Can the aviation industry survive the new crown epidemic in the darkest hour?
Aircraft abandoned by airlines will be sent to an aircraft cemetery. In this outdoor warehouse, abandoned planes are parked huddled together, looking from the sky like forgotten white skeletons. Europe’s largest aircraft cemetery is located in Teruel, eastern Spain, on an apron built in the 1930s. The dry climate here helps protect the metal fuselage of the aircraft. Many aircraft stay here only briefly, waiting for a new owner or accepting maintenance. If the future is not clear, the plane will stay for a long time. Sometimes, the aircraft will be cleanly disassembled into parts and recyclable metals, completely ending its life.
| Double Critical |
In February of this year, Patrick Lesey, CEO of Tarmac Aerosave, the company that owns Teruel Aircraft Cemetery, set his sights on China. Lesai, who has been in the business for a long time, still remembers the suspension of flights during the SARS epidemic. This year, when the new crown epidemic broke out, he understood what would happen, “We started to act like playing Tetris, vacating a few spaces in each aircraft cemetery.”
After the U.S. banned flights to Europe at the end of March, planes began to continue. The ground poured into the aircraft cemetery. On April 3 alone, the Teruel Aircraft Cemetery received five Boeing 747s and two Boeing 777s. In the next few weeks, aircraft from Lufthansa, Air France, Etihad Airways and British Airways arrived one after another. Before the epidemic, Teruel had parked 78 planes. By June, there were 114 planes, and the maximum capacity will reach 120-130 planes. In July, the other three aircraft cemeteries in France were nearly saturated. Earlier, he had just received a call, and the other party hoped that he would receive another 30 aircraft. He said: “I have been in this business for almost 40 years, and I have never encountered such a situation. The atmosphere is not right, and it feels bad.”
The new crown epidemic has hit the aviation industry hard in two ways. The dominant way is people’s fear of infection. Airplanes send passengers who may be ill from one continent to another, and within a few hours, all passengers on the plane have to have close contact with strangers in a small space. In addition, there is a hidden way: economic recession. An accepted view in the industry is that the aviation industry is closely related to GDP. The richer people are, the more they will take flights. But during this historic economic downturn, very few people bought air tickets. In the past, the aviation industry would only be affected by one of the above two methods: during the SARS period, travel was risky, but the global economy was intact; during the 2008 financial crisis, funds were not abundant, but flying did not pose a health risk. These two threats never appeared at the same time until this year.
| Declining Benefits|
For passengers, investors and airlines, before the outbreak of the epidemic, life without flying was unimaginable. In the past 20 years, the commercial aviation industry has experienced rapid development. In 1998, commercial airlines sold a total of 1.46 billion air tickets; by 2019, this number was as high as 4.54 billion. But this year, everything was gone. In March, the International Air Transport Association (IATA) predicted that the industry may have two situations, one of which is that the global aviation industry may lose US$113 billion in revenue. According to data from the aviation industry research company Sirium, in mid-April, about 14,400 passenger planes worldwide were grounded, accounting for 65% of the world’s total passenger planes. The airline nearly collapsed, and some companies even went bankrupt. According to data from the American Aviation Association, the last time the U.S. aviation industry had fewer than 100,000 single-day passenger trips was in 1954.
In June, IATA had to revise its previous forecast: this year, the global aviation industry’s revenue will decrease by US$419 billion, which is exactly half of 2019 revenue. But to industry veterans, these data are not credible. KLM Executive Vice President Poet Kricken still remembers a meeting in Amsterdam early in the epidemic. His colleagues used the latest data to show the new air ticket reservations and the bleak expectations for this summer. Kricken said: “I have also experienced some crises during my work-the Iraq War, the September 11 incident, SARS, the Icelandic volcanic eruption… But this time is different. At the time I stared at the data and thought about the consequences of the epidemic. , I can figure it out, and other people urged me twice:’Poet, have a meeting soon!'”
KLM CEO Piet Elbers said: “The company’s profit margin was only a mere 2 in 2014. %, but it reached 8% last year. The morale of the company is high.” In December 2019, to celebrate the 100th anniversary of KLM, he decided to welcome the new year at the company’s headquarters in Amsterdam. A few weeks later, KLM’s partner airlines in China began to suspend their routes, and Alberts only heard about a strange new virus.
Albers and his team believe that China will soon take measures to curb the spread of the disease, so they reduced the frequency of KLM’s Chinese routes and allocated the extra aircraft to US routes. However, in February, the epidemic has spread to Europe; in March, the entire Netherlands was blocked, and KLM only had Elbers and a few executives still working in the headquarters office to fight the crisis.
| Survival of the fittest |
At the end of April, the aviation industry took a sharp turn, with 166 of the 204 aircraft owned by KLM grounded. Instead of sending them to the aircraft graveyard, KLM decided to park them at Schiphol Airport. The difficulty of keeping the aircraft is not small: aircraft that has been grounded for a long time should maintain airworthiness as much as possible so that they can jump into the air when needed and continue to play their value.
Ton Dortmans, the head of KLM’s engineering maintenance department, explained the team’s efforts to place these aircraft in a video conference in August. “The fuel tank must be emptied, but not empty. The aircraft still needs some weight. , Because the wind in Amsterdam is too strong.” In the same way, the blades of the aircraft engine are fixed by straps so that when there is a strong wind, they will not cause wear and tear on the components due to continuous rotation. The water tank was also emptied. Engineers covered the small holes on the surface of the fuselage with a 3D printed cover to protect the sensors that measure air pressure and altitude from moisture and insects.
Every 7 days, the staff will climb onto the plane and let the engine work for 15 minutes to ensure that it can operate normally. The air conditioning system should also be turned on to avoid moisture intrusion. Dortmans said: “There are also airplane tires, just like car tires. If you don’t open them for a month, they will deflate.” Therefore, they use a tug to tow the plane back and forth every month, keeping the tires and The working state of the axle. However, there will still be some surprises. A ground engineer found a bird nesting in the recess of the aircraft’s spare engine.
On the other hand, the pilot cannot be stored like an airplane. In order to retain flight qualifications, KLM’s 3,000 pilots must meet the minimum flight time standard, taking off and landing 3 times every 90 days. During the epidemic lockdown, the pilots on the ground took turns using KLM’s 9 flight simulators. Summer passed quickly, and some pilots had not actually flown a plane for six months.
Flying itself is also a challenge. Routes and aircraft are adjusted every week, and pilots must adapt to changing rules. U.S. control measures contradict each other: some states require masks, some states allow crew members to leave the hotel, and some do not. To this end, KLM has set up a working group to update relevant information several times a day and communicate it to aircraft over the Atlantic Ocean.
Orders continue to be cancelled, and the number of passengers dropped from 9 million in the first quarter to 500,000 in the second quarter, a drop of 95%. In order to deal with complaints, issue vouchers and reassure customers, KLM assigned 800 employees to temporarily engage in remote customer service.
At the end of July, Elbers announced that KLM’s loss in the first half of this year reached a record 800 million euros. The company received financial assistance from the Netherlands: 1 billion euros in direct loans and 2.4 billion euros in bank loans guaranteed by the government. These loans have strict additional conditions-reduce costs, meet new environmental standards, and restructure the company. At the end of the summer, KLM announced 4,500 to 5,000 layoffs, including dismissal, voluntary retirement and termination of temporary contracts. Layoffs continue to take place in the industry. American Airlines plans to lay off 40,000 jobs, British Airways 12,000, Qantas 6,000, and Irish Ryanair 3,250. According to IATA’s forecast, the global aviation industry will lose 84.3 billion US dollars this year. Albers told his colleagues: “This is a marathon, not a sprint.” He wrote in a notice to employees that KLM’s first task is to “survive.”
| Difficulty |
From now on, the aviation industry will be pulled by two forces. On the one hand, income will continue to fall and be extremely unstable. According to IATA forecasts, the number of passengers will not return to the pre-epidemic level until 2023, but others in the industry pessimistically believe that it may not be until 2024 or 2025. On the other hand, many airlines will have to invest in climate change programs, buy carbon emission credits or fund research projects. European governments require that airlines must implement environmental reform measures after receiving bailouts. For example, in order to obtain a bailout of 7 billion euros, Air France has pledged to halve the carbon emissions of domestic flights by 2024 and reduce short-haul flights in areas covered by railways.
To repay aid loans or purchase carbon emission credits, airlines need passengers. However, the growth of the aviation market in the United States and Europe has begun to slow down, and it is still uncertain whether all passengers will return quickly, especially business travelers. The proportion of such passengers on a flight is about 12% to 15%, but they enjoy the most luxurious services, so on some flights, their contribution to the total profit of the flight is as high as 75%. “The new crown epidemic has prompted companies to reconsider travel costs and therefore reduce business travel expenses.” said Jeff Peltier, the head of the analysis agency “Airline Data”. “They would feel that it is better to spend some money on video conferences online. “
Can the aviation industry survive the new crown epidemic in the darkest hour?