Airline industry may be gutted for years without a COVID 19 vaccine

If the public’s confidence in the ability to fly safely doesn’t rise in the coming months, “you’ll be looking for CARES Act 2.0,” an industry analyst said.

Without widespread testing for the coronavirus or a vaccine, airline travel won’t be anywhere close to normal for months, or even years, to come.

The new reality will likely be fewer, more expensive flights on slimmed-down airlines that have laid off thousands of employees and cut ties to many contractors. In addition, travelers may be required to have new documentation and health checks to board.

“Could there be a new public health agency coming out that requires a new passport to travel? I don’t know. But we’ll be on the forefront of all those advances,” Delta Air Lines CEO Ed Bastian said during an earnings call this month. A recovery, Bastian said, will take years and a vaccine may be what it takes to sway consumer confidence. But questions remain about immunity, and testing for antibodies can be inaccurate and availability is scarce in any case.

The International Air Transportation Association, which represents carriers around the world, recently released the results of a survey in which 40 percent of recent passengers said they may wait at least six months after the outbreak is contained to travel again. And almost 70 percent said they may hold off on traveling until their personal finances are in better shape.

Airline industry analyst Robert Mann predicted that if the public’s confidence in the ability to fly safely doesn’t rise in the coming months, “you’ll be looking for CARES Act 2.0,” referring to the coronavirus aid package enacted last month that included some $58 billion in grants and loans for airlines.

“I think this is part of … the entire reopening debate,” he said. “I guess it starts with widespread, instantly available, highly accurate, cheap testing that gives people the confidence that they aren’t either infected or a carrier and the people around them using the transportation system are similarly not.”

Increasing diagnostic testing capacity to the level needed to ease social distancing has proven a major challenge, and it could be 18 months or more until a vaccine is available. Contact tracing is also viewed as crucial to reopening economies, but the United States lacks the hundreds of thousands of workers required to do it effectively.

Ultimately, layoffs at airlines later this year may be unavoidable. U.S. airlines employ about 750,000 people directly, according to trade group Airlines for America.

“Unless the government repeat[s] the bailout, I don’t see that there’s any way to avoid it,” said Scott Hamilton, an aviation industry analyst, whose consulting firm has estimated that it will take four to eight years for air traffic to return to the levels it reached before the outbreak. “This is all driven by how soon you can get vaccines to the population.”

Sara Nelson, the head of the Association of Flight Attendants-CWA, said “no matter what happens, we’re not restarting this industry with the same numbers that we had in February.” But she said the industry and its labor partners are working to build “bridges to retirement, early-out offers, options for people who might have other earning means to take a leave with a little incentive – cutting back the impact of fewer jobs in that way.”

The CARES Act included $58 billion for the Treasury Department to issue grants and loans to passenger and cargo airlines. Half of the money was dedicated to helping airlines continue to pay their workers, and that aid comes with the stipulation that carriers don’t furlough employees through the end of September.

Last week, Bastian said he was doubtful that more aid would come from the federal government for airlines.

“My sense is the appetite for additional relief beyond that will be challenging,” Bastian said. “And I think the combination of the [payroll aid] together with the loans should provide us the liquidity we need to get through this crisis.”

But Nelson pushed back on that, saying she believes “it’s possible, that if we’re in an emergency state again, that Congress will act again to keep people in their jobs.”

Nelson argued that lawmakers won’t want massive layoffs so close to Election Day, and that the CARES Act showed there can be enough political support for giving aid to airlines if it is focused on workers and comes with strings. In addition, “there is a recognition that we can’t just allow the airline industry to collapse,” she said.

Hamilton, the consultant, said that recovery goes beyond ensuring consumers are confident in what measures airlines take – it also depends on what measures other pieces of the hospitality industry take.

“You also have to ask yourself, if you’re going to travel, is the hotel going to be properly disinfected? Are the taxi cabs going to be disinfected? Will the restaurants be adequately practicing some kind of social [distancing], even in October or November or December?” Hamilton said.

Tori Barnes, the executive vice president of public affairs and policy at the U.S. Travel Association, said having consistent health and safety protocols in place at each stage of travel will be key to making people feel comfortable.

“We want to have that consistency so that people will know what to expect,” Barnes said. “That can help give confidence and assurance that they’re not going to show up at the airport and they don’t know what to do, or they don’t have the right mask, or they don’t have the right wipes – or whatever they’re supposed to have.”

The travel industry is also likely to call for more funding for both diagnostic and antibody testing, Barnes said. “If you could have something where you could take a test easily, you’re know that you’re safe, that you’re healthy, you might have more confidence to leave.”

At the same time, Barnes said the industry needs to “contemplate the realistic factor that things are going to open up slowly, that they’re likely to open up regionally, and how do we market/ encourage folks to consider options closer to home in the meantime … to keep the health of industry alive?”

People will need encouragement “to try new destinations that they may not have otherwise thought about” in their region, Barnes said. That might include deals and information about safety protocols as well as a list of attractions.

Temperature checks, a requirement that passengers wear masks, empty middle seats and cleaning between flights could become the norm for some time. But Mann, the analyst, said testing may need to be done before people get to the airport.

“The last thing you want is folks who thought they were going to be able to travel finding out day of travel that they can’t travel,” Mann said. In addition, he noted that infected people could spread the virus to others at the airport.

Robin Hayes, the CEO of JetBlue Airways, made the same case while on CNBC last week.

“As airports get busy again, you’re going to be mixing in lobbies, in foyers, in security lines with other people,” Hayes said. “There’s a national debate around testing. It’s an important conversation. And I think this is why testing is so important, so that people know before they fly.”

“You may see the rollout of testing and other things at airports,” he added. “But, again, the more that’s done ahead of that, sort of before you can even get in the car or get on the train to go to the airport, the better that is.”

Hayes said he expects people will prefer driving to flying at first, and they will sooner fly domestically than internationally.

“I do think there’s such a pent-up demand for travel, for people to visit friends and family again, to go on vacation,” he said. “There will be some great deals around when this is over.”

Airlines also need business travel to return. “That’s where all the revenue is,” Mann said. www.politico.com