10 insights on the post-corona airline industry
Coronavirus already made an unbelievable impact on the global economy. Let's start from the travel industry: aircraft as a heavy asset initially was made flying. Most of them are grounded. Let's take into consideration the new, high-value aircraft. Airbus A320 list price is set to around $110M per unit.
Most of the airlines don't own these assets. Leasing companies do. Airlines pay the lessors, lessors pay back the funds. There's a lot of money withdrawn out of pension, equity or private funds. These funds used to buy aicrafts. Now, most of them grounded, this financial scheme doesn't work, so who will pay for that and what the outcomes we will face?
- The main question is going to arise again: what is the role of airlines? Is it just business? Or is it infrastructure? Maybe both?
- Tangible assets lose value and depreciate over time, so we going to see a lot of old aircraft to be scraped. No sense of investing a lot of money into maintenance.
- Correction in the pricing of aircraft leasing. Post-corona times will be a good time for starting airlines - cheap assets, a lot of manpower & space in the room for negotiations.
- Different countries already pouring money into airlines to save them under the "subsidy or rescue" codenames. Italy is going to save Alitalia, Norway invests in Novergian, Finland provides funds for Finnair. That list could go on, IATA accounts up to $255B lost revenue.
- The airline business is an intense capital one. With high stake turnovers, but a very thin margin makes it impossible to survive aiming only cash on the balance sheet. Some of the airlines will survive on the cash, but there's not much of them. A lot of airline defaults are on the way.
- There is a kind of duopoly in the aircraft industry. The US manufacturers Boeing and joint-European venture construct Airbus airplanes. The whole industry of airplane buying & selling is a political one. There will be some really strong moves to impact the big buyers of aircrafts by impacting them politically. In a good manner.
- The European airline market is a very fragmented one - a lot of players, only some of them earning a significant profit. All of the rest is on a thin 1-2% EBITDA or losing money on the way. That's a good point of post-corona consolidation or just monopolization.
- Strongest cash positions are among the low-cost carriers, they will definitely benefit from coronavirus outbreak - the fewer competitors to kick down.
- The post-corona aviation industry will be stronger. Let's get back in the late '60s: Boeing laid-off 50.000 employees after losing a lot of future contracts. They re-think everything from scratch and get back to the game much stronger. That was a momentum of success.
- More communication & attention to aircraft design related to passenger well-being & health.
Air Operations & Charter Planning at Air Charter Travel Ltd
4 年In my opinion where our industry has gone wrong is the race to replace assets that should have had many many years of life left in them. Why were B737-700's being torn down after 8 years of service from new, why is a 10 year old A320 no longer deemed viable? Vanity?? Maybe its just me, but I remember standing in a hangar in LTN watching a B737-200 being rebuilt from scratch over an 8 month period. The Aircraft was over 32 years old when it returned to service.? Nowadays anything over 10 years old is deemed disposable when really it should be flying for 3rd-tier Airlines (should there be any left) for many more years.? I honestly believe that this disposable attitude has effected the 'new start-up market' and the ability to access good quality second hand aircraft. Lets face it, how often do we see new bottom tier carriers emerging these days? Is it really necessary to have that shiny new B787 or A330NEO for your two Aircraft long-haul fleet when a used B767, B777 or A330 will be a third/quarter of the lease rate? The exact same issue will hit home in the Car industry. Everyone's jumped on the 'scrappage' band wagon and now the manufacturers are wondering why nobody wants / can afford yet another new car.? ? ?
Seasoned Partnerships & Project Manager (20+ years of experience). Graduate of the KEDGE Grande Ecole (France). Sales Training's Author
4 年I wonder if we should expect the new bankruptcies, especially among the well-known airlines, in near future...No flights = no money, also considering the maintenance of grounded aircrafts the airlines will suffer even more...Or the countries' governments will provide the support to them?
Group Crew Training Director | NP CMT | A320 TRI/TRE
4 年@