Editor’s Note: The following is a series of interviews carried out by the author in May 2020. The series has covered so far the state of the industry and fleet (available in the Special May/June 2020 issue of Airways), the future of the Passenger Experience, Route Networks, Hubs, Scheduling, and Connectivity, and what’s next for the Regional Airlines. and Low-Cost carriers in the United States. Check our subscription plans if you wish to access this and other prime-quality content.

In the final installment of the Future of Air Travel in the Age of COVID-19, we’ve bought together a panel of airline CEOs, front line staff, journalists, analysts, and bloggers to do some educated crystal bar gazing on what the endgame looks like the forever altered competitive landscape. They’ll prognosticate on the winners, the losers, consolidation, and who will be left standing. 


“In the airline industry, there are no true winners in this crisis, at least not in the short or medium term. Just losers, and bigger losers.”

-Seth Kaplan airline analyst and co-host Airlines Confidential podcast.

We are now over six months into the gravest crisis the airline industry has ever known, though it seems like an eternity. According to IATA, the industry is expected to have lost $84.3 billion by the end of 2020 worldwide, and see revenue plummet by 50% with a loss in revenue of $419 billion.

With recovery expected to take years, the situation is untenable in the long term.  And though it seems like an eternity, we are in the early innings of this ball game. 

According to Scott Hamilton, Managing Director of Leeham Company, “The shake-out has yet to come, and it will.” In the United States, the Coronavirus Aid, Relief, and Economic Security Act (CARES) funding of employees’ airline salaries will end on September 30, 2020, unless Congress intervenes with another aid package. “In the US, the bloodbath should begin in the fourth quarter,” Hamilton says.

Gordon Bethune, a former CEO of Continental Airlines, bluntly puts it “The CARES Act is just artificially keeping the patient on a respirator after he’s died. So I think there are too many strings on the CARES act. That date out there is September 30th and by God, it’s still coming. Ever hear about the guy whistling past the graveyard? I mean that’s what we’re doing.”

Worldwide, the pain just continues to intensify with layoffs, furloughs, and the demise of airlines’ accelerating. For certain, the industry is destined to emerge as smaller and vastly different than before.  

Hamilton believes the COVID-19 crisis is accelerating the demise of carriers that were already on a weak financial position, “The shake-out was already underway before COVID-19 took hold. Several carriers already failed or were failing (including, perennially, Alitalia, and South African). COVID-19 tipped a few more over right away and more will come. Asia has too many low-cost and ultra-low-cost carriers, that way over-ordered and over-expanded.” 

Part of the fleet of American Airlines (AA) parked in Pittsburgh International Airport in April 2020. AA posted a net loss of US$2.1 billion in the second quarter of 2020. (Photo: Tom Pawlesh)

Who Are the Losers?


Kaplan sets the stage for who will be winners and who will be losers coming out of this, “Generally it’ll be a function of 1) What kind of shape was an airline in before the crisis? 2) What are its network and market exposure (short-haul better than long-haul) and 3) How important is it to governments and thus what kind of state aid is it getting?”

Let’s flip the script and look at who the losers are first which Hamilton believes is “everybody—speaking of airlines, of course. Actually, cargo airlines are winners.”

“The losers are the super-connectors like Emirates, Etihad, and Qatar Airways, as well as any other airline that doesn’t have a domestic market, like Singapore or KLM. Airlines that built their business on long-haul without the benefit of a domestic network behind them,” says Madhu Unnikrishnan, Editor of Airline Weekly.

Ben Baldanza, former CEO of Spirit and co-host of Airlines Confidential podcast echoes the threat to those with long haul travel as their primary business. “Most likely to shrink significantly or fail outright such are Norwegian and the gulf carriers.” Baldanza also raises a flag for those airlines “that get distracted from the main priorities or lose too much capacity from long-haul to make it up elsewhere.”

Still, Baldanza doesn’t expect an avalanche of bankruptcies in the United States, “I don’t see any US carrier filling yet. If demand does not start to return by year-end, I would expect some to use bankruptcy to protect themselves.”

Harteveldt, however, voices concern about what until recently was the world’s largest airline in particular, “I’m worried about American Airlines because of its debt. Even if the interest rates are low, that’s an awful lot of debt to have to service.”

The current COVID-19 pandemic has turned the airfreight market on its head. Here it is seen a Qatar Airways Cargo Airbus A330(F) landing in London-Heathrow, transporting Personal Protective Equipment. (Photo: Roberto Leiro)

Who Are the Winners?


There’s near-unanimous agreement that the winners are the airlines that entered the pandemic era from a position of strength with the strongest balance sheets and strongest domestic networks. “The winners are well-managed network carriers, like Delta, that can pivot to premium, as well as carriers all over the world with robust domestic networks or that have the advantage of a large domestic market,” says Unnikrishnan.

Kaplan says the best-equipped airline to weather the storm in the US is one with a strong P&L, minimal exposure to international, and the ability to generate additional sources of revenue. This airline also happens to be the most aggressive in bringing back capacity. “In the US, you’d probably prefer to be Southwest than any other airline. It went into the crisis in good shape, which you could also say about Delta and a few others, but then Southwest doesn’t depend on long-haul and/or premium travel for an important part of its profits.”

Also, although Southwest has been reluctant to impose bag fees, or to offer seat assignments for a fee, it does have these available as potential levers, whereas other airlines have already picked those fruit. Southwest could also surely get deals from online travel agencies if it wants to broaden its distribution. “Expedia, and others, would love to be able to offer Southwest’s inventory, whereas in that area too, that’s something most of Southwest’s US competitors already do,” Kaplan said.

Airlines like Delta and JetBlue had already been going upmarket and generating a revenue premium before the pandemic. Now they have staked out a higher ground for their brand with an emphasis on cleaning and blocking out the middle seat. 

Harteveldt says, “One of the ironies here is that the airlines that catered to a more upscale customer are the ones that are more likely to do better in the near term. Because there are a lot of people who are traveling before the pandemic whose incomes were at or below average, who may not have had adequate savings, and who may have had jobs that are more likely to be lost during as their employers shut down or scaled back.”

Harteveldt sounds the warning for the airlines that appeal directly to those consumers – The  LCCs. “Southwest, American, United, and Delta, and to a degree, Hawaiian, Alaska, and JetBlue have a much better chance of recovering before the budget airlines.” He concedes that “it doesn’t matter which you’re talking about, they’re all going to be much smaller.”

In a recent announcement, JetBlue has committed to keep their middle seats blocked until October 2020, and has extended a safety policy against COVID-19. (Photo: JetBlue)

Government Protection


Charles Kennedy, airline author, and historian believes that government aid will protect most flag carriers, “They will be bailed out as they are an instrument of the state. Even if anti-trust rules forbid bailouts, those rules are made by the same governments that depend on their national carriers as part of national security and trade, so they will be taken care of.”

Kaplan describes state aid as a more political question than an economic or financial one. Ironically, some losers could be winners, “In any economically rational world, Alitalia would have ceased to exist long before COVID-19, but the crisis has arguably helped its chances of survival.”

“Almost no airline was positioned to get through the crisis, for a long time, without any help. But the longer the crisis drags on, the more you can detect relatively strong airlines like Delta, Qantas and Air Canada paying attention to the fact that a waning of state aid could push some of their weaker competitors from the marketplace, which could be helpful in the long term for stronger airlines.” Kaplan said.

The COVID-19 crisis led not only to a massive decline in air travel, but also prompted the end of service of the Boeing 747 in British Airways and Qantas. (Photo: Qantas)

Prospects of Consolidation


Consolidation, particularly in the US, has led to a much more robust industry. Does our panel opine on if the pandemic could be a catalyst for another wave of consolidation in America and globally, including more cross-border Mergers and Acquisitions (M&A) activity? 

Baldanza sees some form of consolidation in the US. “I think that consolidation among the 20% that are not Southwest, American, United, or Delta are likely to see some consolidation and it will be accelerated because of this crisis. M&A will accelerate as we pull out of this with the buyers being those that have cash.”

Kaplan, too believes consolidation is possible with caveats, “All things being equal, the crisis makes consolidation more likely. Just based on valuation, it might be a wash, because companies are cheaper to buy, but everyone has less money to buy things. But in terms of getting regulatory approval, now some airlines can credibly argue they might liquidate if a deal isn’t approved, and regulators are more likely to approve a deal if they think it’s a choice between approval and an airline going out of business, rather than between more airlines and fewer airlines.”

Unnikrishnan sees the prospects of consolidation in the US less likely, but more likely internationally, where many think it’s long overdue, “In the US, I doubt there’s a political and regulatory appetite for more consolidation, but I wouldn’t be surprised by another Chapter 11 soon. There’s some chatter that finally we’ll see more cross-border consolidation, but I wonder if, given the increasingly nationalist tilt of governments around the world, whether there is political will for that to happen.”

Harteveldt believes that Europe is probably more likely to see some cross border consolidation or combinations than maybe in Asia but “would not be surprised if this is the catalyst for Etihad and Emirates to merge and maybe even FlyDubai to come together into one UAE carrier.” 

A FlyDubai (FZ) and Emirates (EK) jetliners parked in Dubai. The recent cost-cutting measures applied to both state-owned airlines may lead to an eventual consolidation into a single airline. (Photo: FlyDubai)

IAG, Lufthansa Group Cases


Harteveldt raises the question if international airline groups like IAG, Lufthansa, and KLM-Air France would consolidate their individual brands into one uber-brand as LATAM has done? 

“Will this crisis force countries to allow cross border mergers of their airlines? Let’s look at IAG. IAG is a house of brands. It is not a branded house. IAG owns British Airways, Aer Lingus, Iberia, Vueling, and Level. So, you know if the EU and the UK would allow airlines to merge across borders, could IAG combine any two or more of those airlines into one brand whether it’s the name of an existing brand or whether they created a new airline and brand that could operate more efficiently? If Lufthansa group could combine Lufthansa, Austrian, Swiss, and Brussels into one airline and operated that more efficiently, would you know that’d be better? And I think that the answer is yes.”

With all the state aid particularly in the U.S. with the CARES Act and Lufthansa in Germany, is nationalization an emerging trend? Bethune hopes not: “We’ve got people talking already unfortunately about nationalization. And if you’re thinking about nationalization as a cure, take a look at Amtrak and tell me what you see. Scott Kirby, Ed Beauvais, and Ed Bastian can’t outperform the government? Well, sure they can.”

Breeze Airways is a startup airline expecting to start operations in 2021. (Photo: Breeze Airways)

Out of Crises Comes Opportunity


Winston Churchill once said, “Don’t waste a good crisis.” Out of many crises, has come opportunity and this one may be no different outside the traditional players. Harteveldt says “The winners would be the companies that create health screening. It would probably be some kind of health technology company.”

The immediate post 9/11 years and the Great Recession of 2008-09 spurred on the development of new entrants and startups like Spirit, JetBlue, and Allegiant. History could repeat itself with airlines like Breeze and Xtra, even though the former has been delayed. Harteveldt says “Between Andrew Levy and David Neeleman’s new airlines you’ve got at least two new entrants that are still working on developing their strategies. And I think one of the biggest benefits these airlines have, they’re not operating right now.”  

“These new airlines are starting with a clean slate with minimal debt, potentially new airplanes in the case of Breeze, or cheap airplanes in the case of Xtra, and low-cost labor and flying point to point where you may not have as much competition as you once did. Maybe they’ve got this window of opportunity that opens up every so often.”

Harteveldt also sees a rare bright spot in that COVID-19 can stimulate new opportunities, “There’s going to be a lot of airplanes sitting around, a lot of airplanes turned back to lessors, and some 737 MAXs sitting around that have been built that aren’t going to be taken up. There will be lots of talented airline employees on the market. All of that points to conditions that bode well for some entrepreneurial activity. Who’s to say that there won’t be some more startups in the future, you know, whether it’s in the US, Europe, Asia, or elsewhere?”

Despite the gloom and doom, even Gordon Bethune, who was the most pessimistic person on our panel is ultimately optimistic that the industry will return to strength again, “Our society needs aviation. There is no economy, there is no world economic growth without airlines.”


Featured image: Southwest Airlines Completes First Validation Flight to Hawaii. Photo: Southwest Aitlines.

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