The pandemic paradox: how airlines become winners from losers.

FLIGHTS

It is no secret that the COVID-19 pandemic led to a dramatic drop in air travel, financially gutting the air travel industry. Airlines lost millions of dollars a day during forced downtime in parking lots.

united-airlines-5249634_1280One of the latest signals of how deep the virus is hurting, was the announcement by the United Airlines that 36,000 jobs could be cut. That’s almost half the United States workforce.

But, here is a paradox: for weak airlines, the existing economic crisis has turned into a world of new opportunities. The pandemic has turned everything upside down, and what used to be considered a loss-making business model has now become a promising business.

Weak players in the air transport market, whose continued existence was questionable, uncompetitive and under-capitalized, were blessed to some extent. The economic problems of the crisis in 2020 were a chance for them to survive.

The fact is that many governments have begun to give airlines greater support in the form of grants, singapore-airlines-4675695_1280interest-free loans, tax breaks and other measures. For major players such as Singapore Airlines or the U.S. Delta, such support is not the limit of dreams, as it will only introduce imbalances in the financial statements and reduce shareholder interest. For example, Alitalia has a chance to survive thanks to such support. If it hadn’t been for the crisis, this could never have happened.

Throughout 2019, and what can I say, Alitalia has previously sought vital support. The management turned to the major players of the air transport market: Delta, EasyJet, Lufthansa, as well as private companies and even the Italian Ministry of Finance for help. But no one heard the company on the verge of bankruptcy. And suddenly the COVID-19 pandemic began.

alitalia_airplaneAt the moment, Alitalia is afloat thanks to government subsidies of 3.3 billion dollars. The carrier, which lost more than 500 million dollars last year and another 240 million in the first quarter of this year, will reduce its appetite, but not much. The airline has a fleet of 92 aircraft, including 20 wide-body aircraft for long-haul routes.

Restarting an air carrier also has legal implications that other low-costers such as Ryanair, EasyJet, Vueling, Volotea, Norwegian and Blue Air do not like. They carry the majority of the Italian population and have the right to vote. In order to protect their interests, the above mentioned airlines together oppose the measures taken.

Virgin Atlantic and Virgin Australia have faced the same problems. The latter was forced to declare bankruptcy after being denied state aid. Virgin Atlantic is likely to face the same fate. But they have an aircraft_main_cabinundeniable advantage over brands like Alitalia: they were more successful and provided better service. That is why private investors have shown great interest in them at the moment.

Analysts believe that this year the number of passengers in the world may fall to levels unseen since the 1970s. And bankruptcy of some airlines is inevitable. In fact, there is already evidence of this.

When the year 2021 comes, of course, no airline in the world will say that 2020 was so wonderful. But each of them will confirm that the crisis was a period full of unique opportunities. And some will only survive in 2020 thanks to the crisis. It is because of the investment channels that emerged during the pandemic. Others may be able to turn a loss-making business into a successful model. That’s how losers turn into winners.

The pandemic paradox: how airlines become winners from losers.

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