Longer-term Impact of COVID-19 Crisis On Regional Aviation
The coronavirus pandemic will leave its mark on the aviation industry forever.
The crisis’ impact on the aviation industry is unprecedented and it has happened very suddenly.
Airlines have had to very quickly ground most of their fleet and, in some instances, their entire fleet.
Governments around the world have imposed restrictions on air travel. Some countries – particularly developing nations where medical care is lacking – have banned international and domestic commercial flights altogether.
It could be argued that regional airlines are affected more by the immediate aftermath of the crisis afflicting the aviation industry, because they have smaller balance sheets and fewer financial resources to weather the financial storm.
Also, regional airlines are very prevalent in the developing countries – Nepal, Bangladesh, Papua New Guinea, etc – that are now imposing a blanket ban on all commercial passenger air services.
But to get a clearer picture of the impact on regional airlines, one must examine the situation airline by airline.
Airlines that have a mixed business model are faring better than those that rely solely on scheduled passenger services. For example, airlines that are doing medevac or transporting cargo, such as urgently needed medical supplies, are still operating. Some airlines that are doing charter work, particularly for government agencies, are continuing to fly.
Airlines that own their aircraft can afford to ground the aircraft. If they need to raise cash, they can do sale leasebacks on the aircraft or go to banks to borrow money using those aircraft assets as collateral.
But airlines that have no assets, because they lease their aircraft, are in a far more precarious financial situation. They cannot afford to ground the aircraft, because they are still expected to pay the aircraft leases.
Airlines that have been consistently profitable in recent years will most likely find financial backers to get them through the current crisis. Airlines that were already in debt and struggling to make a profit before the current crisis will most likely close, unless they are government owned.
The regional airline market is about to go through a massive period of market consolidation. The first airline to go into bankruptcy, following the coronavirus outbreak, was a regional airline – Flybe in the UK. More regional airlines will go into bankruptcy.
But one bright spot for regional aviation in future, is that there is evidence to suggest that this sector could be the first to recover from the crisis.
For mainline carriers trying to restore their networks in the wake of the crisis, passenger volumes will be very low to begin with. To minimise their loses, during the times of low passenger volumes, mainline carriers may turn to regional aircraft operators. If you only have 20 passengers on a flight, better to operate a 50 or 70-seat regional aircraft rather than a 180-seat Boeing 737 or Airbus A320.
Regional aircraft only have the range to fly short-haul but when people do start flying again, they are more likely to take a domestic flight, to some place they are familiar with, rather than fly overseas.
Long-haul air travel will take longer to recover and may never fully recover. This is not for cyclical reasons but structural. Community concerns about the environment will have a greater impact on long-haul flights. Everyone’s attention right now has been very focused on surviving the coronavirus pandemic, but the issue of aviation and the environment remains. And it has continued to be mentioned in the news media.
During this current crisis, there have been reports of how the air quality has improved. Satellite images from space show less air pollution now, for example, in China and northern Italy.
The message in all these news reports is very clear – the benefit of less air travel is it gives the environment an opportunity to recover.
Another environmental report, that has gained a lot of traction on social media, is the one on how the water quality in Venice’s canals has improved dramatically.
The fact these ‘good news’ news stories are big on social media shows there is a very strong desire in the community to help improve the environment.
Aviation is increasingly in the spotlight with regards to the environment, because the transportation sector is now the biggest source of carbon dioxide emissions worldwide.
And when it comes to carbon dioxide emissions from flying, a long-haul flight is a bigger emitter than a short-haul flight.
Short-haul flights require less fuel, and thus less carbon dioxide emissions, and short-haul flights are often powered by turboprop aircraft. Turboprops have a far lower fuel burn than jet engines, because the propeller can move a greater amount of air using less energy.
In Europe, some people are turning to trains for short-haul travel, but in Asia Pacific trains and other road transportation is not an option because there is no road or rail. Much of the air travel in Asia Pacific is over water and if it is over land, there is not necessarily a rail or viable road network.