The International Air Transport Association (IATA) has argued that without additional financial support from governments around the globe, airlines will fail to survive.
According to statistics coming from IATA themselves:
- Capacity in October 2020 was down 77% compared to October 2019
- International passenger demand was down 88% in October 2020 compared to October 2019
- Total demand (i.e. revenue passenger kilometers) was down 71% in October 2020 compared to October 2019
- Domestic traffic is down 41% in October 2020 compared to October 2019
EVEN with the collective $173 billion handed out by governments worldwide to their country’s airlines, it is nowhere near enough.
Additional stimulus is required to help financially struggling airlines stay afloat, and those airlines who have some chance of financial success need to take charge in accelerating economic recovery from the COVID-19 pandemic.
Keep this in mind: The international airline industry contributes $3.5 trillion in worldwide gross domestic product and employs 87 million people. And the pandemic has caused losses of $1.8 trillion in economic activity and 46 million jobs either eliminated or at high-risk of being slashed.
So what can governments do to add additional stimulus to airlines, whether in the form of money or incentives for passengers to start traveling again? Breaking Travel News summarizes the five key actions proposed by IATA:
(1) Temporary waivers or suspensions of government charges, taxes and fees to airlines and passengers will reduce flight costs and lower travel costs for passengers.
(2) Route subsidies for flights to local/regional destinations to support connectivity for rural communities and business.
(3) Financial incentives in the form of rewards for operating flights, or seats flown, which can support airlines while load factors or yields are too low.
(4) Advance ticket purchases that governments can use for future trips or distribute to the traveling public in the form of vouchers to support travel and tourism.
(5) Passenger travel subsidies in the form of vouchers for passengers or as a percentage cash-back on overall travel costs.
Quite the heavy ask, in my opinion. For instance, the US government has only bailed out airlines once to the tune of $25 billion and another potential bailout of $17 billion from the second stimulus package (still under heavy negotiation) may be all that US airlines have to last them until the end of Q1 2021.
We’ll have to wait and see how governments decide to handle the ongoing aviation crisis. But one way or another, something has to happen as soon as possible.
What do YOU think about IATA’s proposed actions for governments to help airlines succeed? Are these fair requests, or are these demands simply too much to ask? Reply to this newsletter and share your thoughts with us!
Delta Airlines: “Please Take More Unpaid Leave in 2021”
Cost-cutting measures are now the #1 discussion amongst US-based airlines who are struggling to achieve any shred of financial success as they deal with daily cash burn rates in the millions.
Delta Airlines CEO Ed Bastian is no stranger to this reality, as he has now asked his employees to take on additional unpaid leave in 2021:
“Our voluntary unpaid leave program will continue to be essential to positioning Delta for the recovery, and we will need participants for the foreseeable future… I ask everyone to consider whether a voluntary leave makes sense for you and your family.”
And according to CNBC, this move is significant as several Delta employees have already agreed to take some form of unpaid leave in 2020:
“More than 40,000 Delta employees have opted for unpaid leaves of absence at the company’s urging. Roughly 18,000 accepted buyouts and early retirement packages, cutting Delta’s pre-pandemic head count by about 20%.”
“Unpaid leave” may not be the words that employees want to hear, but it’s certainly better than hearing the words “You’re fired!” Let’s see how many employees agree with Bastian’s proposal and deprive themselves of money they desperately need.
United and Delta Have Removed Their International Change Fees
One of the easiest ways to convince passengers that flying is a worthwhile activity during an economic recession is to offer them financial incentives. Whether that’s giving them “bonus cash” or eliminating standard fees, you take the short-term loss in exchange for a hopeful long-term gain.
That’s exactly what Delta Airlines and United Airlines have done by eliminating the change fees charged to international flights. Here is Delta’s official statement:
“We are waiving change fees for all US domestic and international tickets purchased through March 30, 2021, making it easier for customers to book next year’s spring break or summer vacation with the confidence of knowing they can change their plans at any time, regardless of the type of ticket they booked or where they are flying.”
And here is the statement from United Airlines:
“United was the first legacy airline to announce it would permanently eliminate change fees – a policy that included Basic Economy and International tickets booked through the end of this year…
… we’re extending this policy to include Basic Economy tickets purchased through March 31, 2021. Second, this policy will also apply to all international tickets originating in the United States moving forward.”
Just to give you some further context, it would usually cost you somewhere in the ballpark of $200 to change an international flight. And this new ruling also does not eliminate the same-day standby fee imposed by both airlines ($75 for Delta).
However, it’s yet another reason for international travelers based in the US to consider taking the risk of flying during a global health pandemic. It’s not enough to merely lower the price of flights, as you also need to provide customers with a way to easily cancel their flights should travel restrictions change.
But regardless, it’s a good move from both airlines. Hopefully this will help increase passenger demand for the current holiday season!
Cathay Pacific Now Offers FREE COVID-19 Insurance to Passengers
With several airlines and hotels now offering no-cost COVID-19 insurance to its customers, there is now a good reason for other entities to start doing the same.
The latest airline company to provide this benefit to passengers is Hong Kong airline Cathay Pacific, which will last through February 28th, 2021. Travel magazine Travel + Leisure broke this story and covered the details of this insurance plan quite well:
- All medical expenses related to a COVID-19 diagnosis during travel will be covered
- Up to $200,000, costs of COVID-19 tests and hospitalization acquired during travel will be covered
- Any traveler subject to a 14-day quarantine away from home will receive a daily allowance of $100
- The insurance coverage has a 30-day window from the time travelers depart to when they arrive home
- The insurance DOES NOT apply to domestic trips, and is only valid when the passenger is overseas
It should be noted that of the airlines to offer free COVID-19 insurance, all of them have been international. You’ll have to wait quite a while before the US airlines join the bandwagon and start doing the same.
How “Test Cruises” Must Be Run, According to the CDC
American cruise line companies are currently at the mercy of the Centers for Disease Control and Prevention (CDC). Unless their trial runs of their usual trips meet their rules, they have no chance of resuming activity in early 2021.
Here is what is required of these “simulated sailings” …
- All volunteers must be 18 years old, be free of pre-existing medical conditions, and give their consent to participating in these trips (i.e. they can’t be given any kind of reward)
- Volunteers will be expected to participate in simulated evacuation and quarantine procedures
- COVID-19 tests will be given to all staff and passengers on the first and final days of the trip, and the results must be negative before they can enter or leave
- Cruise ships will be sanitized more frequently, and all passengers will be expected to socially distance while wearing face masks outside of their cabins
- Excursions will likely take place on private islands owned by cruise companies to lower any spread of COVID-19
- Trips cannot be any longer than seven days, and at any given time a COVID-19 outbreak could end the trip immediately
There are indeed many more requirements that passengers, crew members, and the companies themselves will have to abide by. But the rules I’ve listed are by far the most noteworthy ones.
What’s even more impressive to me is that despite all of these restrictions, there is a HUGE demand for these cruises. Tens of thousands of Americans have already signed up for simulated voyages from companies such as Royal Caribbean and Carnival, with many more being added to the potential list of guests every day.
If all goes well and everyone does their part, 2021 could be the year where cruise line companies make the comeback they’ve desperately wanted for the entirety of 2020.