Airlines are likely to shrink as they recover from strict travel restrictions and slumping demand stemming from the coronavirus (COVID-19) pandemic, according to U.K.-based data analytics and consulting company GlobalData.
“Announcements made over the last week or so point in one direction: airlines will become smaller—at least in the short-to-mid-term,” said Nick Wyatt, Head of R&A and Travel & Tourism at GlobalData, in a statement. “Some high-profile names have come to the conclusion that a leaner, more agile business is what is needed to help them navigate the turbulence expected over the next 2-3 years.”
Wyatt points out that carriers are “burning through cash at an alarming rate”
“This will mean that they assess route viability thoroughly and make decisions based upon the findings of such analysis. This could lead to issues with connectivity, but as the U.K. showed in the case in Flybe, there are limits to the value that governments place on this.” Flybe, Europe’s largest regional carrier, collapsed in March less than two months after agreeing to a government rescue deal.
Some airline executives have already hinted that they could be forced to shrink their businesses in order to survive.
“In Q1 results announcements, Delta CEO Ed Bastian and American Airlines CEO Doug Parker both warned that their respective airlines may well be smaller in the future and in a letter to staff, British Airways appeared to cast doubt over whether it will ever resume operations at Gatwick. It is unlikely that these will be the last such announcements,” Wyatt concluded.
In an update to the airline’s more than 60,000 employees last month, Southwest Airlines Chairman and CEO Gary Kelly said that “if things don’t improve dramatically over the May, June and July time periods, we’ll have to prepare ourselves for a drastically smaller airline.”
To put the decline in perspective, the Transportation Security Administration (TSA) screened just 170,254 passengers nationwide on Sunday compared to more than 2.5 million on the same day last year.
The dramatically reduced demand for and limits on air travel have forced airlines to lay off and furlough some workers and others have even canceled aircraft orders in an effort downsize due to the impact of COVID-19.
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