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Airlines teeter on brink and planemakers prepare huge layoffs

October 2, 2020 Headline News No Comments Email Email

As airlines struggle to contend with what one expert yesterday called the deepest shock in the history of air transport, the world’s two biggest aircraft manufacturers face challenging straits, with sales of planes heading the same way as passenger numbers.

“August’s disastrous traffic performance puts a cap on the industry’s worst-ever summer season,” IATA director general and chief executive, Alexandre de Juniac, said yesterday.

“International demand recovery is virtually non-existent and domestic markets in Australia and Japan actually regressed in the face of new outbreaks and travel restrictions,” de Juniac said.

“A few months ago, we thought that a full-year fall in demand of -63% compared to 2019 was as bad as it could get. With the dismal peak summer travel period behind us [northern summer], we have revised our expectations downward to -66%.”

Thousands of aircraft are in “dry storage” in deserts in California and Spain. Many went there early. Some 14,400 passenger planes were placed into storage in a single four-week period earlier this year, according to aviation research firm Cirium.

The United States has performed better than some other markets, but with the northern spring recovery failing to materialise, tens of thousands of airline employees will be laid off this month. American Airlines and United Airlines are reportedly preparing lists of redundancies now.

When third-quarter results are tallied, airlines in the US are expected to report that net booked revenue is down by 80% year-over-year and that they are collectively burning over US$5 billion per month. That’s according to figures released by Airlines for America, an industry trade group representing major US carriers.

In short, US passenger traffic is down 68% year-over-year. Domestic traffic is down 66% while international traffic is down 84%. One-third of the industry’s aircraft have been grounded. US passenger numbers dived in April to less than 88,000 a day, perhaps the lowest level since 1950. Airlines for America calculates that the last time the US averaged fewer than 100,000 passengers daily was in 1954.

Speaking on Wednesday at the Global Sustainable Aviation Forum in Geneva, executive director of the cross-industry Air Transport Action Group, Michael Gill, said: “Air transport is in the midst of the deepest shock in its history. We expect a reduction of up to 4.8 million jobs in the sector by the end of the year and a massive hit to our ability to connect the world.”

America’s Boeing and Europe’s Airbus – the world’s two biggest plane manufacturers by far – are in the firing line.

Airbus chief executive Guillaume Faury told French radio station RTL Airbus needed to cut a total of 15,000 jobs, more than 11% of its workforce.

Addressing French media, Guillaume Faury said: “The crisis is existential. Our life as a business is potentially at risk if we don’t take the right measures.”

The final Airbus A380 fuselage has now left the assembly line, just 15 years after the aircraft’s first flight. Passengers loved the A380 but airline accountants preferred two-engine planes, which burn less fuel. Then came the pandemic. A week ago, the last Qantas operating A380 flew from Dresden in Germany to Victorville on the edge of the Mojave Desert in California, where it will enter a state of deep, dry, long-term storage.

In the US, Boeing had enough on its plate with the 737 MAX fiasco, which saw the narrow-body aircraft type grounded worldwide after two fatal crashes, long before Covid-19 hit the world.

The Wall Street Journal reported yesterday that Boeing is about to announce it will consolidate 787 Dreamliner assembly in South Carolina, ending production of that aircraft in Washington state, as the coronavirus pandemic scythes into demand for aircraft. Boeing has not officially commented on the report.

Written by Peter Needham

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