Months after air traffic demand was outstripping capacity, the aviation industry faces its biggest challenge yet.
Just last year, the aviation industry was staring down congested skies and a pilot shortage.
Pilot hiring could not keep pace with demand. Turnover at regional air carriers was approaching record levels. Flight schools could not hold on to instructors. Delays in Europe were forcing severe constraints on a thriving industry.
American Airlines CEO Doug Parker said, “I don’t think we’re ever going to lose money again… We have an industry that’s going to be profitable in good and bad times.”
Now, those bad times have arrived.
At Midnight, March 16, the United States added the UK and Ireland to a sweeping travel ban. As more restrictions roll out, the bridge between the world’s two largest aviation markets is effectively closing.
In a message issued this weekend, United Airlines called COVID-19 an unprecedented challenge.
“When medical experts say that our health and safety depends on people staying home and practicing social distancing, it’s nearly impossible to run a business whose shared purpose is Connecting people. Uniting the world.”
Other airlines around the world have begun to cut capacity and ground their fleets. According to the Centre for Aviation, airlines are in danger of running out of money by May.
This isn’t just bad. It is likely to be the most significant financial event of our lifetimes.
Some Historical Context
Suddenly, the problems of a pilot and capacity shortage don’t seem all that worrisome. Like the Roaring Twenties leading to the Great Depression, history does not repeat itself, but it does rhyme.
This is not the first paradigm shift for aviation.
I started as a commercial pilot in 2001, and the parallels are eerily similar.
As it did just months ago, the global economy at the time seemed poised for a recession. However, nineteen years ago, it was a terror attack that pushed over the first domino.
On Tuesday, September 11, 2001, the US ordered aircraft to stop flying.
It was unprecedented. Commercial airplanes had been turned into weapons.
Stocks would dive every time white powder would arrive in someone’s mailbox or a suspicious package was left at a train station.
There were acute fears that people would never fly again.
The catalysts today for the greatest crisis in aviation history, are an oil war and a virus.
One significant difference is that this is unfolding over time, rather than as a singular event. And an unfortunate reality exacerbates this crisis; aircraft are a potential vector for COVID-19.
Too Big to Fail?
Historically, aviation has been a leading indicator of economic prosperity.
The recovery from 9/11 set the stage for one of the most notable bull runs in history. After the financial crisis in 2008, we saw an 11-year climb for the stock market.
Though aviation suffered greatly at the time, the airlines were ultimately a benefactor of the prosperity which followed the crises of 2001 and 2008. Today, commercial aviation is an economic engine, in and of itself.
According to ICAO, aviation contributes $2.7 trillion to the global economy and accounts for 3.6% of global GDP. Air transportation supports 7.3 million jobs in North America and 12.2 million in Europe.
Please make no mistake, the aviation industry as we know it today, is in serious trouble. It might take a while to find the bottom.
But People will travel. They will get into airplanes again.
Good times have a way of making things look easy.
I completed my commercial pilot license just months before September 11. I was a flight instructor when no one wanted to learn how to fly. When Canada 3000 went bankrupt, I took note that a career in aviation is a privilege, not a guarantee.
But every single person I learned to fly with, who stuck it out, still has an aviation career today.
This generation of pilots is about to go through their first downturn. It seemed just weeks ago that young pilots would be spared the bush flying or the ramp job. That may no longer be the case.
Like 9/11, and the Financial Crisis, COVID-19 looks to be dangerous, but survivable. But unlike earlier black swans, information now comes at us fast, before being vetted. Our brains have not evolved to keep up.
Our isolationism and nationalist protectionism (perhaps inherent in human beings) are exposed. COVID-19 has highlighted a loss of reason which fear can induce, and the ability for social media to exacerbate our dread — real or imagined.
Warren Buffet tells us in his 2019 annual letter, “an unsettled mind will not make good decisions.” He also says that when significant declines occur, they can offer “extraordinary opportunities.”
The Way Forward
After the fear subsides, a crisis tends to bring out the best in us.
World War 2 ushered in the modern era of aviation, both in terms of technology and airline policy.
The post-coronavirus chaos will offer a unique opportunity to reframe the foundations of the global airline industry.
We were already on the cusp of a change — one that will spring a leaner and meaner aviation industry. Older aircraft will be retired. New technologies such as Performance-Based Navigation, space-based surveillance and UAVs will help us build a robust framework, sustainable for the future.
Just as the capacity crunch in Europe required a holistic approach, the solutions today will require coordination across borders. We need to fight nationalist protectionism for a global industry to survive.
Before the crisis, there was a severe pilot shortage. That will still be the case when the dust settles.
Both pilots and controllers are valuable assets, difficult to replace. Airlines and Air Navigation Service Providers will need to find a way to hold on to them for the recovery. The best way to do this is to train. Build the workforce during the slowdown so that we are poised for growth when things turn around.
As bad news in the aviation industry continues to roll in, try to avoid checking every headline. When in turbulence, slow down and hold your attitude — don’t react to every swing in airspeed and altitude.
This, too, shall pass.