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US Airlines Hit by Economic Turbulence from COVID-19

US Airlines Hit by Economic Turbulence from COVID-19

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By Dr. Michael Marticek, Faculty Member, School of Business, American Military University

The airline industry, which had been soaring for several years following the 2008 recession, has been tossed upside down in recent months due to the coronavirus pandemic and the worldwide restrictions on travel. A few months ago, airports were bustling, now they resemble ghost towns. The pandemic has been compared to 9/11 as far as a reduction in flights. Most airlines have reduced their flight schedules by 50 to 60 percent, depending on the month and the number of reservations.

Americans Ready to End Lockdown but Remain Frightened by COVID-19

Many Americans are ready to end their mandated lockdown, but they remain frightened by the COVID-19 outbreak and the potential for its return before we’ve had time to develop and disseminate an effective vaccine. In the meantime, will the current day-to-day operations become the new normal, such as less travel and more Skype, Zoom or Microsoft Teams? These uncertainties will continue to weigh on us as we struggle to get back to a somewhat normal sense of living and community.

[Related: What Businesses Are Seeing Growth During This Pandemic?]

The U.S. government has deemed it essential for the airline industry to continue operations during this pandemic. However, many airline employees, such as pilots, flight attendants and other front-line employees, feel stressed due to the continued spread of this virus. In addition, many of them are becoming infected with COVID-19, the illness caused by the coronavirus. All airlines have created backup plans and additional procedures and protocols in hopes of reducing the outbreak of the virus in the workplace.

Ramifications of Pandemic Include Reduced Staffing and Increased Unemployment

Also, among the possible ramifications of this pandemic are reduced staffing and an increase in unemployment. So airlines are starting to seek other methods to reduce their costs, such as temporary voluntary furloughs or early retirement packages. Such steps are essential to reduce staffing and lessen the chances of possible permanent furloughs in the long run.

But the airlines are not uniform in their package offerings. One airline, for example, has offered its pilots union a much better package than other airline unions have been offered, which can cause anger and frustration among the union members.

Most union members believe that these cost-cutting measures should be standard across the board. But in most cases there is a reason behind these measures, such as the expense of pilot training on different aircraft. However, if the airlines wanted to reduce staffing without furloughing, they might follow the pilots union and offer better and more attractive incentives for voluntarily taking furlough or retiring much earlier than planned.

A costing-cutting measure that Delta Airlines has taken is to sell some of its airplane fleet for roughly $1 billion. This is a great way for the airlines to reduce the millions of dollars they are burning through each day during this pandemic.

The U.S. government has offered the airline business a life raft, which all airlines have concluded as an aiding process until the industry gets back on its feet. The billions of dollars will provide the airlines with some breathing room and time to review other cost-saving measures. In the end, the CARES Act aid package will ensure airline employees have jobs through September. The biggest question, however, is what happens after that month?

About the Author: Dr. Michael Marticek is a part-time faculty member in the School of Business at American Military University. He has a D.B.A. from Walden University and a M.B.A. from Strayer University and a BS from Robert Morris University. He has been teaching since 2010 and has spent over 10 years in management. To contact the author, email IPSauthor@apus.edu. For more articles featuring insight from industry experts, subscribe to In Public Safety’s bi-monthly newsletter.

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