The craziest thing happening right now is with the Aviation sector and in that the most hit are the Airlines.
As it is history of Airlines show that Airline are one of the major loss making business, over the years there have been very few Airlines really making profits. Some of them may have operating profits but with the amount of loans they sit on, the fuel prices and the taxes they eventually lead to net losses.
My husband has been also working for an Airline and he has been in the travel industry since the beginning of his career. Lately with this pandemic they were informed that they will be on a 65% salary cut. You do not have much of a choice but to accept the decision. The one thing that is looked right now is, Do we still have our Jobs? Airlines have laid off their staff like anything, most of them have cut down their crew by 50%. I wonder how are all these people going to get jobs back in market again in any industry.
And this is not our first experience on Salary cut with an airline in times of crises. In the past when he was working with Kingfisher airline, the airline went bankrupt and eventually got shut down with 1000s of employees stranded and no salaries for months together.
Alirline industry looks very glamorous from the outside but it is the most riskiest industry to be in. When I started my career, it was with Swiss Airline back office, and in 2000 when the Swiss plane crash happened there was a major turmoil and many staff got effected with loss of jobs. Eventually I too decided that it would not be safe to have 2 eggs in 1 basket, so I gradually shifted my career to Human Resources and I absolutely today thank myself for taking that decision.
People who have been working for Airlines have seen very slow growth in their career graph, in-terms of vertical growth and salaries also. The most poor paid sector is the Airline sector, specially the ground staff.
But why is it that the Airline Industry suffers so much. At any given time when we travel, the airports are full, flights are overbooked, they operate with almost full capacity. These days most of the Airlines operate on a low cost model and charge extra for every additional service, so on the look of it, we see they are generating good amount of revenue, then why is it that they still cannot sustain?
Let's looks at some of the reasons which does not allow the Airlines to run profitably.
The ATF i.e. aviation turbine fuel prices charged to the Airlines remain extremely high and noncompetitive. This is one of the major cost for an airline and a big chunk of their revenue goes in this.
Stiff competition between Airlines to maintain a healthy load factor often results in fares been slashed down and sold at uncompetitive rates which over a period of time makes it unprofitable.
Private Airlines are seldom forced to operate unprofitable feeder routes by their respective governments which in turn results in high losses.
In General, the Aviation sector breakeven is extremely high with Airlines making profits only if load factor remains above 80 percent which is extremely challenging to maintain for every single flight throughout the year since there will be peak periods and low season periods also and the high standards to maintain.
The indirect distribution costs for selling seats remain extremely high with the monopolistic Global distribution systems charging noncompetitive high distribution fees per sector sold by Travel Agents globally.
Maintenance and repair work of Aircraft's with periodic checks is also one of the high costs which the Airlines has to cater too resulting in lower profits.
And besides these there are many other overheads, which in all does not allow the Airlines to operate profitably. With all of these factors it becomes extremely challenging for the Airline to get into a profit zone and now an already loss making business is being hit with the worst crises ever in the history of Aviation, the Pandemic. It has not only reduced their staff but many have filed for bankruptcy also.
For this sector to come up again and get to a break even point it would be years and that too by soaring up their prices, cutting down on their services and if there are no other impacts additionally coming for them in future.
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So well explained.
Informative and priceless.
I wish the pandemic ends soon and everyone get their businesses back on track.
Your well wisher from Pakistan🖤
Thank you @haidermehdi. Yes we all hope that this madness ends soon now
I think the way we travel is most definitely gonna be changing. The hardest hit will be people in places like Australia and New Zealand, where they don't have the choice to use an international bus or rail service, and where fuel-surcharges etc are the highest. Happy to be in Asia. 😊
I'd be happy living in Singapore or Malaysia where it's the busiest hub for international travel and cheaper too.Travel is already changing in Indonesia. My other mom had to wear mask, obtained a health paper, and even bought two seats to avoid sitting next to someone.
I am waiting to travel back to my second home and already dreading the formalities :-(
In Oman too we do not have rail systems, forget the international connectivity, we still do not have inter-city rail transport. it's either Bus or Car which is again very time consuming for long distance. It's all going to be crazy for the next 1 to 2 years and by then may be it will all become a trend and set it, so little or no scope of going back to the old :-(
The impact on the aviation sector is really very complicated. The financial losses will be huge and it will take a long time for things to return to the "new normal".
It would be some years, and some may even shut down for all you know :-( It's a sad state scenario