The Current Situation of Aviation Sector

COVID-19 has a drastic impact on the current Situation of many Countries, Airlines and Staffs.

Its no hard to realize that the travel has changed a lot during the current pandemic that has strike almost all the countries of the World. Its not hard to also realize that the Aviation Industry is the worst suffer of the ongoing crisis. But the thing here is that the situation is about to change a lot worse in the coming months. Lets take a look how.

Let take an example of American Airlines, perhaps one of the biggest airlines in the World, when Corona hit the US and started growing people started to remain more and more in their homes rather than going to work, for a Business Man who lives in USA but has a business in Canada, perhaps he'll prefer staying home than going to another country. As the result he is saving on his cost, which is actually good for him.

But, if you take that situation from an Airline point of View than you can imagine that there will be almost 50- 60 percent of people who will not fly. As the result the cost will be divided on the remaining 40 percent who will fly. But the thing is that the fixed cost will remain same and the airlines will have to pay for it. So, for the remaining idle capacity they'll pay from their pockets. As the result their revenues start decreasing day by day. As, more number of passengers stop flying the revenues decrease at a greater pace. The result? The company won't be able to fly and they'll have to cease some of their routes where the capacity is close to none. Still, there might be few routes where the capacity is still the same, the company will deploy some of their aircraft's on these routes.

But, there is another problem, since the demand will be high the prices of the tickets will skyrocket, the company has to make conscious decision on the number of aircraft's they want to deploy, as the routes may be limited.

Now, with half of their fleet already grounded, and half serving limited routes( which will be only for few days). There is no change in the fixed expenditures for the company some of the expenses incurred for the grounded fleet are:

1. Maintenance Charges

2. Parking Charges

3. Taxes

4. Misc. Charges

All of these charges will be paid by the company from their reserves, but needless to say, at some point the Reserves will also get exhausted. So, so overcome this situation, the company will approach the bank and ask for loan. This will only increase the debt pile of the company (considering the company also has to pay for the lessor for the aircraft if taken for lease). The situation will get worse and Worse if the aircraft's don't start flying again.

Now, lets take some Live Examples to demonstrate the situation:-

• Singapore Airlines and Emirates have received Governmental Aid so that the companies don't have operational problems.

• Many of the Airlines like Spice jet have send their employees on Unpaid Holidays.

• Some of the regional carriers have send their aircraft's to the lessor, to cut off their expenses

• Its being Estimated by CAPA, that almost 70 percent of the companies may go bankrupt if some of the aids aren't provided by the government.

There are a lot of challenges that are faced by the companies and there are certainly going to be more. But let's hope that the companies will come out well from the situation and we'll be able to see Aircraft's back in skies again.