London Daily

Focus on the big picture.
Friday, Jun 20, 2025

Airlines will struggle long after passengers feel safe to fly again

Airlines will struggle long after passengers feel safe to fly again

The Covid-19 pandemic has caused the worst financial crisis in the history of the airline industry. But when the health crisis is over, airlines' financial problems will probably continue for years.

History has shown clearly that it takes a tremendous amount of time for passenger traffic to recover after a recession.

recently, it took a whopping five years after Great Recession ended in 2009 for passenger traffic to recover, according to Philip Baggaley, the chief credit analyst for airlines at Standard & Poors. Even after the relatively mild 2000 recession caused by the bursting of the dot-com bubble, it took until 2004 for US air passenger traffic to again reach its pre-recession peak.

"Recessions are tough for the industry. Airlines are dependent on economic growth," said Baggaley.

Beyond the years it takes for overall air travel to recover after a recession, historically it takes even longer for a return of business travel, which is the most lucrative sector for airlines -- one most of them depend upon.

That's one part of what makes this recession particularly chilling for airlines. On an overall scale the pandemic has caused widespread economic pain, with millions losing their jobs and burning through savings that they might otherwise have used for discretionary spending like vacations.

But when it comes to that all-important business travel, the situation is arguably worse.

Many companies have fewer employees on payrolls with a need to travel. Most will also be trying to recoup losses or pay down debt caused by the pandemic -- and trimming travel by skipping conferences and meeting with clients virtually is likely to be a cost-cutting measure. And, of course, there are many companies that have gone out of business altogether during the crisis.

"Business travel typically falls farther and takes longer to recover," said Adam Sacks, president of Tourism Economics.

Sacks thinks next year's travel will still be significantly affected by the pandemic itself. But he said he believes that in "2022, we're dealing with picking up the pieces from the economy that has been damaged."

"In this case, I think four years [after 2021] is what we're looking at to get leisure travel back to pre-pandemic levels. Businesses will take at least an extra year," he added.

There is no blueprint for a crisis like this. The last pandemic on this global scale was more than 100 years ago in 1918, before the age of commercial air travel.

More recent pandemics -- such as the SARS crisis in 2003, which badly damaged air travel to and from Asia, particularly Hong Kong -- did not cause a global recession. The SARS pandemic was over relatively quickly, and the impact on air travel ended only six months later, Sacks said, as people felt safe flying again.

What airline executives are saying


In this pandemic, US airlines collectively lost $12 billion in the second quarter. So far for the third quarter the five largest carriers -- American (AAL), United (UAL), Delta, Southwest and Alaska Air (ALK), have already reported losses of $8.9 billion excluding special items like $25 billion in federal assistance for the industry overall.

And airline executives have been blunt about their expectations for a slow, painful recovery.

"We have to assume that business travel will be lighter for a long time," said Southwest (LUV) CEO Gary Kelly in an interview on CNBC last week.

He cited examples of business travel taking five years to recover from past recessions, adding, "you've got to believe that will be at least the case now. I've said it may be 10 years before business travel recovers."

The airlines are also concerned about a permanent hit to business travel given growing use of video services, although they say they believe the shift to virtual meetings will be limited.

"I'm of the view that it will have some impact, but it's not going to be a substitute," said Delta (DAL) CEO Ed Bastian when speaking with investors earlier this month. "I don't think anybody knows. My sense is that we could be looking at anywhere from 10% to 20% reduction in the next couple of years when we get to that new normal of business travel."

Most of the financial damage to the airlines so far has been because of a combination of shutdown orders limiting nonessential flying, quarantine rules for travelers and border closings. Travel through US airport checkpoints since March is down 75%.

While those losses may not be repeated -- especially if the vaccines and treatments help to beat back the pandemic sometime next year -- they still have left an industry that went into the crisis in relatively strong financial shape with much weaker balance sheets. All have taken on massive levels of debt to ride out this downturn.

And they've all cut their staff -- through voluntary buyouts and in many cases involuntary layoffs and furloughs -- to reduce costs. If even a modest level of traffic returns next year with an end to the pandemic, the losses could end by the middle of 2021. But that doesn't mean they'll be in good financial shape.

"The airlines may be able to break even again or make modest amounts of money," said Baggaley. "But even if they're able to make money at this lower passenger levels, profitability won't return to previous levels any time soon."

Newsletter

Related Articles

0:00
0:00
Close
16 Billion Login Credentials Leaked in Unprecedented Cybersecurity Breach
Senate hearing on who was 'really running' Biden White House kicks off
Iranian Military Officers Reportedly Seek Contact with Reza Pahlavi, Signal Intent to Defect
FBI and Senate Investigate Allegations of Chinese Plot to Influence the 2020 Election in Biden’s Favor Using Fake U.S. Driver’s Licenses
Vietnam Emerges as Luxury Yacht Destination for Ultra‑Rich
Plans to Sell Dutch Embassy in Bangkok Face Local Opposition
China's Iranian Oil Imports Face Disruption Amid Escalating Middle East Tensions
Trump's $5 Million 'Trump Card' Visa Program Draws Nearly 70,000 Applicants
DGCA Finds No Major Safety Concerns in Air India's Boeing 787 Fleet
Airlines Reroute Flights Amid Expanding Middle East Conflict Zones
Elon Musk's xAI Seeks $9.3 Billion in Funding Amid AI Expansion
Trump Demands Iran's Unconditional Surrender Amid Escalating Conflict
Israeli Airstrike Targets Iranian State TV in Central Tehran
President Trump is leaving the G7 summit early and has ordered the National Security Council to the Situation Room
Taiwan Imposes Export Ban on Chips to Huawei and SMIC
Israel has just announced plans to strike Tehran again, and in response, Trump has urged people to evacuate
Netanyahu Signals Potential Regime Change in Iran
Juncker Criticizes EU Inaction on Trump Tariffs
EU Proposes Ban on New Russian Gas Contracts
Analysts Warn Iran May Resort to Unconventional Warfare
Iranian Regime Faces Existential Threat Amid Conflict
Energy Infrastructure Becomes War Zone in Middle East
UK Home Secretary Apologizes Over Child Grooming Failures
Trump Organization Launches 5G Mobile Network and Golden Handset
Towcester Hosts 2025 English Greyhound Derby Amid Industry Scrutiny
Gary Oldman and David Beckham Knighted in King's Birthday Honours
Over 30,000 Lightning Strikes Recorded Across UK During Overnight Storms
Princess of Wales Returns to Public Duties at Trooping the Colour
Red Arrows Use Sustainable Fuel in Historic Trooping the Colour Flypast
Former Welsh First Minister Addresses Unionist Concerns Over Irish Language
Iran Signals Openness to Nuclear Negotiations Amid Ongoing Regional Tensions
France Bars Israeli Arms Companies from Paris Defense Expo
King Charles Leads Tribute to Air India Crash Victims at Trooping the Colour
Jack Pitchford Embarks on 200-Mile Walk to Support Stem Cell Charity
Surrey Hikers Take on Challenge of Climbing 11 Peaks in a Single Day
UK Deploys RAF Jets to Middle East Amid Israel-Iran Tensions
Two Skydivers Die in 'Tragic Accident' at Devon Airfield
Sainsbury's and Morrisons Accused of Displaying Prohibited Tobacco Ads
UK Launches National Inquiry into Grooming Gangs
Families Seek Closure After Air India Crash
Gold Emerges as Global Safe Haven Amid Uncertainty
Trump Reports $57 Million Earnings from Crypto Venture
Trump's Military Parade Sparks Concerns Over Authoritarianism
Nationwide 'No Kings' Protests Challenge Trump's Leadership
UK Deploys Jets to Middle East Amid Rising Tensions
Trump's Anti-War Stance Tested Amid Israel-Iran Conflict
Germany Holds First Veterans Celebration Since WWII
U.S. Health Secretary Dismisses CDC Vaccine Advisory Committee
Minnesota Lawmaker Melissa Hortman and Husband Killed in Targeted Attack; Senator John Hoffman and Wife Injured
Exiled Iranian Prince Reza Pahlavi Urges Overthrow of Khamenei Regime
×