As countries are starting to open up their border and airlines slowly ramp up their flights, a more potentially dangerous COVID-19 variant dubbed “Omicron” threatens to derail travel lanes. But airlines are ready to adapt to whatever the government imposes.
- COVID-19 expose airlines financial well-being
- Airlines have adapted enough to the ever-changing regulations
- Border closure cannot stay close for long
COVID-19 expose airlines financial well-being
What took every airline by surprise is how one virus exposed almost all the airlines’ financial well-being when government start closing its border, preventing people from traveling in and out of the country.
With non-existent passenger demands, airlines began to temporarily ground or retire early their aircraft, personnel were let go or were asked to voluntarily retire early, pay cuts were in force and airports could not capitalize on the aerobridge and ramp fees as aircraft ran out of parking space.
Airlines began posting losses in the millions and were on the brink of being shuttered if not for government support aids. But some airlines, especially low-cost carriers were in such dire straits that eventually it had to be shut down or bought out by their competitors.
Two examples that come to mind are the AirAsia group and Garuda Indonesia. In the case of AirAsia group, the airline bought too many planes pre-pandemic and while it enjoyed a good discount with the bulk purchase, the COVID-19 pandemic forced the low-cost carrier to shutter its subsidiary in Japan and its long-haul arm in Indonesia, and divestment of its stake in AirAsia India to Tata Sons, resulting in excess unfulfilled aircraft orders from Airbus.
AirAsia’s long haul arm, AirAsia X, recently received approval from creditors last month for its debt restructuring, possibly paying only 0.5% of the debt.
On the other hand, Garuda Indonesia’s financial woes were exacerbated with high leasing rates from lessors, operating unprofitable routes for years, and having too many aircraft types in its fleet.
Some airlines have taken the initiative to raise up their capital through bonds, stock divestment, sale and leaseback of aircraft, and reducing capital expenditure.
Airlines have adapted well enough
With stringent procedures such as pre-departure and post-departure testing, limiting seating capacity, disinfecting aircraft after every flight, and cutting short-haul meals, airlines could make a decent income from carrying passengers, though it would still need to dig into their reserves and rely on government support from time to time, especially those without a domestic market.
Throughout this pandemic, airlines bore the worst, with passenger demands plummeting to their lowest record ever which were saved by robust cargo demands throughout the world that even they are struggling to fulfill, which in turn led to a sharp increase in shipping costs.
Even if the government were to impose a ban on passenger flight overnight, airlines are nimble enough to convert the flight to a cargo-only flight, maintaining cargo capacity on the route and keeping shipping costs to a level that is sustainable.
Border closure cannot stay close for long
As different variants of the virus keep appearing throughout the world, it is understandable that we have to safeguard our own country at the beginning of the virus outbreak. Two years in, as more and more people have been vaccinated and new medicine that increases the chances of the person from getting the virus, the only thing that the government can do is to identify and isolate potential carriers of the virus at the point of entry.
Loved ones have been waiting for a long time to be able to come back to their country, which they call home, to see their parents, partners, and children. Some of them, which I have known, have not been back home for nearly two to three years.
We have closed our borders for far too long and we cannot expect things to return to how it was in the short run. However, with precautions taken by the respective government and airlines, the virus spread will hopefully be limited.