Executive Summary
For two years, from 2019 to 2021, almost every State in the globe was affected by a respiratory disease known as Covid-19. Being a respiratory disease caused by a virus, it did spread at a higher rate even to the majority of the nation that had strict non-pharmaceutical interventions, such as Germany, the U.S., the U.K., and Australia. Consequently, the pandemic has caused various sectors adverse social and economic disruptions. Tens of millions of people were faced with the risk of extreme poverty. This respiratory disease resulted in a massive dislocation of the small and large industries worldwide; more importantly, in the U.S., food, and accommodation, agriculture, arts, manufacturing, health, transportation, and mining are the most affected industries by covid-19 in the United States. Therefore, this report prioritizes exploring the impact of the Covid-19 pandemic on the aviation industry in the U.S. The report will explore both effects on domestic and international air travel. The research findings indicate that (1) Airlines were the most affected subsectors of the aviation industry. Due to the covid-19 pandemic, the U.S. airlines only managed to generate $130 billion, a significant drop compared to the previous years. For instance, in 2019, the total revenue generated equaled $248 billion, and in 2018, more than$ 240 billion, (2) the covid-19 pandemic also disrupted the stability of the U.S. domestic air travel operations reducing it by 71% in 2020. As a result, more than 32% of the United States markets declined, and (3) a more significant drop in international air travel operations was observed.
Introduction
For two years, from 2019 to 2021, almost every State in the globe was affected by a respiratory disease known as Covid-19. It is a pandemic that took every part of the world by surprise. It drastically impacted human life around the globe and presented numerous challenges during that time. The covid-19 pandemic, recorded on 2019 December 31st, is the recent feared pandemic with a mortality rate of about 6 million people around the globe. Nonetheless, the virus infected more than 17 million people seven months after the World Health Organization declared it a global pandemic in February 2020. Being a respiratory disease caused by a virus, it did spread at a higher rate even to the majority of the nation that had strict non-pharmaceutical interventions, such as Germany, the U.S., the U.K., and Australia. Its spread was fast, reaching more than three-quarters of the world within months. Its spread continued to instill fear in the people around the globe with no hope of its end. Consequently, the pandemic has caused various sectors adverse social and economic disruptions. Tens of millions of people face the risk of extreme poverty. The pandemic resulted in a dramatic loss of citizens’ lives around the globe, but also millions of corporate businesses and industries faced the risk of extinction. This respiratory disease resulted in a massive dislocation of small and large industries worldwide. More importantly, in the U.S. Significantly, the pandemic caused both an economic crisis and a health crisis. Ideally, the pandemic pushed the United States healthcare facilities to their limits. On the other hand, it caused an international economic slowdown in all parts of the U.S. According to Suneson (2020), airlines, theaters, hotels, live sports, shipping, film production, oil, and gas, etc., are among the business categories that were disrupted by the pandemic in the U.S. Furthermore, food and accommodation, agricultural, arts, manufacturing, health, transportation, and mining, are the most affected industries by covid-19 in the United States. Therefore, this report will survey on the consequences of the Covid-19 pandemic on the aviation industry in the U.S. The report will explore both effects on domestic and international air travel.
Effects of Covid-19 on Air Travel
Overview
Almost every research material, website, and blog site on the internet contains the Covid-19 pandemic advert for increasing its awareness to the public worldwide today. Similarly, this is the case for air travel in the country. Following the negative consequences of the covid-19, the majority of the aviation companies were urged to take responsibility for reducing the spread of the virus. Before venturing into the results of covid-19 on air travel in the U.S., it is crucial to understand that aviation transport plays a vital role in its economic and social development.
Federal Aviation Administration (2016) report indicates that aviation travels have impacted the economic growth and development of the United States in the following ways; namely, enhancing economic prosperity through transportation of people and goods, energizing the country’s economy by connecting it with the outside markets beyond its local society. It has aided in the improvement of citizens’ standards of living and increased business innovations. Furthermore, the U.S. aviation industry enhances trade within its borders and other continents such as Europe, Asia, Africa, etc. The aviation industry generates more than $641 billion of revenue every year. The industry has helped reduce the challenge of unemployment in the U.S. by providing jobs to its citizens, thus improving living standards. Aviation in the U.S. is among the most critical industries connecting individuals and businesses from the country across its borders.
Over the years, the aviation industry has faced external threats, for instance, natural disasters, recession, oil crises in Iran-Iraq, and disease outbreaks such as the 2003 Severe Acute Respiratory Syndrome (Olaganathan, 2021). These threats have led to flight cancellations, grounding of aircraft, banning of air travel, or even closure of central international borders. However, the 2020 -2021 global pandemic brought the United States air transportation industry to a standstill after the outbreak. Unlike the education and business sector that shifted their operations to the online platform following technological advancement, air travel was prohibited, and strict measures put in place by the U.S. administration halted the movement of people across the borders (Hotle & Mumbower, 2021). The author states that a decline of about 71% was experienced in the domestic departures by May 2020.
Impact of Covid-19 Pandemic on Air Travel revenues
The U.S. air travel industry is relatively small compared to other sectors such as agriculture; even so, it is the primary enabler of the majority of the different economic operations in the country. Therefore, despite representing a small share of the country’s GDP, its strong linkage with the significant economic upstream and downstream of the U.S. makes it a substantial part of its growth. Following Perez et al. (2022) report on the aviation industry and covid-19, the central question that the author raises is whether the current business models adopted by companies in the aviation industry will help them overcome the catastrophic losses they incurred during the partial lockdown period. This indicates that the pandemic halted the demand for air travel services resulting in a financial crisis in this industry. The author points out that post the covid-19 pandemic, most firms largely depend on the government’s support to assist them back to their feet. Airlines were the most affected subsectors of the aviation industry (Bouwer et al., 2022). Before the pandemic, airline companies operating in the domestic market could manage to secure profits of up to 77% since their business operations were very high and relatively stable. Their average losses accounted for 55% of $168 billion in 2020. According to Salas (2021), as a result of covid-19 pandemic, the United States airlines only managed to generate $130 billion, which is a significant drop compared to the previous years. For instance, in 2019, the total revenue generated equaled $248 billion, and in 2018, more than$ 240 billion.
Like other industries in the U.S., the airlines in the aviation industry are no exception as they experienced a reduction in their bottom lines. The partial lockdowns that were implemented by states in the country and in other nations aimed at regulating the movement of people in an attempt to fight against the spread of the virus disrupted the airline operations. More so, the covid-19 protocols that were proposed reduced the demand for their services. Therefore, passenger traffic in the U.S. dropped from 927 million people to 369 million from 2019 to 2020 (Bureau of Transportation Statistics, 2022). More than half of domestic and global aviation traffic was lost by around 558 million passengers. Josephs (2021) allege that hundreds of jet carriers were parked as their routes shrunk, which multiplied their debts by around $67 billion.
Figure 1. (Bureau of Transportation Statistics, 2022).
Air travel depends on air traffic. As the latter declines, the airlines and airports cannot sustain their business operations since there is little flexibility in the aviation industry. Therefore, this respiratory disease challenged the airline’s financial viability. More so, more than 50% of the jobs created by the airlines were lost during the covid-19 as the various firms in the U.S. airline companies lacked funds to support their needs. Research reveals that by October 2020, more than 43 commercial airlines in the U.S. had gone bankrupt following the consequences of the covid-19 pandemic on their revenue. This number increased as the year ended. These firms include Airbus A340, Southwest Airlines, and Airbus A380. The pandemic was brutal for the majority of the U.S. airlines. Interestingly, covid-19 ended ten years of profits for most airline firms that they enjoyed from 2010 to 2020. Most of them had increased their workforces, flights, and markets and bought new planes ready to expand their operations.
Impact of Covid-19 pandemic on Domestic U.S. Air Travel Operations
U.S. domestic air travel is propelled by the increased number of entrepreneurs who have impacted the demand for leisure travel and business trips. Delta Air Lines Inc, American Airline Group Inc, Southwest Airlines Company, and United Airlines Holding Inc, are the major firms with the most significant airline traffic in domestic air travel. Unsurprisingly, the covid-19 pandemic also disrupted the stability of the U.S. domestic air travel operations reducing it by 71% in 2020 (Hotle & Mumbower, 2020). As a result, more than 32% of the United States markets declined. More so, large and busy airports in the country experienced a significant reduction in services. The United States domestic travel sector was negatively impacted in March 2020, even after the first case of covid-19 was discovered in January in Washington DC. Nevertheless, in that month, more than 15% of the domestic air travel operations, scheduled and performed departures were observed in the country. This continued following the 69% decrease in April 2020, whereby the majority of the airline firms were now on the alert regarding the issue with the virus, and they began adjusting their schedules.
Hotle & Mumbower (2020) allege that following the results of covid-19 on the airline entreprise, there was a significant drop in the domestic markets being served, which were initially 6,141. However, this number dropped to 4,505 in April 2020, 26.6%. In addition, this number got worse as the pandemic became more severe.
International U.S. Air Travel Operations
Significantly, the pandemic halted the U.S. airline domestic operations, causing economic challenges; a more significant drop in international air travel operations was observed. Sanchez et al. (2020) term this challenge as the end of the aviation industry as the international air traffic reduced following the quick geographic spread of the covid0-19 pandemic. The American commercial and cargo airlines that serve in the global market that tried to operate regular flights were banned by the individual country’s restrictions on mobility. Consequently, this interprets that there was a sudden drop in the international air travel operations across Europe, Asia, and Africa, which resulted in the economic stability of the U.S. due to loss of revenue. Only the necessities were allowed to fly across borders, with the ban of business and leisure travelers from the U.S. to other countries and into the U.S. With no guarantee of when the pandemic will reduce or end, the economic stability of the airline firms operating in the international market was unknown as they went bankrupt within the first six months after the partial lockdown.
It is true to say that the aviation industry took a drastic turn from a flourishing industry to a shocking one caused by the crisis of the covid-19 pandemic. Before the pandemic, most of the firms operating in this industry were optimistic. For instance, Boeing and Airbus airline companies have increased their consumer bases and annual profits over the years of their operations. Nonetheless, this positive sentiment was destroyed in 6 months, damaging everything the various companies had built in years. Increased uncertainties regarding whether the pandemic will have a long-lasting effect.
CARES Act played an essential role in helping the airline companies perform their operations under its guidance in support of air travel. According to Hotle & Mumbower (2020), services were conducted through points or cities instead of airports as per the requirements of the CARES Act. Additionally, it provided finances to support airline transportation. Covid-19 crippled U.S. air travel leading to service reduction and loss of revenue to both the government and individual firms. This was a sudden impact, and therefore, there was no plan whatsoever with any airline companies or the aviation industry to respond to this matter. But with the signing of the CARES Act, there was eased tension regarding air travel in small and large airports. Even so, the damage done by the pandemic was catastrophic. The restrictions adopted by other governments to reduce mobility reduced the aviation industry’s revenue recovery. Furthermore, since the reduction of air travel traffic is directly linked to the covid-19 pandemic’s spread, the county’s domestic and international air travel and individual firm revenue reduced. Most airline companies have borrowed money to stay afloat, which negatively affects their business as repaying these loans proves difficult due to high interests (Bouwer et al., 2021).
Recommendations
To recover from the covid-19 pandemic results, companies operating in the aviation industry should reevaluate their operations. This is to make small contributions to help them regain their traffic which could also propel a sound pricing logic.
In addition, mergers and acquisitions can be beneficial to companies struggling financially or are on the verge of collapsing. This will elevate their competitive edge in air travel and more to increase their resource stream. Often, mergers and acquisitions benefit firms to access new markets, which is necessary for the air travel firms in the United States to overcome covid-19 effects. On the other hand, mergers and acquisitions aid in reducing the operation cost. Lowering the cost of operation reflects the firm increased profit margin.
Personal Reflection on Covid-19
As we are already past the covid-19 pandemic’s direct impact on our lives and the country’s economy, its footprints are still evident. Companies and people are trying to recover from loans and revive businesses that collapsed during the partial lockdown. More so, the partial lockdown made people feel like they were living in a new world. The first lesson that most people have learned is that its health effects are significant and diffuse since the range of lingering health conditions or effects on those that contracted and survived the virus remains to be seen today. People worldwide were faced with different levels of uncertainty, with multiple questions lingering in their minds. For instance, when will the virus end? Will there be a cure? How many will more people perish due to the virus? As I reflect on the Covid-19 pandemic, it is an honor to pass my gratitude to everyone who dedicated their time and resources to aid in helping the people who could not afford basic needs in the U.S., such as food, masks, and primary education on ways to prevent further spread. Also, to those on the frontline in the search for its cure.
As the American community, we are lucky to have some of the greatest minds in research who have worked tirelessly to safeguard our survival. Their guidance and advice helped the American community overcome this lethal virus that caused about one million deaths.
As I compose this reflection, I speculate about historicizing the parallelism of the covid-19 and the 1918 Spanish Flu pandemics. However, I am glad that no one I know perished due to the virus, and for that, I am eternally grateful. It is also my happiness to mention that no significant harm, economically, came to my family as most American communities experienced and some still do.
The pandemic has taught us that, as patriots, it is a moral duty to lend a hand to those suffering and each other within our states and the U.S. territory. We have learned new ways to survive, which have been put to the test and succeeded. However, it is upon the U.S. government to ensure that it has reacted fast enough in case there is another pandemic or any form of danger threatening the well-being of its citizens. At an individual level, I would urge all the citizens to make it their life purpose to aid in the fight against diseases and promote health equity as a significant takeaway from the covid-19 pandemic crisis life lessons.
Individually, there is something that I have learned that I will address. Although this applies to many people worldwide, mentally and emotionally, I have been affected. Even though I have moved on over the months, I am still stuck in the fear that my social interactions can be snatched away from me, which would drive me mad. Nevertheless, the most important thing that no one would have expected is the covid-19 pandemic crisis becoming a thing of the past. Our legacy as a community matters a lot; therefore, since we have had similar situations in the past, specifically, the 20th century with several pandemics, including the Spanish Flu, the U.S. government needs to be keen on other successful administrations that were quick to curb the pandemic in their State before it caused significant harm. Of course, it is not guaranteed that the U.S. administration will take this direction; civil liberties are vital to the American citizens.
Summary
To sum it up, from the case study on how the Covid-19 pandemic has crippled air travel in the U.S., it is clear that the pandemic contributed to the fallout of significant business operations in the country and outside. Having caused over one million deaths in the U.S., the pandemic has had adverse effects on the well-being of the people and various sectors, including education, health, accommodation, etc. The virus exacted an essentially human toll resulting in the shutting down of most of the country’s economic sectors. Its effects are severe and still evident today. However, there is a challenge as one tries to analyze the actual impact of the virus on the U.S. sector. Besides, the American financial industries were hit hard and fast, disrupting their stability in the long run. The pandemic has left longer-term problems that have overstretched the government’s resources, especially with the struggling industrial production sector. Due to the collapse of the economy, unemployment rates are high, and most people struggle to afford their basic needs.
References
Bouwer, J., Krishnan, V., Saxon, S., & Tufft, C. Taking Stock of the pandemics impact on global aviation. (March 31, 2022). URL: https://www.mckinsey.com/industries/travel-logistics-and-infrastructure/our-insights/taking-stock-of-the-pandemics-impact-on-global-aviation
Bureau of Transportation Statistics. Full-Year 2021 and December 2021 U.S. Airline Traffic Data. (March 10, 2022). URL: https://www.bts.gov/newsroom/full-year-2021-and-december-2021-us-airline-traffic-data#:~:text=U.S.%20airlines%20carried%20674%20million,2019’s%20927%20million%20(unadjusted).
Federal Aviation Administration. The Economic Impact of Civil Aviation on the U.S. Economy. (November 2016). URL: https://www.faa.gov/air_traffic/publications/media/2016-economic-impact-report_FINAL.pdf
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Olaganathan, R. (2021). Impact of COVID-19 on airline industry and strategic plan for its recovery with special reference to data analytics technology. Global Journal of Engineering and Technology Advances, 7(1), 33.
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Suneso, G. Industries hit hardest by coronavirus in the US include retail, transportation, and travel. USA TODAY. (March 20, 2020). URL: https://www.usatoday.com/story/money/2020/03/20/us-industries-being-devastated-by-the-coronavirus-travel-hotels-food/111431804/
Suau-Sanchez, P., Voltes-Dorta, A., & Cugueró-Escofet, N. (2020). An early assessment of the impact of COVID-19 on air transport: Just another crisis or the end of aviation as we know it?. Journal of Transport Geography, 86, 102749.
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