COVID-19: Sector Impact

Part
01
of three
Part
01

COVID-19 Impact: Airline Industry

The effects of the COVID-19 virus will be seen in the airline industry in the future. Based on current conditions and projections, passenger airlines may have smaller fleets, fly to fewer destinations, and serve fewer passengers. In the short term, airports will lose revenue, and that may continue if airlines merge or cease operations. Air cargo companies may have permanently lost share to ocean shippers, and aircraft manufacturers may be much smaller companies than they were in the recent past.

Airline Industry Market Segments

  • The global aviation industry is divided into market segments: passenger airlines, cargo airlines, aircraft manufacturing companies, airport managing companies, and catering and other service companies. The segments will be affected differently in the future by the COVID-19 pandemic.

Impacts on Passenger Airlines

  • Passenger airlines have been severely affected by the cancellation of flights and limitation of flights by governments. In the future, passenger airline company capacity to recover their business will be affected by the speed with which tours and traveling increase from where they currently are, which is at zero in many places. In 2020, many international and domestic flights were canceled to curb the transmission of the virus. Governments canceled the visas of foreign citizens and refused them entry. The reopening of countries to tourism may take substantial time, thus affecting airline recovery.
  • Qatar Airways, Emirates, China Eastern Airlines, Lufthansa, Boeing, Airbus, American Airlines Group Inc., and Delta Air Lines are global airline carriers whose routes were affected by massive passenger and flight cancellations. Some grounded all or parts of their fleets. Some are seeking bailouts from their governments. Financial troubles have had impacts on all airline companies, and will likely continue to affect their ability to rehire employees and recover routes.
  • Many airlines have had to lay off staff during the crisis, including Virgin Atlantic and United. Whether these staff can be brought back, and when, are questions that cannot be answered at this time. British Airways is proposing to lay off 12,000 people.
  • Some airlines are proposing to reduce the number of flights they offer, and the number of destinations to which they fly, as cost-cutting measures.
  • Temporary health protection measures including leaving middle seats vacant, requiring passengers to wear face masks, requiring crew to wear face masks, requiring temperature screenings for passengers and crew, and increasing the number and kind of cleaning regimes are some of the measures that have been discussed by various airlines.
  • Some carriers may merge with others if financial pressures become too great for companies to survive on their own. Smaller carriers may be bought by larger companies and disappear. The future airline landscape may look very different from today.
  • One source predicts that the effects of the pandemic on airline fares will be similar to the effects that took place following 9/11 and the Great Recession. "Following the September 11 terror attacks, airfare prices dropped 18 percent for the remainder of 2001, only for prices to rise 25 percent by 2003. Similarly, airfare prices dropped 21 percent during the Great Recession in 2008 and 2009 but saw a 24 percent increase in 2012."
  • If one uses the same pattern and calculates changes using the 2019 fares as benchmarks, "Dollar Flight Club predicts a 35 percent decrease in airfare prices in 2021 and a 27 percent increase through 2025, assuming that travel resumes May 31, 2020."
  • One study predicts what changes will mean for airline passengers. It suggests that "future travelers should expect to see reduced travel options, fewer flight delays and cancellations, more bag fees and miscellaneous charges and fuller and more expensive flights."

Impacts on Airports, Airport Managing Companies, and Ancillary Services

  • Fewer flights and fewer passengers mean losses of revenue for airports. Airport revenues are directly linked to passenger traffic levels. The flight bans and flight cancellations seen around the world have led to fewer flights, and less revenue coming in to airports. When passenger traffic declines, "airports have limited ways of reducing costs. The cost of operating airport infrastructure remains the same, and airports can’t close down or relocate terminals and runways." Some airports may have to cease business.
  • What are called "non-aeronautical revenues", such as fees for vehicle parking and space rental, are the main source of non-aeronautical income for many airports, especially in North America, where non-aeronautical income represents over 58 percent of airport gross income. The huge decline in passengers has a large impact on the airport’s and airport retailer’s income.
  • The decline in passenger traffic at airports also affects the communities and all the personnel working in the various sectors and services at the airports. For example, ridesharing services and taxi drivers have few riders. Fast-food restaurants have almost no customers. Booksellers sell no books and t-shirt vendors have no buyers. The loss of personal income for the workers who are laid off from these jobs affects hundreds of thousands of families all over the world. It is impossible to predict when the jobs might return.

Air Cargo Companies

  • With the decrease in airline flights, cargo shipments have been displaced and cargo companies have had to find other ways to transport their freight to destinations. The price of air cargo has increased since the beginning of the pandemic affected flights.
  • Globally it has become a problem for many air freight shippers. The airlines have canceled or reduced their flights. This has had a substantial impact on air freight movement and available capacity.
  • "Around 40 percent of annual global air cargo is typically transported in the bellyhold of passenger aircraft — contributing to the capacity pinch, with the vast majority currently grounded."
  • Some airlines have been using their empty passenger planes to carry freight. These include Delta, Qatar Airways and Cathay Pacific. "These passenger aircraft are not only being operated by their respective airliners but are also being chartered by freight forwarders to boost their capacity." However, capacity is still not sufficient.
  • In the future, airline cargo carriers that have lost freight contracts or relationships with shippers may have difficulty re-establishing their business.

Aircraft Manufacturing Companies

  • In the future, aircraft manufacturing companies may have fewer employees, fulfill fewer contracts, and build fewer planes. Announcements from Boeing, GE Aviation, and Airbus indicated they were downsizing.
  • A major company, Boeing, announced recently that it was reducing the number of planes that would be manufactured. "In a letter to employees, Boeing president and CEO David Calhoun revealed that the production rate for its 787 aircraft will be reduced to 10 per month in 2020 and to seven per month by 2022, with the combined 777/777X production rate also dropping to three per month in 2021. Production rates for its 767 and 747 aircraft will remain unchanged." This drop in production will result in a 10 percent reduction in Boeing's workforce. The company will use a combination of voluntary and involuntary layoffs and natural turnover to reduce the number of employees.
  • Boeing also received a partial cancellation of an order from United Airlines. T United Airlines told Boeing that "it will be taking less than half of the new 737 MAX jets it originally ordered."
  • GE Aviation has announced additional voluntary and involuntary layoffs that will see its 52,000 employees reduced by 25 percent as the company reduces its expenses by $1 billion this year, according to "company CEO David Joyce ... in a letter to employees dated May 4. The plans, said Joyce, include $2 billion in 'cash actions' in 2020 and follow a 'comprehensive strategy' ... to re-size the business to match its forecast for the commercial aviation market."
  • Airbus announced that it won't know "the full short- to medium-term impact of the Covid-19 crisis until June." The European company suggested to reporters that it will likely "defer decisions on steps to right-size the business for another two or three months to allow more time to reassess the situation of its airline customers and also to get more complete guidance from governments on steps to ease lockdown restrictions."
Part
02
of three
Part
02

COVID-19 Impact: Healthcare Industry

The COVID-19 pandemic is bringing urgency to new developments in several areas of the healthcare industry. The COVID-19 pandemic is revealing an urgent need for new wearable technology to monitor and track COVID-19 symptoms and cases. Advances and new methods for vaccine development are being considered and tested due to the severity of the COVID-19 outbreak. Continued advancements in wearable technology and vaccines are necessary to address current and future COVID-19 outbreaks.

Wearable Symptom Monitors

  • New forms of artificial intelligence and technology are needed to monitor the current and future COVID-19 outbreaks. New technology is needed to "improve and personalise the care of people who will be affected."
  • Medical experts believe "the reliance on medical technological solutions will increase and increase at a pace and scale we have not witnessed before."
  • Devices are needed to both monitor mild cases at home, and also to create personalized care of patients after being discharged from hospitals.
  • Devices can also be used to trace COVID-19 contact and exposure, and to more systematic and technologically enable monitoring of the workforce.
  • New devices must fit within parameters or existing clinical workflows, be accurate and reliable, be personalized, and secure.
  • As COVID-19 progresses, new discoveries "highlight the desperate need for more data to help researchers and physicians better understand — and treat — the extremely contagious and deadly disease," leading to an urgent need for new wearable device information and data.
  • Researchers at Northwestern University and Shirley Ryan AbilityLab in Chicago are developing a new wearable device capable of tracking early COVID-19 symptoms. The patch, worn 24/7 at the base of the throat, "continuously measures and interprets coughing and respiratory activity in ways that are impossible with traditional monitoring systems."
  • According to Northwestern’s John A. Rogers, who led the technology development, “We developed customized devices, data algorithms, user interfaces and cloud-based data systems in direct response to specific needs brought to us by frontline healthcare workers. We’re fully engaged in contributing our expertise in bioelectronic engineering to help address the pandemic, using technologies that we are able to deploy now, for immediate use on actual patients and other affected individuals. The measurement capabilities are unique to this device platform — they cannot be accomplished using traditional watch or ring-style wearables that mount on the wrist or the finger.”
  • According to Shirley Ryan AbilityLab's Arun Jayaraman, "We anticipate that the advanced algorithms we are developing will extract COVID-like signs and symptoms from the raw data insights and symptoms even before individuals may perceive them. These sensors have the potential to unlock information that will protect frontline medical workers and patients alike — informing interventions in a timely manner to reduce the risk of transmission and increase the likelihood of better outcomes."
  • The wearable device being developed by Northwestern can be used to monitor healthcare workers for early signs of symptoms.
  • Patients can wear the Northwestern device while hospitalized, and then continue to wear it once discharged to continue 24/7 monitoring for unusual changes once they are back home. This helps relieve strain on hospitals and ensures safety of recovering patients. According to Jayaraman, “This opens up new telemedicine strategies as we won’t have to bring in patients for monitoring. Physicians can potentially review the patients’ data for hours, days or weeks, immediately through a customized graphical user interface to a cloud data management system that is being set up for this purpose, to see an overall image of how the patient is doing.”
  • A wearable symptom tracking device, which alerts users on an iPad app, can also address the need to help understand and contain new cases; "as the symptoms continue to progress, users will be able to track and report on their experiences to better help scientists understand the disease and ensure new cases can be contained locally."

New Vaccine Approaches

  • The extreme need for a vaccine to stop the COVID-19 pandemic is leading to new approaches in vaccine development and delivery. Scientists at UPMC and the University of Pittsburgh School of Medicine have announced a potential vaccine, which is to be delivered in a new patch form. The fingertip-sized skin patch consists of "400 tiny needles that deliver spike protein pieces into the skin, where the immune reaction is the strongest." These needles are made of protein and sugar pieces, and dissolve into the skin when applied similar to a Band-Aid.
  • Instead of traditional methods, which take many months to develop, scientists are looking towards gene-based vaccines to speed up the process for an effective COVID-19 vaccine.
  • DNA-plasmid vaccines, previously used only in veterinary applications, are being considered; Inovio Pharmaceuticals, headquartered in Plymouth Meeting, Pennsylvania, is using the DNA-plasmid approach to develop a COVID-19 vaccine.
  • Instead of using plasmid, researchers are also trying to embed the DNA into an RNA strand to create a vaccine; this approach is being tested by Moderna in Cambridge, Massachusetts.
  • An additional new vaccine approach is to insert the DNA blueprint into the common cold virus, which is being tested by Johnson & Johnson.
  • Due to the severity of COVID-19, "companies are accelerating the development time for a SARS-CoV-2 vaccine in part by testing vaccines in multiple animal species at once and in parallel with small numbers of people. Usually the process is one animal at a time, and people later, to make sure that side effects are small, that immune response is large and that disease is actually defeated. Lack of time warrants greater risk."
Part
03
of three
Part
03

COVID-19 Impact: Energy Industry

The COVID-19 pandemic has helped renewables-based electricity generation to garner a larger share of electricity generation globally due to the reduction in both electricity demand and consumption from other sources.

Energy Consumption and Demand Decreasing

  • Compared to Q1 2019, global energy demand fell by 3.8% during Q1 2020. Energy demand for 2020 is projected to fall by over 6% if there is a slow global recovery and lockdowns persist. This event will effectively erase the growth in demand the energy industry has recorded over the past five years.
  • The reduction in economic activity worldwide due to the COVID-19 pandemic has reduced the demand for several energy sources, including coal (-8%), oil (-5%), and natural gas (-2%).
  • The week to week decline in energy consumption is greater for nations with more stringent lockdown measures: 15% to over 35% (full lockdown), 10% to over 25% (partial lockdown), 1% to over 15% (limited restrictions). Energy consumption in China, the United States, and the European Union fell by more than 7%, 6%, and 5% respectively. However, energy demand is projected to fall by at least 10% in the United States and the European Union.
  • The projected declines in primary energy demand for the full year by source goes as follows: coal (-7.7%), gas (-5.0%), oil (-9.1%), and nuclear (-2.5%).
  • Another pressing matter is that consumers are receiving recommendations from their government and energy regulators to put off paying their utility bills, leading to defaults on payments, which can have a widespread effect on the entire energy industry.

Oil Demand and Prices are Plummeting

  • Compared to the previous year, global oil demand in April 2020 decreased by an estimated 29 million barrels per day. According to PV Magazine, this reduction in global oil demand represents the lowest level since the year 1995. For the 2020 year, overall oil demand globally is anticipated to decrease by approximately 9.3 million barrels per day.
  • The Organization of the Petroleum Exporting Countries (OPEC) recently revealed that they were cutting supply by around 10 million barrels a day due to the restrictions in travel and the movement of individuals brought on by the COVID-19 outbreak.
  • Additionally, the COVID-19 pandemic has bolstered the ongoing decrease in the price of gas and oil, along with their share prices. It has also caused a drop in production for the sector. These issues have been compounded by the price war between OPEC and Russia. Around 32.2% of energy companies believe that the low oil prices will harm their financial performance for 2020, while 30.6% expect a high impact and 19.4% anticipate a moderate impact.
  • Furthermore, the effects of COVID-19 on the oil and gas sector is expected to have a ripple effect on the energy industry, and the loss of revenue, production reductions, and decreased oil prices is projected to remain significant hurdles for oil and gas businesses, particularly those that may not be able to refinance their debt. As reported by PwC, the industry is facing a long recovery period that could last at least two years.

Electricity Consumption and Prices Dropping

  • Confinement measures enacted by governments due to COVID-19 have contributed to reductions in electricity consumption. As a result, Europe has witnessed a record decrease regarding electricity prices. Electricity consumption in Italy, France, and the United Kingdom has fallen by 25%, 20%, and 12%, respectively, negatively impacting the cash flows of utility businesses.
  • In the first quarter of 2020, electricity demand worldwide fell by about 2.5%, despite lockdown requirements being implemented for just under a month. Demand in the United States, Europe, Korea, and Japan decreased by 2.5% to 4.5% during this time, partially due to COVID-19. Meanwhile, China, which imposed containment measures in January, saw a demand reduction of 6.5%.
  • Overall, global electricity demand is projected to decrease by an estimated 5% for the year 2020, which would represent the highest global decline since the Great Depression. It would also represent a reduction that is eight times larger than the one witnessed during the 2009 global financial crisis.
  • However, demand in residential electricity has risen in the majority of nations as more individuals are spending their time doing activities, including working, at home. In some European nations, weekly demand rose 40% compared to the same periods in the previous year.

Renewables-Based Generation Obtaining a Larger Share

  • According to a report from IEA, the reduction in electricity demand and the implementation of lockdown measures has led to renewable energy acquiring a larger share of electricity generation. In the first quarter of 2020, renewables-based generation rose by about 3%, brought on by the double-digit percentage increase in wind power as well as the expansion in solar photovoltaic output.
  • During this same period, renewables share regarding electricity supply amounted to nearly 28%, which was an increase over the first quarter of 2019 (26%). Overall, renewables are expected to rise by 0.8% in 2020 regarding primary energy demand.
  • Comparatively, nuclear power generation and coal-fired power generation fell by 3% and 8% respectively.
  • In the first quarter of 2020, there was a remarkable "shift towards low-carbon energy sources" as many nations saw reductions in coal-fired power generation following the creation of lockdown measures due to COVID-19. In the United States, coal-fired generation fell by one-third over the first quarter of 2019. In some nations, the decline of coal-fired generation, along with its share, has allowed renewables' share (i.e., 40% for low-carbon, 6% for wind, 11% for nuclear, 20% for other renewables) to approach that of coal (34%) in regard to electricity generation.

Value Chain for the Energy Industry Impacted

  • Every segment of the value chain for the energy industry has been impacted by the ongoing COVID-19 outbreak. These include service companies, as well as the upstream, downstream, and midstream sources.
  • This development will likely force high cost producers within the energy industry to "consider ways of partnering or delivering consolidation that can enable them to reduce their cost base."
  • Meanwhile, all companies operating in the energy industry will be forced to install safety precautions against COVID-19, along with using traditional downturn measures, including cash conservation and diminishing capital expenditures. They will also have to analyze hedging positions, while basing risk mitigation, hedging, and procurement tactics on "effective scenario and demand curve data analysis."

Delay or Cancellation in New Energy Infrastructure and Facility Construction and Projects

  • Several energy companies have been forced to lower capital expenditures on their current and future projects, while suspending investments that are considered non-critical. Other businesses, such as BYD, a rechargeable battery supplier, are unable to finish new model evaluations. BYD's situation has caused a decrease in the rechargeable battery delivery volume to Europe.
  • Many nations are facing project delays in their energy sector, while also dealing with disruption in equipment delivery to power plants. In India, around 3,000 MW of wind and solar energy projects could be delayed because of lockdowns associated with COVID-19.

Impact on Energy Companies

  • A survey from Mercer conducted in mid-March 2020 revealed that most energy companies expect the COVID-19 pandemic to significantly impact their company, although the anticipated time from differs. The length of time the energy companies believe the pandemic will continue to harm their company goes as follows: 0-3 months (12.1%), 3-6 months (33.2%), 6-9 months (26.3%), 9-12 months (15.3%), and over 1 year (13.2%).
  • Regarding its impact on their financial performance for the year, only 1.6% believe it will have a low impact, while 11.1% expect a low to moderate impact. The remaining energy companies anticipate impacts ranging from moderate (31.2%), moderate to high (32.8%), and high (23.3%).
  • Also, due to COVID-19, several energy companies globally are preparing to deal with ongoing supply chain concerns, the possibility of layoffs or furloughs due to poor financial performance, reducing their workforce, etc. In fact, 57% of energy companies are considering reducing their workforce company-wide and 62% are contemplating a reduction for targeted groups.
Sources
Sources

From Part 01
Quotes
  • "Global Aviation Industry is concerned with the manufacturing and operations of all types of aircraft and related services during transportation. According to the World Bank Organization, in 2018, around 4.2 billion passengers were carried around all across the globe. Factors that were driving the aviation industry before the COVID-19 pandemic include increasing disposable income all across the globe, the introduction of low-fare airlines, increasing global economic activities, new travel trends, and many more. Moreover, replacement of aging commercial aircraft has also contributed significantly to the market growth. "
  • "The key factors affecting the aviation industry after the pandemic include the decline in tours and travels as a large number of international as well as domestic flights are getting cancelled all across the globe to curb the transmission of the virus. The government all across the globe are cancelling the visa of foreign people and locking down affected area which is also one of the major reason behind the slowing down of the aviation industry. "
  • "The global Aviation industry report is segmented into passenger airlines, cargo airlines, aircraft manufacturing companies, airports managing companies, and catering & other service providing companies. Out of which, passenger airline segment is expected to get affected most along with catering & other service providing companies. Cancellation of airplane order may also be witnessed in the near future by the airline companies affecting the airplane manufacturing companies. "
  • "Effect of COVID-19 on the aviation industry can be observed in each region including North America, Europe, Asia-Pacific and Rest of the World. For instance, in the US, since the national health emergency due to the COVID-19 outbreak, most of the region is on complete lockdown, which is in turn restricting the domestic travel in the country. Countries such as Italy, France, Spain, and India are under complete lockdown and all kinds of flights are stopped until further notice. "
  • "Key companies of the aviation industry that are getting affected globally include Qatar Airways, Emirates, China Eastern Airlines, Lufthansa, Boeing, Airbus, American Airlines Group Inc., and Delta Air Lines. For instance, Qatar Airways suspended all of its flights to and from Italy that was one of the worst-hit countries by the pandemic of COVID-19. Additionally, the company has also decided to scale back its operation which includes cutting flights and removing less economical aircraft. Qatar Airways grounded all its ten A380 aircraft until 31 of May 2020, as a precautionary measure of COVID-19 outbreak. "
  • "Moreover, Emirates also halted most of its passenger operation as a result of the pandemic. Now, airlines and airport managing companies are seeking bailout packages from the government. For instance, airport managing companies in Europe are expected to incur a loss of $15.4 billion due to pandemic. It is estimated that airports in Europe will receive 700 million fewer passengers which are 28% less as expected earlier. "
Quotes
  • "Cons Outweigh Pros of Blocking Middle Seats, IATA Says Considering the minimal risk of viral transmission aboard aircraft, IATA has spoken out against leaving middle seats vacant. IATA director general and CEO Alexandre de Juniac is advocating for a layered approach to biosecurity that “keeps the cost of flying affordable.” Face masks for passengers and crew, temperature screenings, distancing during boarding and deplaning and increased cleaning are measures that “reduce the already low risk of onboard transmission” without reducing load factors well below the break-even level and thereby increasing fares by as much as 54%. Meanwhile, IATA is appealing for $10 billion in assistance for the African travel and tourism sector. De Juniac noted that the COVID-19 crisis “could take Africa’s development back a decade or more.”"
  • "United Will Cut Staff After CARES Period, GE to Lay Off 13K Employees According to an internal memo, United Airlines will lay off 30% of management staff in October. United is restricted from firing employees until September 30 under the terms of the CARES Act, but with costs outweighing revenue by billions of dollars, the company must take “strong and decisive action” to stay afloat in the long term, said Kate Gebo, the airline’s executive vice-president for Human Resources and Labor Relations. Up to 30% of United’s pilots could also be displaced, according to a separate memo. The airline also reduced the maximum value of flight credits offered to travelers who voluntarily give up seats on overbooked flights from $10,000 to $2,500. Meanwhile, as part of a $3 billion cash savings plan, GE Aviation will fire 25% of its workforce representing up to 13,000 individuals."
  • "Qatar Airways has maintained flights to at least 30 destinations during the COVID-19 crisis and now feels confident to begin planning the gradual reintroduction of additional service. The company aims to have 80 destinations in its schedule by the end of June, including 23 in Europe, four in the Americas, 20 in the Middle East and Africa and 33 in Asia Pacific. By the end of May, the airline plans to grow its network back to over 50 destinations, resuming services to Manila, Amman and Nairobi. The carrier will not be immune to staff cuts: In an internal memo, CEO Akbar Al Baker revealed that the company would need to seek government aid and “make a substantial number of jobs redundant – inclusive of cabin crew.”"
  • "Heathrow Airport will begin testing UV sanitizing, contactless security procedures and equipment, and camera-assisted temperature screening with the aim of setting an international standard. The airport’s operator is looking to examine both the effectiveness of the solutions and passenger sentiments toward them, and will share their results with other airports in order to reach a consensus on what protective measures are required once travel restrictions are eased. In order to protect its employees from COVID-19, Iberia will administer a voluntary blood test to detect antibodies in employees returning to work after a furlough. Those returning to work from sick leave must be tested for coronavirus. The company also ramped up disinfection procedures, issued PPE to employees and is encouraging remote working."
  • "Virgin Atlantic made an announcement this morning that pilots’ union Balpa described as a “bombshell”: The airline will end its operations at Gatwick Airport and cut more than 3,000 jobs in the UK. The airline said that COVID-19 is the most “devastating” challenge it has ever faced, and is applying for emergency government loans. Balpa general secretary Brian Strutton noted that the union “will be challenging Virgin very hard to justify this.” British Airways, Gatwick’s second-biggest carrier, has indicated that it also might not restart its operations there. Meanwhile, Qantas has halted Project Sunrise, thereby pausing its order of 12 Airbus A350-1000 jets that were to fly 18–20-hour direct flights starting in 2023."
  • "Tough times continue for Boeing as United Airlines informed the airframer it will be taking less than half of the new 737 MAX jets it originally ordered. Rolls-Royce, in turn, is seeing less demand for its engines and announced plans to cut 8,000 jobs in the UK, or 35% of its workforce in that country. According to the South African government, the country’s flag carrier is “dead” and will be replaced by a new “financially viable and competitive” airline."
  • "The French government set out a series of environmental expectations for Air France in exchange for providing a multibillion-dollar loan. The carrier must halve its overall carbon-dioxide emissions per passenger kilometer by 2030 compared with 2005 levels. For domestic flights, this must be accomplished by 2024. Another condition orders a reduction of service for flights of less than two-and-a-half hours when a viable rail alternative is present. Meanwhile, Swiss International Air Lines and Edelweiss will receive $1.56 billion in government loans, Iberia and Vueling have secured financing for $823 million and $285 million respectively, and Hawaiian Airlines is in line for $654 million in CARES funding."
  • "In a letter to employees, Boeing president and CEO David Calhoun revealed that the production rate for its 787 aircraft will be reduced to 10 per month in 2020 and to seven per month by 2022, with the combined 777/777X production rate also dropping to three per month in 2021. Production rates for its 767 and 747 aircraft will remain unchanged. As a result, Calhoun said Boeing will reduce its workforce by approximately 10 percent through a combination of voluntary and involuntary layoffs and natural turnover, with its commercial airplane and service businesses set to be some of the hardest hit. Despite this, the OEM reported a revenue of $16.9 billion for Q1 of 2020, and Calhoun predicts 737 MAX deliveries will resume in the third quarter of this year."
  • "As part of a restructuring program that is set to last until travel demand increases, British Airways is proposing 12,000 layoffs. In a letter to employees, CEO Alex Cruz rationalized the decision by noting that a government bailout was not on the table and short-term loans “will not address the longer-term challenges” faced by the company. Meanwhile, Lufthansa Group is reportedly considering bankruptcy as an alternative to state funding. Yesterday, reports surfaced that Germany was set to dole out $9.76 billion to the airline group. Creditor protection would allow the company to restructure without sacrificing equity, board seats and other provisos to the government."
Quotes
  • "Asia-Pacific and Middle Eastern airport revenues are under tremendous pressure three months into 2020 amidst the impact of the COVID-19 outbreak. China and other Asian countries made significant efforts to contain the transmission of the virus however, as we know, it has spread to other regions of the world. We can expect the same pressure there and, by now, a global impact."
  • "Airport revenue generation is directly linked to traffic levels. The flight bans and cancellations are leading to less flights, hence less aeronautical revenue coming in. Unlike other players in the aviation industry, when traffic demand falls, airports have limited ways of reducing costs. The cost of operating airport infrastructure remains the same, and airports can’t close down or relocate terminals and runways."
  • "The other aspect to consider is non-aeronautical revenues, which are necessary, as aeronautical revenue alone cannot cover all airport operations and capital cost. For some hub airports in the region, non-aeronautical revenues are the principal revenue source. On average, Asia-Pacific airports derive as much as 45 per cent of their revenues from non-aeronautical sources. The drop in passengers has a significant impact on the airport’s and airport retailer’s bottom line."
  • "On the human side, it also impacts the community and all of the personnel working with the various sectors and service providers at the airport. It has become common for retailers and airlines to ask their personnel to take unpaid leave during this troubling time."
  • "Every lost passenger is a loss not just to us, but to the retailers in our terminals, the taxi and ride-share drivers and the other airport businesses that rely on us and the passengers we serve. So, the focus now is on working together with airport partners to make sure we remain open for business and ready for recovery when the time comes."
Quotes
  • "The research study consisted of a 16-question survey completed by 269 industry professionals from 47 countries, alongside research and expert interviews. The participants of a subsequent webinar, which drew over 900 participants, were also polled on some of the questions."
  • "he first, “Survival of the Safest,” sees a deep recession and fragmented industry response. In this scenario, the report suggests passengers’ reluctance to fly would be heightened by confusing protocols differing by country, airline and airport. “That’s the scenario where you could see a lot of airlines folding and airports having to close, because we just don’t have the recovery of passenger numbers,” explained Talwar during Inmarsat’s FlightPlan online broadcast event. “Those that do survive will be the ones who can demonstrate the strongest end-to-end safety methods.”"
  • "The second scenario, “Love in a Cold Climate,” predicts what air travel could look like if there is an economic recession, but a co-ordinated industry response. While financial hardship would mean less leisure travelers, the report argues that business travelers and those with disposable income would be more likely to feel safe when flying, spurring a growth in demand."
  • "Meanwhile, “Hope and Glory” imagines strong economic recovery, but a fragmented industry response. In this scenario, the study predicts that the air transport ecosystem will rely on passengers to take responsibility for testing, vaccination, and certification, meaning that air travel demand would return, but revenue would lag due to intense competition."
  • "The fourth scenario, “Sealed and Secure,” imagines economic recovery alongside a cross-sectoral approach. “This is a scenario where the industry is basically hermetically sealing the travel experience,” Talwar said. This scenario has interesting implications for the passenger experience. During FlightPlan, he elaborated, “You could see that from the point where a traveler makes their booking, they have either an antibody test to demonstrate that they’ve had the virus or (later down the road) that they’ve had the vaccination, but before they get to the airport they’ve already got a certificate to prove that.”"
  • "However, few webinar participants (18%) predict that a “Sealed and Secure” scenario is most likely. Instead, the highest number of respondents (32%) predict a “Survival of the Safest” scenario, followed by “Love in a Cold Climate” (30%) – both of which foresee a financial recession or depression. Only 20% of respondents foresee the scenario outlined in “Hope and Glory.”"
Quotes
  • "Following the September 11 terror attacks, airfare prices dropped 18 percent for the remainder of 2001, only for prices to rise 25 percent by 2003. Similarly, airfare prices dropped 21 percent during the Great Recession in 2008 and 2009 but saw a 24 percent increase in 2012."
  • "Using the above pattern and the 2019 benchmark, Dollar Flight Club predicts a 35 percent decrease in airfare prices in 2021 and a 27 percent increase through 2025, assuming that travel resumes May 31, 2020."
  • "With US airlines expecting a $113 billion loss due to the coronavirus, Dollar Flight Club expects that, within the next six years, at least two large carriers will merge to strengthen control in the market and that low-fare carriers like Spirit and Frontier will be “swallowed up” by these larger carriers. Additionally, the study predicts that airlines will reduce the number of flights and routes to increase revenue. Finally, the study determines what all these changes will mean for airline passengers, and it suggests that future travelers should expect to see reduced travel options, fewer flight delays and cancellations, more bag fees and miscellaneous charges and fuller and more expensive flights."
Quotes
  • "The latest estimates indicate that the possible COVID-19 impact on scheduled international passenger traffic for the full year 2020, compared to Baseline (business as usual, originally-planned), would be:V-shaped path (Scenario 1: a first sign of recovery in late May)– Overall reduction ranging from 38% to 55% of seats offered by airlines – Overall reduction of 861 to 1,292 million passengers – Approx. USD 151 to 228 billion potential lossof gross operating revenues of airlines"
  • "U-shaped path (Scenario 2: restart in third quarter or later)– Overall reduction ranging from 48% to 71% of seats offered by airlines – Overall reduction of 1,108 to 1,524 million passengers – Approx.USD 194 to 269 billion potential lossof gross operating revenues of airlinesThe impacts depend on duration and magnitude of the outbreak and containment measures, the degree of consumer confidence for air travel, and economic conditions, etc."
  • "•International air passenger traffic: An overall reduction of international passengers ranging from 44% to 80% in 2020 compared to 2019 (by ICAO)• Airports: An estimated loss of over 50% of passenger traffic and 57% or over USD97 billion airport revenues in 2020 compared to business as usual (by ACI)• Airlines: A 48% decline of revenue passenger kilometres(RPKs, both international and domestic) in 2020 compared to 2019 (by IATA) •Tourism: A decline in international tourism receipts of between USD 300 to 450 billion in 2020, almost one third of the USD 1.5 trillion generated in 2019, with 96% of worldwide destinations having travel restrictions (by UNWTO) •Trade: Afall of global merchandise trade volume bybetween 13 and 32% in 2020compared to2019 (by WTO) •Global economy: A projected ‐3% contraction in world GDP in2020, far worse than during the 2008–09 financial crisis (by IMF)"
  • " 3 scenarios to assess the possible economic impact of COVID-19:–Baseline: counterfactual scenario, in which the COVID-19 pandemic does not occur, that is, originally-plannedorbusiness as usual–Scenario 1:V-shapedpath, normal shape for recession, a brief period of contractionfollowed by quick/smooth recovery –Scenario 2:U-shapedpath, prolonged contraction and muted recovery, possibility of not to return to trend line growth (L-shaped) "
  • "Analytical focus, for the time being, on:– Near-term, i.e. monthly profile from January to December 2020– Scheduled international passengertraffic"
Quotes
  • "Since the beginning of 2020, more and more countries across the globe shut down borders and limit domestic travel as a response to the novel coronavirus (COVID-19) outbreak. Thus, cancelling almost all flights to control the spread of the virus has affected the entire airline industry globally. "
  • "During the week of April 20, 2020, the number of scheduled flights worldwide decreased by 66 percent in comparison with the week of April 22, 2019 with high cross-country variations. In some countries the year-on-year decline in the number of passenger flights reaches over 90 percent, for instance, reaching 98 percent decline in Italy. On March 22, 2020, airline capacity in Europe was down by almost 88 percent compared to the same day in 2019. In the first half of 2020, Chinese passenger travel is expected to decline by approximately 87 million passengers. Therefore, the international airline industry is estimated to experience a severe V-shaped decline throughout 2020 in terms of capacity, with cross-regional variances with respect to the severity of the decline. For example, the passenger capacity decline is estimated to hit Europe the worst. In the second quarter of 2020, a 90 percent decline in European passenger traffic is estimated, if the same travel restrictions will continue to prevail. "
  • "Considering severe declines on the demand side, as of March 2, 2020, there were two loss scenarios developed by the International Air Transport Association (IATA) - limited and extensive. According to the extensive impact scenario, the initial containment measures taken by the governments were estimated to affect the global aviation industry by approximately 130 billion U.S. dollars loss of annual passenger revenue. Nonetheless, as the outbreak exceeds 2.5 million infected people around the globe, as of April 14, 2020 IATA updated its estimates. Airline passenger revenue loss estimates now reach 314 billion U.S. dollars globally. On the other hand, airports loose as a result of this crisis as well. In 2020, an estimated revenue loss of around 17 and 25 billion U.S. dollars in North America and Europe respectively are expected. "
Quotes
  • "Airlines have an array of choices to make, and this article outlines a number of actions they can take to respond, recover, and prepare to thrive in the new normal, including: Putting people first Transforming the supply chain Adapting to consumer shifts Leveraging loyalty Recalibrating investments Reimaging partners Repurposing people ad assets Protecting the brand "
  • ""
Quotes
  • "On the defense side of the industry, the situation appears less dire, with demand protected by budgeted government spending and a supply chain with minimal exposure to hard-hit jurisdictions such as Asia. However, events outside the US are affecting the US defense industry, as some US military partner nations may experience challenges in military readiness and ability to maintain equipment. Additionally, some defense companies may be financially weakened, but most likely to a lesser extent compared to consumer-facing aerospace companies."
  • "Most companies already have business continuity plans, but those may not fully address the fast-moving and unknown variables of an outbreak such as COVID-19. Typical contingency plans enable operational effectiveness following events like natural disasters, cyber incidents and power outages, among others. They don’t generally take into account the widespread quarantines, extended school closures and added travel restrictions that may occur in the case of a health emergency."
  • "Steps to consider: Crisis management and response Assess how profitability, loans, revolving credit and cash flow reserves can support ongoing operations in a low-revenue environment — in light of current (and forecasted) cash operating expenses, taxes and other cash expense items. Review capital and corporate cost budgets to identify not only marginal investments, but also discretionary items that can be cut. "
  • "Revisit your capital allocation and cash flow plans (and forecasts) to conserve cash during the period of uncertainty, as aircraft and air travel demand will likely be impacted for a prolonged period. This should include reassessing dividend and share repurchase plans. Consider divesting non-core or underperforming assets or assessing mergers and acquisitions (M&A) prospects as a potential source of cash. Consider refinancing debt."
  • "Urge and help coordinate government support through a package of initiatives, including guaranteed loans, deferred taxes and similar measures. At the same time, urge relevant government agencies to increase intergovernmental coordination and collaboration to help protect the industry from bankruptcy risks."
  • "Workforce Ensure your employees are safe and know how to protect themselves. Establish (or reinforce) sanitation rules in the workplace and assess mobility policies to encourage remote working where possible and necessary. Require employees who are sick to stay home until they are better. Eliminate nonessential travel. Discuss change management and flexible work arrangements."
  • "Assess strategies and plans to retain and deploy your workforce during the slowdown and establish risk mitigation programs for employees who still need to work on-site. Consider ways to automate tasks to minimize person-to-person contact Gather necessary data on employees (geography, visas, etc.) and track employee movements during the crisis. Outsource functions that can trim operating costs"
  • "Operations and supply chain Gain a keener, more real-time situational awareness of your supply chains. Assess all links in your supply chain and identify potentially weak ones — especially in geographies now affected and those that are prone to be impacted by COVID-19. Prepare for supply chain pivots that could mean identifying alternative suppliers."
  • "Improve your supply chain visibility and lines of communication to help detect and remediate potential problems early. If you don’t have digital supply chain transparency solutions in place, create greater transparency through daily self-reporting with all critical suppliers. Keep an open and regular dialogue with your suppliers and customers on how they’re being impacted by COVID-19 and how their experiences could affect your business. Seek alternatives that allow you to preserve relationships, co-create solutions and sustain both businesses. It’s possible that a third-party provider may prove to be a critical point of failure in creating a response to COVID-19."
  • "Tax and trade Address mobility and immigration issues for employees moving in and out of areas affected by COVID-19. Consider the tax implications of mobility. Depending on where you temporarily host employees, the company — and the employees — may face unintended consequences. Prepare and plan for different types of support governments may extend, from emergency funding to state guarantees of new loans to tax incentives or deferrals. "
  • "Plan strategically. Government assistance in one part of the industry, such as commercial airlines, may help ease pressure on another part of the industry, such as, defense. Assess which countries your company is most vulnerable in — both in repatriating cash and in stranded assets. Monitor and reassess other geographies on an ongoing basis and adjust your cash flow strategies as needed. Carefully consider the tax and transfer pricing components of any global supply chain restructuring."
Quotes
  • "Air rates stayed elevated this week thanks to limited capacity and still-peaking demand for PPE and medical supplies. Demand is so great that China’s PPE manufacturers will reportedly stay open over the Labor Day holiday. This demand, as well as new Chinese customs requirements aimed at weeding out shoddy PPE products, are pushing rates out of China to record highs. The price of air cargo is so inflated that the Australian government is subsidizing air exports, and the USPS has taken the rare move of shipping mail to Europe by ocean. Some observers anticipate high air rates even after the shutdown ends as many passenger flights and their cargo capacity will likely stay canceled even as other restrictions are lifted. "
Quotes
  • "Globally for all Air freight operations, from/to each Bansard countries, the airlines are canceling or reducing their flights, thus having a substantial impact on the air freight and available capacity. Nevertheless, for almost all the countries, the cargo planes (freighters) are still ongoing and allowed to travel between countries as usual. Regarding the impacts on sea freight, road or other logistics activities are subject to local government decisions...."
Quotes
  • " May 4, 2020 - 11:11 AM GE Aviation To Shrink Workforce by 25 Percent Further voluntary and involuntary layoffs at GE Aviation will see its 52,000-strong global workforce shrink 25 percent as the company institutes plans over the “coming months” to shave its cost base by $1 billion this year, company CEO David Joyce wrote in a letter to employees dated May 4. The plans, said Joyce, include $2 billion in “cash actions” in 2020 and follow a “comprehensive strategy” under development to re-size the business to match its forecast for the commercial aviation market. "
  • " Apr 29, 2020 - 5:23 AM Airbus Sees More Pain in Commercial Market Through 3Q2020 Airbus does not expect to have clear visibility of the full short- to medium-term impact of the Covid-19 crisis until June. In a briefing for financial analysts this morning to announce diminished first-quarter results for 2020, the European aerospace group indicated that it will likely defer decisions on steps to right-size the business for another two or three months to allow more time to reassess the situation of its airline customers and also to get more complete guidance from governments on steps to ease lockdown restrictions. "
Quotes
  • "Around 40% of annual global air cargo is typically transported in the bellyhold of passenger aircraft – contributing to the capacity pinch, with the vast majority currently grounded."
  • "In contrast to the dramatic drop in passenger demand, air cargo operations are surging to respond to calls to move essential supplies to tackle the COVID pandemic. Time is of the essence, but freight movements are constrained by red tape."
  • "Back when things were “normal”, passenger flights did much of the heavy lifting for the transport of air cargo. The vast passenger networks enabled the efficient distribution of the global supply chain to connect every corner of the globe and high-frequency schedules were able to meet the expectations for fast delivery from the booming e-commerce market. "
  • "The other 60% of annual global air cargo is usually moved around in dedicated freighter aircraft by freight forwarders and cargo operators. These cargo operations are primarily hub-focused and follow key trade routes, so are less comprehensive than passenger air networks. "
  • "Around 20 airlines have undertaken the use of their passenger aircraft for dedicated cargo missions spanning the globe, including Delta, Qatar Airways and Cathay Pacific. These passenger aircraft are not only being operated by their respective airliners but are also being chartered by freight forwarders to boost their capacity. A positive side effect of these passenger-as-cargo operations is in keeping these aircraft flying, which minimizes the maintenance and operational effects of parked aircraft. "
  • "Despite these creative additions, there is still a shortfall in capacity or rather, access to capacity at a time when it is most needed. As the virus sweeps across the world, the task of dispersing essential supplies to virus hotspots is challenging. Excess medical supplies need to be moved from waning epicentres to developing ones. As production in China resumes, goods need to be dispersed to the world’s supply chain. "
From Part 02
Quotes
  • "improve and personalise the care of people who will be affected"
Quotes
  • "continuously measures and interprets coughing and respiratory activity in ways that are impossible with traditional monitoring systems"
  • "These ever-emerging mysteries highlight the desperate need for more data to help researchers and physicians better understand — and treat — the extremely contagious and deadly disease."
  • "We developed customized devices, data algorithms, user interfaces and cloud-based data systems in direct response to specific needs brought to us by frontline healthcare workers. We’re fully engaged in contributing our expertise in bioelectronic engineering to help address the pandemic, using technologies that we are able to deploy now, for immediate use on actual patients and other affected individuals. The measurement capabilities are unique to this device platform — they cannot be accomplished using traditional watch or ring-style wearables that mount on the wrist or the finger."
  • "We anticipate that the advanced algorithms we are developing will extract COVID-like signs and symptoms from the raw data insights and symptoms even before individuals may perceive them. These sensors have the potential to unlock information that will protect frontline medical workers and patients alike — informing interventions in a timely manner to reduce the risk of transmission and increase the likelihood of better outcomes."
  • "This opens up new telemedicine strategies as we won’t have to bring in patients for monitoring. Physicians can potentially review the patients’ data for hours, days or weeks, immediately through a customized graphical user interface to a cloud data management system that is being set up for this purpose, to see an overall image of how the patient is doing."
Quotes
  • "400 tiny needles that deliver spike protein pieces into the skin, where the immune reaction is the strongest"
Quotes
  • "Companies are accelerating the development time for a SARS-CoV-2 vaccine in part by testing vaccines in multiple animal species at once and in parallel with small numbers of people. Usually the process is one animal at a time, and people later, to make sure that side effects are small, that immune response is large and that disease is actually defeated. Lack of time warrants greater risk."