Insight: Monday 16 March 2020: Prepare for a US Airline Shutdown

News: With most international travel already curtailed between the US and Asia and the US and Europe, the next step in the Covid19 fight is likely to be a near-complete shutdown of domestic US flying. Load factors have already dropped well below the point of profitability, and airlines are currently losing money on virtually every flight. For business travelers, we have the technology that provides desktop videoconference capabilities to replace travel in the interim. From a leisure standpoint, if we have mandated that people hunker down and minimize social contact, leisure travel is unnecessary. We expect a government mandate to stop airline flights in the United States for at least two weeks, potentially by the end of this week. Analysis: Minimizing the spread of the virus is a key element of keeping the infection rate down and minimizing travel will remove the threat of spreading the disease from one state to another by individuals who may be carriers yet not realize it. Travel brings large groups of people in close proximity, and while modern aircraft have air quality that is better than homes and close to that of hospitals, airports do not. Travelers must queue in close proximity to clear TSA checkpoints, and gate areas become crowded with less than recommended space for social distancing. This is not an ideal environment to bring people to prevent contagion. Load factors are exceptionally weak. Anecdotal evidence from friends and airline employees who travel report most aircraft with load factors from 30-60%, with most middle seats unoccupied. Only the premium cabins seem full, as upgrades fill the available seats. Clearly, with break-even load factors near 75% today, airlines are losing money on every flight they undertake. Insight: A shutdown of air travel is looming. The question now is when, rather than if. We will likely see a decision to suspend domestic airline travel in the US by the end of this week. That will cause hardships, but overall is the right thing to do to slow the spread of this virus. The question then is what about pilots, flight attendants, and ground staff that support the canceled flights? Do we send them home with paid leave, which will cost the airlines, or will they be forced to take unpaid leave? There are real consequences from a shutdown that will need to be addressed, and airline employees should not bear the brunt of the Covid-19 crisis. There are two aspects to this process that need to be addressed. The first is the contagion itself, reaction to which is the right thing to do, and the second is the economic fallout from the necessary actions. The latter issue will likely be more difficult to deal with than the former. It is easy to cease operations. It isn’t easy to keep airlines maintained and ready to go, as aircraft need maintenance if sitting for more than a few days. What staff will be essential and continue to be utilized, and who will continue to be on duty at airports? Will MRO activities take advantage of a shutdown, or will employees be sent home? What about the aircraft sent to remote places like the desert? Who maintains them? While there are a lot of questions that remain unanswered, a domestic shutdown of air travel is looming. It would be best to prepare for it now, including where to position grounded airplanes, sooner rather than later.

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