In any other year, these should have been the best of times for the aviation industry. With oil prices this low and the travel urge at a peak, the great metal birds in the air should have been soaring to greater heights. Instead, thanks to the pandemic, global airlines have slashed seat capacity by more than 70 per cent. Singapore Airlines just announced that it will continue to cancel most flights until the end of June, and offer only limited connections to six South-east Asian cities, Tokyo, Los Angeles and London. If ever an industry had its wings clipped, metaphorically and literally, it is aviation. Some two-thirds of the world's 26,000 passenger aircraft have been grounded and as many as 25 million jobs are at risk.
Administrators of Virgin Australia have reportedly invited prospective buyers to examine its books after it became the first airline in the region to fall to the virus, denied state aid to survive and with nearly A$7 billion (S$6.4 billion) in outstanding debt. In London, Sir Richard Branson is reportedly seeking a buyer for his ground-breaking Virgin Atlantic Airways, the brand that made him a global icon of entrepreneurship and style, after his application for state aid was shelved effectively. Delta, which owns 49 per cent of Virgin, cannot help because of foreign ownership limits. Its own chief executive officer has told his staff that an industry recovery could take between two and three years, and would be "choppy, sluggish" when it arrives.
When airlines are struck, plane manufacturers are also impacted. Last week, Boeing acrimoniously walked away from a deal to buy Embraer's commercial aircraft business because of the changed market conditions. In the emerging environment, the future of giant transporters such as the Airbus 380 seems dicey and this could be the year that Boeing ends production of the iconic 747 model. Airbus CEO Guillaume Faury says his firm is bleeding cash at an unprecedented speed, and this is threatening Airbus' "very existence".
Capitalism, with private property, laissez-faire and the profit motive as organising principles, is probably still the most efficient model. Nevertheless, it has an unsparing side, and nations do need to act, particularly when acts of God intervene, as has now happened. So, national rescue is essential given the wider ramifications of airline collapses. The United States' decision to provide payroll assistance to airlines - carriers have just started receiving the first disbursements - is a correct one. That said, airlines need to adapt as well. From wider seat spacing to pre-boarding health checks, the next era of aviation will likely see a variety of mandatory requirements that will push up costs, just as security expenses rose after the 9/11 terrorist attacks. Industry consolidation is inevitable and it is time governments relooked restrictions on outside ownership of airlines. The time to start planning for all that is now.
