Industry Spotlight: Airline Insights

Businesses across industries globally have been forced to deal with unprecedented change due to the COVID-19 pandemic, largely in the absence of any specific playbooks to follow. Without question, one sector that's faced a seismic shift has been the airline industry.

That was particularly evident as many airlines reported net losses in the billions for the first quarter of the year, a period heavily weighed down by global flight restrictions and cutbacks. Comments from airline executives in their earnings reports referenced things like this being "the darkest period ever in the history of commercial aviation" and "these are truly unprecedented times for all of us."

Virtually all airlines have been forced to make significant capacity reductions in light of COVID-19. Capacity is essentially the number of seats available for purchase on an airline's routes. Some airline executives expect it could take at least three years to recover to 2019 levels of revenue and capacity.

According to a Morningstar equity analyst report published May 4, air traffic typically returns to average trend levels four years after a major event occurs. It referenced four previous significant air travel disruptions since the late 1970s: the second oil shock in 1979, the first Gulf War in 1990, the dot-com bust in 2001 and the financial crisis in 2008.

Amid the challenges, many airlines have touted the resiliency of employees and have undertaken ways to offer support elsewhere – including repatriation flights, food donations, cargo flights carrying protective equipment, free flights for medical workers and more. At an airline-focused virtual event hosted by the Canadian Club of Toronto at he end of April, one airline executive maintained an optimistic view of the road ahead, saying the aviation industry has many "intelligent, creative and adaptable" people in it and "we will find a way out."

Airlines in the U.S. are seeing some government relief, with the promise of a $25 billion (U.S.) government bailout for passenger carriers. Some European countries have made similar moves. The National Airlines Council of Canada (NACC), which represents Canadian passenger air carriers, has been calling on the Canadian government to introduce liquidity measures for the industry and welcomed the May 11 announcement of the Large Employer Emergency Financing Facility (LEEFF) to provide bridge financing to Canada's largest employers.

According to a Canadian government release, the objective of LEEFF "is to help protect Canadian jobs, help Canadian businesses weather the current economic downturn, and avoid bankruptcies of otherwise viable firms where possible."

The Air Transportation Association of Canada also asked for the Canadian government to table a financial aid package for the aviation industry.

For investors, research is key when trying to determine if investments in a specific industry are right for you and when trying to determine what the outlook for an industry might look like. Industry watchdogs, analysts, government organizations and news outlets can all be excellent resources for research. For the aviation industry specifically, groups such as the International Air Transport Association, a trade group, can offer key analysis on topics such as the outlook for air travel in the years following COVID-19.

To find other ways to explore more about companies, industries and topics of interest to you, check out Extra, Extra: Market News is at Your Fingertips and 7 Useful Things You'll Find On a Company's Website.