 2,500 crore BDT losses.

With a fleet size of 20, Biman Bangladesh has been the major airliner of the country, carrying more than 2 million people to 25 destinations per year. However, after almost 50 years of operating experience, Biman remains an albatross for the Bangladeshi aviation industry. Schedule mismanagement, loss of revenue and a habit of leasing aircraft from foreign countries left the flag carrier of Bangladesh with a mediocre reputation. Things started to look bright in the 2018-19 FY when Biman was clocking positive revenue collection. Improved service, reorganization, anti-corruption steps and several new jets added to the fleet also increased Biman’s capacity to continue flight around the world. However, the pandemic has stopped the growth again. Biman Bangladesh alone lost more than 2,200 crore BDT in 2020-21 FY. Its large fleet requires almost 300 crore BDT per year for maintenance alone. Despite heavy subsidies from the government, international flight operations have become too costly.

Unlike Europe or North America, Asia and Middle Eastern countries kept air travel open to a limited extent. Traditionally Biman relied on large expat and working communities in the Middle East, U.K., China and East Asia along with India for its revenue. As many of these expats have returned to the country, and others were barred from returning; continuous flight became unnecessary. Bangladeshi airliners are now relying on mostly domestic flights, cargo and chartered operations to compensate for the loss. The government has also taken steps to go easy on loans. Previously, price of jet fuel has been a major obstacle for Bangladeshi airliners but that problem too has been mostly resolved. It’s yet to see what lies ahead in the future of aviation.

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