Airlines Going Under
 

It has begun.. Virgin Australia, Air Mauritius, SAA, FlyBe ++ either in administration or fully bankrupt. The Guardian (+ others) write that most "every" airline will be bankrupt by the end of May this year.
In any event, and likely looking at the bright side, the airline industry and it's dedicated satellites (e.g. catering, maintenance etc.) will, following a long and very slow ramp up, likely only revive 50% of its previous levels of activity...
This will NOT end well for many..

I agree. About 50% I would say, in about a year or two. And maybe remain at 50% levels (of 2019) for another 10-15 years.

Maybe in 2030 we'll be back to the heady days of 2019 travelling numbers...

Absolutely devastating.

What on earth are you basing your numbers on? Post 2008 the markets went on the longest bull run in history. This pandemic has been a black swan event for the world economy because we were woefully underprepared for it, however just like the crash of 2008 this too will pass.

I certainly don't have the answers but I am certainly more optimistic of a medium term recovery, trying to predict 15 years out from now is insanity. The vacuum created by the airlines that have gone bust will be filled by new airlines or expanding surviving airlines.

The only thing that is certain is that the sh1t well and truly hit the fan this time, the next 2-5 years no one really knows.

What am I basing my numbers on? Nothing, just spit balling.

You really see a post 2008 style bull run after this one? Great, if so, we should all be buying a few airline stock, particularly Cathay and Swire shares. And I honestly hope you're right, that there will be a huge, rapid recovery.

But having been around about 5 decades, and been in the business since the early 90s... come on, this is nothing like the relatively quick impact, closure, and recovery that we had a with the Asian crisis, 9/11, sars, gfc, etc. This is a whole other animal. In multitudes.

Just taking one thing in isolation - (no pun intended), people working from home, getting used to it, and companies realising the benefits, will have a massive impact on business air travel.

And then there's the fear of flying/travelling, and cruise holidays for the wary. And then the fact that we are ALL going to be broke for the next few years. What holiday? Screw that, save your money mate, for a rainy day. Like we should have all been doing, but none of us did. (present company included).

Flying Clog, pessimism comes with age my friend..
Nobody can look 10-15 years in the future and people have very short memories. But 50 percent reduction is horse manure.

​​​​​​Survival of the fittest is what we will see.

SAA has had an incompetent corrupt management in place for years and was going to go under anyway
Air Mauritius couldn’t survive with no tourist industry , but with SAA having gone under there is no competition on the SA to Mauritius route so may rise from the ashes
Virgin Australia think that they will have a new buyer in place by end of June and virgin MK2 will be up and running soon thereafter
FlyBe really didn’t have a great route structure but was able to survive in the good times , the lockdown was the final straw that broke the camels back , very sad for all concerned

However for those that can ride this storm out there will be better times ahead

It matters not about good or poor management, if there's NO fuc**ng passengers, they go tits up. Period.. And this is what's in store for the next few years being extremely optimistic.
Numbers; the top 4 biggest US airlines are losing 100 MILLION US$ per day - EACH !! Populate those figures to EVERY major airline in the world, get out your calculator and I doubt you can calculate the number unless your calculator can express scientific notation. Then take a wild guess at all the medium to small airlines ..
For those above basing their thoughts on 2008 & SARS.. You need to read more economic news as to what's going on !!! The US ALONE has already lost about 3 TRILLION $ in GDP (this not including lost income/salary).. that's in the US in just a 2 month period.. Get out that calculator again and just take a rough guess at the ROW numbers. Europe, Asia, Aus/NZ, South America +++.. This is money that has simply "vanished" never to be seen, spent or invested and VERY IMPORTANTLY, NOT Taxed (meaning, governments spending like drunken sailors with NO income)...
In the US "alone" already this coming week will see approximately 30 MILLION unemployed.
There is ZERO rosy pictures for the industry and adding to this, China (the CCP) has managed, in a 4 month long lying spree, to alienate nearly every country in the world so one might expect, over the next years, for those lucrative cargo shipments of rubber dog **** to collapse as well..



I'd personally stop those expensive Cable TV Sports channel subscriptions and cancel next years vacation reservations while you can.. This is just getting started..... B well.

The big difference with this disaster compared with 2008 is the fact the population has had the crap scared out of it. Going from social distancing to going through an airport and being crammed in a tube (already known to be unhealthy) is not something that will happen quickly. Without the cramming the airfares will be seen as very expensive.
For what it’s worth, I would get on a VS, DI, BA tomorrow given the choice. Many wouldn’t.

Flex, that nails it middle of the bulls eye. Anyone that thinks this will end well for the individual is deluded. Certainly airlines will come out with market advantage, but you can also certainly believe that they will have drastically reduced their cost base in the meantime (meaning salaries, benefits and pensions). CX is planning an all out assault on the T and C's of their pilots, in all bases including HK. I have already heard some of what's coming and it won't be pleasant. The meeting next week between the AOA and management is simply going through the motions; the company already has their strategy ready to go. The big problem is that the initial panic in this case is now being followed by even worse metrics for the long term (see the "fear factor" and distance conferencing realisation regarding pax returning to normal habits). The public is being conditioned to not want to fly, never mind need to fly. Anyone that thinks our cushy pay and benefits will survive intact....well, I have a few bridges to sell you. Best prepare for the inevitable.

I agree with all the realists above. Sadly.

I’m a glass half full kind of person but this gloomy forecast is one for the dust bin. Do not underestimate the pent up demand that is brewing in 100’s of millions of travellers as we wait this out. I haven’t talked to one person who has been put off flying by this and will get on a plane as soon as reasonable.
The outlook that suggests people will revert to online work at home forever is seriously unschooled in the nature of humans. The moment workers can kick their zoom meetings to the curb they will. Not suggesting the market wont shrink and take a few years to recover but 50% is too pessimistic and unrealistic to even consider seriously. Sitting around forecasting the demise of this industry is completely unproductive.

Sadly, I’m with the realists, and the serious financial press seems to agree:

About that ‘V-shaped’ recovery

Reality
 

I love this.. I don't think any of the 100's of millions of "UNEMPLOYED" workers in the world (or their families/dependants) are put off as well.. The small problem of having NO MONEY or JOB is that tiny little fact you forget..

I'm all about optimism. And fully understand the HUGE pent up demand of travellers wanting to go on their holidays once this is all over. Indeed, there will be massive demand, particularly from the Brits, the Mainland Chinese, and Northern Europeans

However ... ticket prices will not only be double to triple (think paying biz class for a crappy eco ticket), due to social distancing requirements, but on top of that, your average punter is going to be BROKE AND ON HIS ASS financially for the next few years. So unless you're a complete idiot, you don't blow what little money you have on a weekend jolly to Ibiza at 2-3 inflated prices, but save it for a rainy day like we should have all been doing for years all along. But we were too greedy. The sensible would surely opt for a staycation particularly with a caravan. And avoid flying at all costs.

Has anyone thought of buying campers and caravans up en masse in the UK to satisfy the coming summer UK market? Another business idea.... you can have that one for free.

Nope didn’t forget it. There’s this little thing called trillions of dollars being pumped into every nook and cranny of the economy. Lots of jobless for sure and businesses going bust and years to recover but my point still stands, 50% reduction is ridiculous. If you prefer the apocalypse have at her then. Your forecasts do nothing for anyone’s wellbeing or outlook
though.

My money is on this passing much like 9/11. That shook up the industry but it was a black swan event not a structural failing like the GFC.

Sure 9/11 claimed plenty of poorly run and capitalised airlines as will this virus. I dont think fear will keep people from travelling though, heck in this part of the world it is hard enough keeping people at home for thier own good during 'lockdown'.
I dont think the fear of travelling will be any different to the early post 9/11 days.

And then there is the potential of a vaccine already undergoing human trials.

People also forget that aviation actually prospered during the Great Depression of the 1930s. New airlines created with considerable amount of capital being spent on new aircraft orders while most of the rest of the world's economies walked a slow death march.

Countries where tourism is a major contributor to their GDPs have been apparently asking the major tour operators of their largest markets what the consumer confidence is like. Vast majority report healthy amount of enquiries as people wish to go from the homes they've been locked down in as far as possible.

It definately won't be a light switch recovery, especially with no vaccine or active treatment available in the immediate short term, but there will be recovery all the same.

Fuel-Off :ok:

I don't doubt that some airlines will survive and eventually regain some semblance of health. The problem is that nearly all managements (and especially ours) will use this situation to cynically advance their long held desire to strip away the pay and conditions that we currently operate under. The airline will probably survive (in fact, they will probably have less competition to worry about), but the employees will certainly pay the price. It will be interesting to hear what management proposes to the AOA this week. I am certain it will be difficult to accept and deal with. I seriously doubt we will be going back to the way things were.

Capitalist societies go through boom and bust cycles. People over extend themselves during growth phases thinking the good times will last forever, and when the crash happens end up in the **** financially. They then believe the bad times are the new normal and here to stay. The smart people live below their means and save and invest sensibly during the boom, understanding the next crash is always just a few years away and when it comes it's just a buying opportunity and make a fortune from the recovery.

This is a particularly nasty correction due to the nature of the pandemic, however the economic path to recovery will be the same as always. Yes CX might be about to take a chainsaw to your current contract, but my point is that predicting destruction lasting 15 years is simply nonsense.

I don't know what he's basing his numbers on either, but I think your view of the economy is bloody naive. CV19 was just the straw that broke the camels back, debt hasn't gone down, but risen massively since the GFC, which was a rise from the late 80s to early 90s, and so on. If it wasn't CV19 it would have been something else, the economy has been stretched to buggery because of debt levels so there was no room to move.

That there will be a correction on the level of air travel, I think, is a no brainer.

Something to read: https://www.macrobusiness.com.au/202...t-and-history/

I've read that before and I follow Dalio on social media. My point stands that trying to predict how aviation and the economy will look 15 years out is nonsensical.

Pilots and their predictions. If I had a dime for everyone that failed to come true. I would be a billionaire.

Billionaire? You'll be lucky to have a dime this time next year DropKnee. :hmm:

that’s a prediction as well, you just blew my mind.

Indeed you are right. Sometimes we need to realize we are not business developers , and although we are likely to be the victims of what is happening, pilots are not decision makers, nor policy makers for airlines.
Some other people get paid way more than the pilot payscale to take these decisions. I'm rather asking myself where are they now... and what's their prediction!
And i'd rather stay away from all what is reported over and over again on the media.

Be safe and stay strong.

Then if you read that we are coming up for a reckoning, and obviously consumers spending will be smashed and as a result of that international flying (more so than domestic) will suffer.

Can you provide a link that will support that? I've googled various versions for airlines during that period and got very little.

Anyway, my take on your assertion without having any historical material to go off. What may be the reason for your "People also forget that aviation actually prospered during the Great Depression of the 1930s" claim, is because maybe your data skews the outlook to that rosy claim because that is the era when airline travel took off, so off a low base whereas today we're talking about a very mature market, such that an airline seat is now a commodity like a loaf of bread and very sensitive to price. Pax numbers (when reviewing airport numbers from around the world) have doubled in 8-10 yrs (8 for the M.E. 3) and more so if you look at the last 30 yrs, while in the west households are heavily indebted (Aust. #2 or 3 in the world) with wages stagnant for the past decade while house prices have boomed. Globalisation has been good for executive pay and extremely wealthy individuals, but for the west the result has been cheaper prices for consumer crap and the massive loss of jobs that started with manufacturing that's has progressively moved up the food chain. Ask anyone in IT what their real wages are like compared to a decade ago, noticed those tax kiosks around the EOFY time at shopping centres? Meanwhile Atlasssian are busy bringing visa workers (so called Skilled Workers on 50+k) into Australia for around high 50s with 5+ yrs experience, a pay level that would equate to a new grad here. Ask a nurse grad if she / he can find work.... yeah nah..... too many visa nurses from Asia already trained.

Imo I think we have seen the best of times and it's likely to be a downhill ride for the next decade. I have a few yrs to go before retirement, but in general I've been bloody lucky and don't believe I've worked any harder than anyone else, street sweeper or whatever and I worry about what is being left behind for those coming through, by this this I mean every field of work, not just aviation.

Good luck, because imo you're going to need it.

My thoughts
Vaccine plus 12-18 months before countries start to open their borders properly for tourism as we saw it. I believe there is plenty of desire to go travelling, it’s the closed borders or restrictions that will stop it. That’s close to 3 years....
Internal domestic travel in countries where community transmission is controlled a lot sooner. But I really can’t see international getting to what....20-30% for years? I feel sick as I contemplate that but I can’t see it better than that. 15 years we will all have forgotten it ever happened, just in time for the next crisis.

I read alot of content and investment books from bulls and bears. Dalio is a legendary investor but the feds spending and US debt is uncharted territory. Who's to say it can't go alot higher than 24 trillion? I don't pretend to know and none of us have a crystal ball. What I do know is that predicting a downturn some 50% longer than the 1920s depression is at the bat**** crazy end of the pessimism spectrum.

YF777,

"Who's to say it can't go alot higher than 24 trillion? " Well, I believe he answers that in the extract linked.

Edit: Btw, even if exaggerated it will still substantial damage.

The reality is that the debt stops growing when creditors stop buying US treasuries (bonds) and the fed’s printing stops creating capital liquidity due to (hyper-) inflation. That’s when the music stops and you better have a chair to sit on.

Or a really good place to go. Perfect storm. The economic engine has been stopped by feckless governments, everyone is borrowing from everyone else, and everyone is printing. Don't even need a press anymore; just electronically add a couple of trailing zeroes. The Keynesian money tree concept has never worked.

I think things will ramp up very quickly soon as the virus threat is handled.

The planes are there the pilots too .And I believe people will fly unless tickets become absurd and I think they won’t for long .

Being alive is about being optimistic.

Reality
 

All fine being either an optimist or a pessimist however when it comes to caring for and supporting your family or planing a career path, being a realist is a must !! Facts over feelings..

I would rather stay home than do a 2 week holiday in the U.K. with the same crap weather I would have at home.

People are craving for a change from quarantine and will absolutely start booking en masse vacations abroad. Nobody I speak to has any plans to reduce their spending on travel, on the contrary, they want to enjoy their life together with their family during a well earned vacation in a safe environment ( think EU).

Icelanta. I admire your stubbornness, in spite of all evidence to the contrary :hmm:

What evidence?! The evidence is an increase in bookings for winter 2021 with travel agencies in Western Europe compared to same time last year

I will be just fine. Remember, I get a dime for every pilot prediction that fails to materialize 👍

It really does get funnier the more times you say it. ;)