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Up to 46 million jobs at risk due to COVID-19 aviation downturn, Air Transport Action Group warns

By

Bart Noëth

 -

14 October 2020

© Edwin Vanoverschelde

The severe downturn in air traffic this year caused by Covid-19, followed by a slow recovery will result in a loss of up to 46 million jobs normally supported by aviation around the globe, according to new industry figures released on 30 September.

Under normal circumstances, aviation and the tourism it facilitates supports 87.7 million jobs worldwide. Over 11 million jobs are within the sector itself, employed at airlines, airports, civil aerospace manufacturers and air traffic management. The near total shutdown of the system for several months, as well as the stop / start nature of the reopening means that air travel will not recover to pre-Covid levels until around 2024.

Executive Director of the cross-industry Air Transport Action Group, Michael Gill said: “With the expectation that we will see less than half the passenger traffic this year than we carried in 2019, we know that a lot of jobs in air transport and the wider economy relying on aviation are at risk. Some companies are already making difficult decisions, with many colleagues being impacted by the downturn.

“Our analysis shows that up to 4.8 million jobs in aviation may be lost by the beginning of next year, a 43% reduction from pre-Covid levels. When you expand those effects across all the jobs aviation would normally support, 46 million jobs are at risk. These include highly-skilled aviation roles, the wider tourism jobs impacted by the lack of air travel and employment throughout the supply chain in construction, catering supplies, professional services and all the other things required to run a global transport system.

“It is absolutely incumbent on governments to do whatever they can to help the sector get back on its feet so we can bring back those jobs and that economic activity. And this must go beyond schemes to support employment. Passengers and businesses need certainty around travel – not to be subject to random quarantine declarations and constantly changing lists of acceptable and unacceptable destinations.

“We know it is tough to make these decisions. But as testing improves and the prospect of a vaccine becomes clearer, we hope that more stability in the travel environment also leads to a more stable return to the wider economic role of air transport.”

Key facts outlined in Aviation: Benefits Beyond Borders, include that in a normal year:

• Air transport supports 87.7 million jobs and $3.5 trillion in global economic activity.
• Over 11 million people work directly for the industry itself. Aviation jobs are, on average, 4.3 times more productive than other jobs in the economy.
• Air travel carries 35% of world trade by value ($6.5 trillion worth in 2019), but less than 1% by volume (61 million tonnes in 2019).
• Airfares today are around 90% lower than the same journey would have cost in 1950 – this has enabled access to air travel by greater sections of the population.Scope of the industry: 1,478 airlines flew 33,299 aircraft on 48,000 routes between 3,780 airports in airspace managed by 162 air navigation service providers.
• 58% of world tourists travel to their destinations by air.

Impact of Covid-19:

• Aviation-supported jobs potentially fall by 46 million to 41.7 million (-52.5%)
• Direct aviation jobs (at airlines, airports, manufacturers and air traffic management) fall by 4.8 million (a 43% reduction compared with pre-Covid situation)
• Nearly 39,200 special repatriation flights took nearly 5.4 million citizens home after borders closed in March 2020.
• Nearly 46,400 special cargo flights transported 1.5 million tonnes of cargo, mostly medical equipment, to areas in need during the height of the pandemic response

The report, which can be downloaded at www.aviationbenefits.org, was prepared by ATAG along with other global aviation industry associations and builds on extensive research by Oxford Economics.

Related

Delta Loses $5 Billion In 3rd Quarter, May Soon Furlough 1,700 Pilots

With summer vacation travel weaker than expected and business travel a fraction of what it used to be, the losses continue to mount at Delta Air Lines.

Delta, the nation's second largest airline by the number of passengers flown last year, reports losing $5.4 billion in the third quarter of this year, as the travel industry continues to suffer from low demand due to the coronavirus pandemic. Add that to the $5.7 billion loss reported in the second quarter, Delta's total losses due to the pandemic rise to more than $11 billion.

Despite assurances from Delta and other airlines that transmission of COVID-19 is relatively rare on planes, most would be travelers steered clear of flying.

After implementing deep airplane cleaning protocols and requiring passengers and crew to wear face masks, the industry had hoped for a boost in air travel over the normally busy summer months. But after a brief uptick around the July 4 holiday, sharp increases in COVID-19 cases in many cities and states and quarantine mandates for Americans traveling abroad had a chilling effect on air travel demand, and the number of people flying in July, August and September was around 70% lower than a year ago.

Delta CEO Ed Bastian suggests it may take a lot longer than initially thought for air travel demand to return.

"We do believe it could still be two years or more until we achieve a normalized revenue environment," Bastian said on a conference call with reporters and analysts Tuesday. "Until then, we will be smaller in the short term, but also more agile and more efficient."

Bastian acknowledged that more profitable business travel, which is down about 85% from a year ago, may take even longer to fully bounce back, with many business trips likely being replaced by meetings and conferences on Zoom, GoToMeeting, and other video conferencing platforms.

"We could be looking at anywhere from 10% to 20% reduction in the in the next couple of years when we get to that new normal of business travel," he added.

Some aviation industry analysts find that revelation a concerning sign.

"Business travel was 50% of their revenue at one point," Peter McNally, an analyst at Third Bridge Group in New York, told the AP. "It's a market that Delta has made the core of their business, so they will be forced to compete harder on the leisure side of the market to make up for that loss."

Delta executives say they are beginning to see an uptick in bookings by leisure travelers for the November and December holidays.

"It's slow, but it's steady — week by week, they are coming back," Bastian said of passengers.

With so few people flying, Delta has parked scores of planes and has plans to retire many of its older jets, about 400 of them, by 2025.

Delta has reduced its cash burn rate from a peak of close $100 million a day in April and $27 million a day over the summer, but the airline is still losing a little more than $18 million a day, as revenue in July, August and September was down 76 percent from the same three months last year. Near record air travel demand in the third quarter last year helped Delta record a profit of $1.5 billion.

About 18,000 Delta employees, close to 20% of the airline's work force, have taken early retirement or other incentive packages to leave the company voluntarily. In addition, close to 40,000 employees have taken voluntary unpaid leaves of absence. Those voluntary actions save the airline $1.9 billion, and unlike competitors American and United, Delta has been able to avoid employee layoffs and furloughs, thus far.

But that could change Nov. 1. Delta is asking its pilots to accept steep pay cuts, and if negotiations with the pilots union fail to produce an agreement, the airline could begin to furlough 1,700 pilots next month.

Delta received $5.5 billion in federal grants to cover payroll costs from April through September — which is its share of the $25 billion given to the industry as part of the CARES act. Delta still has about $1.3 billion of that aid left that it can continue to use to keep employees on the payroll.

"We've stretched those dollars out," Bastian said, adding that he supports industry efforts to secure additional airline aid from Congress. There is bipartisan support in Washington for an extension for the payroll support program, but a deadlock over a broader coronavirus relief package has stalled action on assistance for airlines.

Pratt & Whitney cuts salaried workers as commercial aviation reels from COVID-19

• Jet engine manufacturer Pratt & Whitney, reeling from the downturn in commercial aviation caused COVID-19, said Tuesday it will lay off salaried workers.

The East Hartford subsidiary of Raytheon Technologies Corp. did not say how many workers or at which of its work sites in the U.S. and globally will be affected, but notifications will be completed by Thursday. In Connecticut, Pratt & Whitney makes engines in East Hartford and Middletown.

Raytheon cutting 15,000 jobs at Pratt & Whitney, Collins Aerospace and corporate offices in response to slump in aviation »

Salaried workers could include administrative employees, engineers and others. Workers who are members of the machinists union are not affected.

In a statement, Pratt & Whitney said it made the “extremely difficult but necessary decision to implement an involuntary separation program” for salaried workers. It cited reduced commercial business due to COVID-19.

“This has forced us to take further actions to align with current and future business demand in an evolving environment,” the manufacturer said.

Tens of thousands of airline jobs could disappear if Congress and President Donald Trump fail to reach agreement on a second round of economic stimulus for the industry. Since the pandemic hit, thousands of flight attendants, baggage handlers, gate agents and others have received some financial help from Washington as part of $25 billion in grants and loans to the nation’s airlines. Companies agreed to not lay off employees through Sept. 30.

Raytheon Technologies Chief Executive Officer Greg Hayes said last month the commercial aviation and defense giant is cutting 15,000 jobs, or about 7.7% of its global workforce of nearly 200,000. The reductions are limited to Pratt & Whitney and Collins Aerospace, a manufacturer of airline cockpit equipment, flight data components and other parts and materials.

Military sales remain robust due to increased Pentagon spending.

The April-to-June quarter was the worst three-month period for airlines, which faced an “unprecedented loss of revenue,” the International Air Transport Association said in a recent report. Revenue was down about 80% compared with the same quarter in 2019 “with almost full grounding of the passenger fleet despite strong cargo revenues,” the organization said.

As a result, airlines “turned their focus on cutting expenses during this period,” IATA said. But operating costs were reduced by 50% year-over-year due to costs such as labor and maintenance costs, it said.

Raytheon Technologies has gradually ratcheted up cost-cutting as the coronavirus drags on, even spiking in recent months. In mid-April, less than two weeks after its launch as a result of the combination of United Technologies Corp. and Raytheon Co., the conglomerate announced pay cuts and furloughs.

Second-quarter sales at Pratt & Whitney fell 30%, to $3.6 billion, from the same period last year and posted a rare loss of $151 million.

However, Pratt & Whitney posted an 11% increase in military sales, specifically engine production for the F-35 fighter jet manufactured by Lockheed Martin Corp., in the April-to-June quarter. It also reported a rise in parts sales and servicing on fighter jet platforms.

Raytheon Technologies has scheduled its third-quarter financial release for Oct. 27.