Introduction
The COVID-19 pandemic started in the Chinese city of Wuhan in the Hubei province in late 2019. The virus is caused by SARS-COV-2 coronavirus, causing respiratory illness. This paper will look at the effects of the COVID crisis on the airline industry with a specific focus on Virgin Atlantic Airlines. The pandemic became a global phenomenon in February 2020 and has yet to stop. All industries have been affected by the disease, from healthcare to governance. Perhaps the most affected industries are the hospitality industry and aviation industry. These are most affected because they are predicated on people traveling. There have been travel restrictions since February 2020, although there was a little respite in the summer of 2020. For Virgin Atlantic Airlines, their path was not any special from that of a typical airline in that they had to lay off a good proportion of their workforce. Although they did not qualify for a bailout from the government, they did manage to acquire a private rescue package from an American hedge fund. Most airlines have been forced to restructure because of the uncertainty posed by covid. Some have had to cancel their leased aircraft, while others have had to postpone their aircraft deliveries, with some even canceling altogether. The pandemic has caused quite some uncertainty in the industry, providing an opportunity for the stakeholders to rethink its future.
Coronavirus Disease
Coronavirus disease 2019, also referred to as COVID or coronavirus, is a contagious respiratory disease caused by the severe acute respiratory coronavirus 2 (SARS COV 2) virus (Sauer, 2021). The virus was first identified in December 2019 in Wuhan, China, and has since then spread around the globe and become a global pandemic that is still wreaking havoc. The symptoms of the disease vary, but the most common ones include fever, headache, fatigue, loss of smell and taste, and breathing difficulty (Sauer, 2021). The symptoms of the disease begin 14 days after exposure to the covid virus. It is estimated that about 33% of infected people do not show noticeable symptoms, while out of those that develop enough symptoms to be called patients, 81% only show mild symptoms (Sauer, 2021). Fourteen percent of these develop severe symptoms such as hypoxia and dyspnea, while 5% suffer extreme symptoms such as organ failure (Sauer, 2021). Advanced age is one of the risk factors for developing severe covid symptoms. It has been recorded that some recovered patients continue experiencing the effects of the disease months later.
Airlines have been one of the most impacted industries by the pandemic, which comes as no surprise given their potential to spread the virus. Covid 19 is a respiratory disease that is mainly spread through the air making airplanes a potential risk area for transmission. Moreover, after it was established that the disease was highly contagious and lethal, many countries instituted lockdowns that lead to many cancellations.
Virgin Atlantic Airlines
The airline trades by the name Virgin Atlantic for both Virgin Atlantic Airways Limited and also Virgin Atlantic International Limited. It is a British company headquartered in Crawley, England. When it was founded in 1984, it was called the British Atlantic Airways; its cofounders Alan Hellery and Randolph Fields had intended the airline to be a link between the UK capital London and the Falkland Islands (Our Story| Virgin, n.d.). Afterward, it became Virgin Atlantic Airways; Fields would divest from the company after a row with Richard Branson about the company’s management. Virgin Atlantic Limited controls the airline and is the holding company. The Virgin Group, together with Delta Airlines, owns Virgin Atlantic Limited in a 51%/49% split. (Our Story| Virgin, n.d.). The company is not administratively the same as other Virgin branded airways. Virgin Atlantic International Limited together with Virgin Atlantic Airways Limited, both operate under Type A Operating Licenses from the Civil Aviation Authority(CAA). These licenses allow them to fly passengers, mail, and cargo on aircraft with at least 20 seats (Our Story| Virgin, n.d.). The airline uses both Boeing and Airbus planes with destinations to North America, Africa, the Caribbean, Asia, and the Middle East from its Heathrow base or its second one in Manchester.
Literature Review
A Timeline of how the Pandemic Unfolded
The breakdown is according to a Reuters report by Wu & Kretser (2020). On December,31st 2019, China informed the WHO about new cases of viral pneumonia in the Hubei Province’s Wuhan city. The following day, Chinese authorities closed a wet market after finding that some patients were sellers in the market. On January,11th 2020, the first death was reported of a 61-year-old man with preliminary tests showing a new coronavirus. On January,13th a woman from China is isolated in Thailand in the first case of the virus outside China. On January 15, the first case was confirmed in China, while on January 20, Korea also reported its first case. The WHO convened a special meeting on January 22 with the Director-general saying that the disease did not constitute an international emergency yet.
On January 23, China issued lockdown orders for the region of Hubei and Wuhan as the death toll climbed to 18. Meanwhile, in Europe, the first case is reported on January 24. On the 25th of the same month, China banned wildlife trade and extended the Lunar New Year holiday for schools and workers. The leader of Hong Kong also announced safeguards to limit links with China. The US warned against traveling to China on January 27 after five confirmed cases from people who had traveled to Wuhan. On January 30, the WHO finally declared covid a public health international emergency. On February 2, the first death outside China was reported in the Philippines.
On February 3, $393 billion was erased from China’s benchmark stock index dumping the Yuan and selling commodities upon resuming trade from the Lunar New Year recess. Hong Kong would report its first death the following day while Macau closed its casinos; American Airlines and United Airlines suspended flights to Hong Kong. On February 5, approximately 3700 passengers were quarantined in the Diamond Princess cruise ship off the coast of Japan. More than 14 people succumbed, with the quarantine lasting close to a month.
The first fatality was reported in Europe on February 19 of a Chinese tourist hospitalized in France. On the 19th, a spike in infections in South Korea was linked to a church super-spreader event. On February 22, Italy sealed its Northern areas of Lombardy that had been heavily hit. On February 25, the US CDC warned Americans about the spread of the disease, signaling a change of tone. February 26 was the day infections outside China surpassed those in China, with Iran and Italy emerging as hotspots.
The US’s S&P recorded its most significant weekly drop since 2008, with more than $5 trillion getting wiped off the markets. On March 1, two deaths are reported in Seattle, marking the first US deaths. The US Federal Reserve cut interest rates to curtail the economic damage as markets continued to dip. The number of global infections exceeded 100000, with 3400 recorded deaths. On March 9, crude oil tumbled more than 25% as Russia and Saudi Arabia began a price war. On March 10, Italy locked down its entire country. The following day, the Bank of England cut interests with the British government unveiled a budget splurge to contain the recession. On the 13th, Donald Trump declared an emergency to release $50 billion in aid from the federal government. On the 14th, France and Spain imposed a lockdown for millions of people joining Italy. Austria issued a self-isolation order for foreign travelers, with more countries extending bans to stop the virus. On the 17th, Brazil recorded its first death, and the European Union banned outside travelers. Italy’s death toll overtook China’s on March 19, with the virus present in more than 170 countries. In the US, California issued a stay-at-home order while New York closed non-essential businesses.
On March 24, the International Olympics Committee (IOC) announced the postponement of the 2020 summer Olympics as India went into lockdown. The US issued a $2 trillion coronavirus package. South Africa would go on lockdown on the 27th, while Kenya and other African countries tried to lock down cities. Global cases passed 1 million on April 5 as deaths rose in Europe and North America. On April 8, Wuhan reopened its city, allowing residents to leave their homes for months. The global deaths would reach 100000 on the 10th. On the 13th, a few European Countries started to ease restrictions.
The US reported the most significant plunge in jobs in April, with unemployment standing at 14.7%. In South America, on May 9, Avianca Holdings, the second-largest Latin American airline, would file for bankruptcy, followed sooner by the continent’s largest airline, LATAM Airlines. Shanghai Disneyland would reopen on May 11, the first Disney park to reopen. On May 22nd, Brazil surpassed Russia as second in cases worldwide. England allowed retail stores to reopen on June 15 after 83 days.
Flight Cancellations
Because of the government in Europe and North America, airlines were forced to refund fares for canceled flights, but instead, many airlines offered vouchers that could be used until the year-end. There were pleas by lobbyists to include travel credits in the regulations, but the US Department of Transportation declared that airlines were mandated to offer fare refunds for canceled flights (Hepher & Young, 2020). Currently, travel vouchers are allowed if passengers cancel their travel plans because of travel advisories, stay-at-home orders, or any other restrictions. By early March 2020, 10% more flights had been canceled compared to the previous year. As the covid pandemic worsened, there were 40-60 percent fewer flights in late March, with the most affected being international ones (COVID-19 and the Aviation Industry, 2020). 80% of all flights had been restricted across all regions by April. Some studies have shown that it might take 2-4 years for passenger demand to go back to pre-covid levels; this is projected to be around late 2022.
Interestingly, 2022 is the most optimistic estimate, with some negative ones projecting 2026 as the realistic recovery year. There are disparities among different regions, with Asia-Pacific having the shortest recovery projection at 2.2 years while North America is projected at 2.5 years with Europe coming in last at 2.7 years. Airfreight demand is projected to recover faster than passenger demand. Regionally, Asia-Pacific leads again with 2.1 years while North America and Europe are tied at 2.2 years.
Cargo
The cancellation of passenger travel had a dramatic effect on air cargo. It cost three times more to send freight across the Pacific Ocean by late March 2020. There was a 4.4% decline in adjusted cargo capacity while demand for air cargo dipped by 9.1%. However, the virtual halt in passenger travel reduced the ability even more sharply since most cargo is ferried in the bellies of passenger jets. As a result, air freight rates increased from $0.80 per kilo for transatlantic air cargo to $2.5-$4 per kilo; this lured passenger airlines to only operate cargo flights. On the other hand, cargo flights revived their stored fuel guzzlers due to reduced oil prices. There was also a temptation for airlines to convert their passenger planes to cargo.
By late March, air cargo capacity was 35% lower than the year before. The capacity from North America to the Asia Pacific had fallen by 17%. The Asia Pacific to Europe had dropped by 30% (-32% in reverse) while intra-Asia had slumped by 35%. Following the reduced capacity, demand had fallen by 23 percent in March, leading to increased freight rates such as China/Hong Kong rising by 158% between March 2nd and April 6th and +90.5% for Europe/North America. Freight rates had increased to $12 per kilo from Shanghai to North America and $11 per kilo from Shanghai to Europe.
Impact by Airline
On March fifth, the International Air Transport Association (IATA) projected that the airline industry would lose between $63 billion and $113 billion as a result of reduced passenger numbers (Coren, 2020). IATA had previously predicted a $30 billion loss before the 5th March estimate (Harper, 2020). By March 17, IATA updated its estimates to estimate that airlines would need a $200 billion bailout to survive the predicament (Jasper et al., 2020). They again revised their revenue loss estimates on March 24 to $252 billion worldwide, a 44% drop (Hepher & Young, 2020). They would publish another forecast on April 4 that estimated the revenue slump at $314 billion (a 55% slump) accompanied by a 48% drop in traffic for 2020 by passenger number.
Because of the abrupt loss in revenue, airlines would begin to hesitate to refund canceled flights to avoid cash drawdown despite government requirements. European airlines had succeeded in postponing around $1.2 billion worth of air traffic control fees (Keonig & Laris, 2020). It was also reported that Asian airlines had managed a 23% reduction in available seat miles. The pandemic is also expected to increase corporate consolidation in the industry. By CAPA Centre for Aviation forecasts, most airlines would have gone bankrupt by the end of 2020.
Even though travel restrictions due to covid did not begin until late January, the industry still recorded the lowest growth in travel demand since the eruption of Eyjafjallajökul in April 2010. The number of flights had slumped by March with only 280000 flights recorded between March 24 and 30; this was compared to 780000 the previous year. Despite the decline in passengers and rules concerning flight slots, British airlines had to fly unoccupied planes to airports around Europe to avert a loss in space (Paton, 2020). Despite the reduction in oil prices due to the Saudi Arabia/Russia price war, it was insufficient to compensate for the plunge in demand (Josephs, 2020). A Google Trends survey revealed that the customer service departments of airlines had seen a massive surge in searches from February to March in comparison with any other industry’s customer service department (Max, 2020)1. As a result of the disruption, experts expected airlines to cut the sizes of their flights either by keeping old planes and avoiding expenditure on new planes or by fast-tracking the retirement of older planes and keeping their orders for more recent, more fuel-efficient aircraft.
The number of inactive aircraft had risen to 14400 by mid-April, which was more than 66% of the 22000 passenger airliners. That left 7635 in operation; in Europe, less than 15% of aircraft were operating compared to 49% in North America and 49% in Asia. Incidentally, narrow-bodied aircraft were more affected than wide-bodied aircraft. As a result, demand for storage had increased tremendously, with runways and taxiways being closed in some busy airports such as Atlanta to create more room for storage.
By April 2020, global passenger capacity had plummeted by 91%, with the ICAO anticipating a 1.2 billion drop in passengers by September compared to the average year (Cirium, 2020). They had also expected a decline in revenue for 2020’s first nine months of $160-250 billion. IATA predicted a 55% drop in revenues, with European airlines owing $10 billion in canceled flights. The hit on the broader economy was to cost $452 billion. Boeing was predicting passenger traffic recovery to take three years, with production taking longer. The Airports Council International estimated 2020 passenger numbers to be less than 4.6 billion below the 9.1 billion reported in 2019. IATA projected RPKs to slump by half compared to 2019, but North American numbers were projected to drop by 36%, equating to a $314 billion revenue drop. The association had also predicted that air travel would drag economic recovery by up to 2 years, with air travel down by 24% in 2021. It is projected that 2019 levels may not return until 2023-2025 (Dunn, 2020).
IATA predicted an overall net yearly loss of $84.3 billion compared to that of $30 billion during the 2008 financial crisis, with negative incomes expected even for 2021. 14500 mainline aircraft were stored by mid-April 2020, with only 7400 active; this was a third of the entire fleet, worse for European carriers, which had a fifth of their fleet active (Kingsley-Jones, 2020). The number fell a little by mid-June with 10500 aircraft in-store while 11500 were active; the average utilization was down 35% compared to 2019 (Kingsley-Jones, 2020). Regionally, Asia-Pacific airlines had 75% of their planes active, while Europe had had a third still in storage while North America had a 50-50 still ratio (Kingsley-Jones, 2020). Plane deliveries for major airlines had dropped to an average of fewer than 40; this is from a high of 90-100 a year before.
Airlines are fast-tracking the retirement of older, less fuel-efficient aircraft since passenger traffic may not return until 2024 (Hemmerdinger, 2020). The phasing out is happening for models such as the Boeing 777, Airbus A380, and Airbus A330; these are being replaced with newer models such as the Boeing 787s and the Airbus A350. China Southern airlines returned to profitability by the third quarter of 2020 (Chua, 2020). It became the first of major airlines to do so, with China Eastern and Air China narrowing their losses (Chua, 2020). A recovery in domestic traffic boosted these results; however, demand for international flights was yet to recover.
Major Airlines Layoffs
In a Financial Times report on September 4, 2020, Virgin Atlantic warned that it would cut more than 1000 jobs after it had completed a private £1.2 billion rescue (Georgiadis, 2021). The chief executive, Shai Weiss, had said that the airline was still in trouble as the aviation industry faltered from the covid 19 economic impacts. The airline had said it would cut 1150 jobs in all departments of its business. This was on top of the 3150 it had shed in May 2020 at the height of the lockdown (Georgiadis, 2021). This would leave the airline with just over half the 10000 workers it had before the crisis. The pandemic had put the airline into its worst crisis since 1984. Richard Branson ventured into the competitive transatlantic market offering £99 fares from London to New York (Georgiadis, 2021). Virgin Atlantic has a stylish image with lounges and bars and considers itself a disrupter. The airline’s extended haul-centric model has exposed it to the collapse in air travel due to the pandemic (Georgiadis, 2021). Of importance, fewer passengers have made the trans-Atlantic trips which account for 70% of the airlines.
The £1.2 billion package rescue was set to be a blueprint for other airlines. The company’s majority shareholder, Richard Branson, had injected £200 million into the airline after he had sold shares in Virgin Galactic (Nelson, 2020). The rescue package also included £400 million of shareholder fee deferrals; these are Delta Airlines and the Virgin Group. Creditors had also agreed to postpone £450 worth of payments (Georgiadis, 2020). Major suppliers to Virgin Atlantic, such as aircraft lessors, took a 20% cut on the money owed to them (Georgiadis, 2020). At the same time, the airline received debt funding of $170 million from Davidson Kempner Capital Management, an American hedge fund (Georgiadis, 2020). The company did not succeed in obtaining a bailout from the UK government like its rivals, such as British Airways.
Virgin was not alone in announcing major restructuring and layoffs. Lufthansa Group, a German company that owns significant airlines in Switzerland, Austria, and Belgium, announced 22000 job cuts in June 2020 (Meyer, 2020). According to estimates by Fortune Magazine, the pandemic had cost the industry an excess of 70000 jobs by June, and more were expected. Boeing projected that the crisis would cost the industry a ton of 100000 jobs. There was a catch for US airlines who had agreed with the US government that they could not terminate employees until September as part of the coronavirus package deal. The move by Lufthansa was in the wake of a $9.8 bailout agreement from the German government for a 20% stake pending a sign-off by shareholders and the European Commission (Meyer, 2020). Lufthansa had also obtained $510 million from the Austrian government, while the Swiss government had offered loan guarantees totaling $1.5 billion.
By the end of April, British Airways announced they intended to lay off up to 12000 employees. BA, an IAG subsidiary employs about 42000 people; 12000 is a higher proportion than Lufthansa planned to lay off (Meyer, 2020). On the other hand, the Emirates Group was expected to end up with the heaviest job cuts, with reports of as many as 30000 out of their 105000 employees (Meyer, 2020). As of the June report, the Dubai flag carrier had cut around 7200 staff. Across the pond, American Airlines reported in May that it would be laying off approximately 30% of management and support departments totaling about 5000 workers; however, once again, they could not do this until September 2020, according to the coronavirus package deal (Schlangenstein & Mohsin, 2020). Scandinavian Airlines, SAS, which is jointly the flag carrier of Norway, Denmark, and Sweden, reported that it would lay off up to 5000 workers, as much as 50% of its workforce.
In Norway, Norwegian air, a fierce SAS rival, had four of its subsidiaries in Sweden and Denmark file for bankruptcy in April; it also terminated around 4700 jobs (Frost, 2020). The British budget airline EasyJet announced that it would cut around 4500 jobs (approximately 30% of its workforce) and would cut even more if the lockdown continued (Meyer, 2020). To an internal report by United Airlines, the company had planned to cut 30% of its administrative and managerial workforce totaling 3500 workers (Sainato, 2020). These are significant numbers that highlight the gravity of the situation.
A Timeline of Airline Bankruptcies Due to Covid
Flybe, a British airline that was already struggling with the pandemic, collapsed due to the effects of the covid crisis; it entered administration on March 5, 2020 (Toh, 2020). Miami Air International, a charter airline, filed for bankruptcy on March 24, 2020, and ended operations on May 8 (AllPlane, 2021). Compass Airlines – sister company to Trans States Airlines – halted operations on April 1, 2020 (AllPlane, 2021). On March 19, BRA Braathens Regional Airlines would announce a reduction of their flights; later, they announced taking a break with all the employees getting furloughed (AllPlane, 2021).
An airline known for its flights from the City of London, City Jet, filed for bankruptcy as a result of covid ruin.
Virgin Australia reduced 8000 of its 10000 employees and formally went into voluntary administration on April 21 (AllPlane, 2021). The administrators, Deloitte, would announce on June 26 that they had sold the company to Bain Capital, a US private equity firm. Despite its shareholders, Broad Break and Tor, a Hong Kong investor, wanting to make a bid themselves, the deal was finalized on September 4, 2020 (AllPlane, 2021). Air Mauritius would also enter into voluntary administration in a bid to protect its interests after failing in its financial obligations due to the COVID-19 crisis. Even before the pandemic, the company was mauling a change of its business model to address its economic problems.
German Airways went into insolvency in April 2020; it had planned to restructure because of the entire contract for Bombardier DHC-8-400 planes with Eurowings (AllPlane, 2021). On May 11, 2020, the largest airline in Latin America, Avianca filed for chapter 11 bankruptcy; they also liquidated their subsidiary, Avianca Peru. Thai Airways presented a case before a bankruptcy tribunal with the intent to restructure its operations, but the government, a majority shareholder in the company, forbid them from formally doing so. The Ecuadorian government, on May 20, 2020, announced liquidation plans for TAME airlines and stopped all operations (AllPlane, 2021). The airline had struggled for some time, but the compounding effect from covid sunk them. In the US, LATAM Airlines Group would file for Chapter 11 bankruptcy, including for their subsidiaries in Chile, Ecuador, the US, Peru, and Colombia (AllPlane, 2021). The company announced on June 17 that they would cease operations of their Argentinian subsidiary and return all aircraft to lessors, laying off all employees immediately.
On June 18, Level Europe would announce a cessation of operations and enter insolvency. Five days later, SunExpress followed suit and announced that SunExpress Deutrshland would fold operations in 2020 and be liquidated with its routes taken over by Eurowings and SunExpress (AllPlane, 2021). On June 24, 2020, One Airlines stopped operating because of the impact of the pandemic. The company’s owner went ahead to blame stiff competition from LATAM, JetSMART, and SKY, for which we’re offering lower charter prices (AllPlane, 2021). He also accused the Chilean government of not offering financial support. In 2020, South African Airways was bailed out by the government to the tune of several billion Rands. Since the previous year, the airline was already under voluntary rescue; when the pandemic hit, it worsened their already dire situation, with analysts declaring it officially dead after their appeal for 10 billion Rand in aid was turned down (AllPlane, 2021). Jet Time announced on July 21 that they had filed for bankruptcy; they had dismissed a majority of their staff in the previous month due to covid. However, the owners promised to reestablish the company under a new name, Jettime, after the crisis; the CEO, key staff, and five of their Boeing 737s were transferred to the new company (AllPlane, 2021).
European Airlines Bailouts
One cannot think of an industry that was hit harder than the aviation industry. Most airlines lost a lot of money and would have folded if it were not for financial arrangements with governments or private equities. In the UK, EasyJet received £600 million from the government-corporate financing facility (Anderson, 2020). The amount was meant to insulate the company from the effects of covid-19. In Norway, the government was to give out a rescue package for airlines in the form of a NOK 6 bn loan guarantee. 25% of the fund was to be divided between Widerøe and smaller airlines; Widerøe offers essential services in the region (Anderson, 2020). The total amount of €455m availed by the Norwegian government was available for all airlines in Sweden. €137 was loaned to SAS (Anderson, 2020).
Discussion
The covid 19 impacts have not spared any industry in the global economy. The airline industry has, without a doubt, been one of the most affected because of how reliant it is on an open world. There has been a significant slump in numbers. There has also been a considerable decline in revenue because of the reduced passenger numbers. To save the industry from ruin, governments have had to step in bailing out airlines to the tune of billions of dollars. Some special arrangements have been made where governments have acquired a stake in troubled airlines in exchange for the package. In such troubled times, the airline industry needs to exercise agility and holistic management of risks such as accounting risks in line with direct financial risks. Driven by regional securities and market regulators, there is an emerging need to emphasize transparency in reporting and disclosure. Airlines are required to assess how groundings, travel restrictions, economic turmoil, and market volatility could affect their financial conclusions.
Some considerations that may need to be included are change of depreciation methods, revising projected salaries in present liabilities, the effect of extending loyalty points expiry dates, re-evaluation of projected fuel consumption and hedged fuel volumes, reassessing current leases, and revision of aircraft overhaul and maintenance cost (Ramsay, 2020). Airlines have depended on governments and private equity funds to stay afloat. Because of the difficult times, some airlines have had to speak with leasing companies that own many aircraft currently operational (Hamilton, 2020). Options that have been explored have been to either return the planes, return maintenance inventory, postpone new aircraft deliveries or even cancel them entirely; all these have been viable options for cash-strapped companies.
Large airlines have been discovered to have better access to finances than small ones. It is not a surprise that Lufthansa was able to acquire bailouts from 3 governments; they are believed to be too big to collapse or too big to be allowed to fail since they are a strategic airline. Smaller ones, on the other hand, have not found it easy in the bailout market. One risk posed to most airlines is the devaluation of their aircraft or the undervaluation by future lenders. Takeoff and landing cycles and time flew are essential factors in determining how much maintenance costs could be deferred.
It is becoming more apparent that all regions of the world will not recover at the same time. It can be argued that China already recovered given how early their airlines returned to profitability; however, since the Chinese economy is highly dependent on the state of the global economy, they would have to wait for international demand to recover. One challenge that has emerged from the literature review is the problem of demand forecasting, with some models predicting a recovery by 2022 while others were talking about 2025 (Dunn, 2020). The traditional models of forecasting demand have been rendered irrelevant by the changing data (Garrow & Lurkin, 2021). The model was not trained on pandemic scenarios occasioned by volatility in schedules and unpredictable travel restrictions.
The aviation industry is facing many challenges, but therein lies an opportunity too. The events that have happened during the pandemic will likely be looked at in the future as a turning point that changed everything. This has been observed with some airlines accelerating the retirement of older, less fuel-efficient aircraft. The industry has faced many risks in the past year, but some have come with opportunities. The coming few years will undoubtedly be bumpy for the entire aviation industry as normalcy may not return until 2025 to some forecasts. However, the industry should not waste the crisis but use it to enact change.
Conclusion
The pandemic has been a catastrophe for the global economy, and it is no surprise that the industry that helps bridge the geographical divide has been so severely affected. This paper has looked at how the overall airline industry has faired amidst the covid pandemic. Particular focus was also placed on the Virgin Atlantic airline; it was discovered that compared to other airlines, Virgin Atlantic was not particularly special since it had to adhere to the restrictions like everybody else. Passenger volumes were low for Virgin Atlantic as they were for the overall industry. The reduced demand caused a plunge in revenue across the industry, with many airlines going into the receivership pipeline of administration to insolvency. With so many cancellations of tickets and the requirement by regulators to refund the tickets, airlines found themselves in a hard place and risked running short of cash. The airline industry would have sunk into the irredeemable territory were it not for government interference that poured billions into the industry.
With so much uncertainty in the industry owing to an unprecedented level of crisis, some airlines have made changes such as cancellation of lease agreements, postponement of aircraft deliveries, or even cancellation of deliveries altogether. It was also discussed that despite the challenges brought about by the pandemic, there also lies an opportunity. Ways in which the airline industry could change are the elimination of many players since some airlines may never recover from the pandemic. Another way in which the sector could completely change is in the overhaul of the traditional forecasting models since they have not been working. The pandemic also avails an opportunity for airlines to transform their fleets as they retire old models in favor of new ones. Indeed, the pandemic has altered the global economy in ways that nobody could have imagined, and the impact may take years to recover.
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