Flying through Covid: Airline Profits, Customer Service, and Possible Trends

By Faisal Khan, with Edits and Revision by Zakir Mir

We all know that the aviation industry has always played a crucial role in our transportation, but 2020 was a difficult year for the aviation industry with unbelievable losses witnessed. However, when many airlines had their fleets parked, some airline companies still managed to close their books with profits or break even. In August 2020, when a Qatar Airways official was asked if any passenger airline can close the year with a financial profit, He replied “no”. In this article, we will learn about the airlines who have defied this conventional logic, as well as those who are not doing as well.

As we close out 2021, it appears that many of the airlines described below have taken active and fruitful steps towards recovery, in line with the trends described and highlighted below. One interesting development is the new focus on international cargo business, as international trade continues during the pandemic. Government assistance, route changes, and the unfortunate reality of packed flights and cost cutting may also figure more prominently in the travel industry, in the future. These strategies may help the airline industry bounce back. However, where these strategies leave customer service and safety standards, and the willingness of governments to enforce any public policy in this regard, remains worryingly unclear.

Airlines that Did Well During the Pandemic

China Airlines
Based at Taoyuan airport, China Airlines is Taiwan's national carrier and one of two major Taiwanese airlines. China Airlines is both a member of SkyTeam and SkyTeam Cargo, and operates across Asia, Europe, North America, and Oceania including cargo destinations. As the pandemic started, the airline rapidly switched to cargo operations resulting in an operating profit of $76.3m at the end of the year.

Korean Air:
Headquartered in Seoul, Korean Air is the largest airline and flag carrier of South Korea. Being a member of SkyTeam and SkyTeam Cargo it operates 150 international routes to every continent, and it is another Asian carrier that made a profit in 2020. Korean Air also increased freight operations, leading to a positive result of USD $219 million in operating profit which was disclosed at its board meeting in February 2021. COVID-19 diagnostic kits and automobile parts were the main driver for cargo sales.

Ethiopian Airlines:
Based in Addis Ababa, the airline is Ethiopia's flag carrier and the country’s biggest airline. It is considered to be one of the few profitable African airlines. The airline says it has generated USD 3.3 billion in annual revenues. Although the airline states a profit for 2020, no official figures can be found. To mention that Ethiopian’s financial year ends in July, the months from August to December 2020 are not included.

Bamboo Airways:
Headquartered at Hanoi, Vietnam, Bamboo Airways is a Vietnamese leisure airline. The airline started its operations in 2019, it operates to 29 destinations and plans to expand its operations in 2021. The airline made a revenue earning of more than $17.4 billion by concentrating on the domestic market and new routes, especially niches and leisure routes, resulting in an increase in their revenue by nearly 34 percent compared to 2019.

Airlines which experienced losses:

Emirates:

This Dubai based airline is one of two flag carriers of the United Arab Emirates. Emirates is the world's fourth largest airline by scheduled revenue passenger-kilometers flown and the second-largest in terms of freight tonne kilometers flown. On 15 June 2021, The Emirates Group announced its first year of loss in over 30 years. The Emirates Group reported a loss of AED 22.1 billion (US$ 6.0 billion) for the financial year ended 31 March 2021 compared with a AED 1.7 billion (US$ 456 million) profit for last year. The Group’s revenue was AED 35.6 billion (US$ 9.7 billion), a decline of 66% over last year’s results. However, the Group has invested AED 4.7 billion (US$ 1.3 billion) in new aircraft and facilities, the acquisition of companies, and the latest technologies for recovery and future growth.

Air Canada:

With its headquarters in Montreal, Air Canada is Canada's national carrier and the largest airline of Canada by fleet size and passengers carried. Despite a company-wide cost reduction, capital reduction and deferral program for 2020 the airline reported a staggering $1.16 billion loss in the fourth quarter of 2020, captioning it as the 'bleakest year' in its aviation history. In the Q4 of 2020, the Canadian government announced that it was developing a package of assistance to Canadian airlines.

British Airways:

The flag carrier of the United Kingdom is the second largest UK based carrier, based on fleet size and passengers carried, behind easyJet. Despite being an international airline and one of the best in the industry, the airline also reported a €7.4bn loss for last year. The authorities said that passenger capacity last year was only a third of 2019 and the passenger revenues plunged by 75% from €22.4bn to €5.5bn. They also added that its cargo business had “helped to make long-haul passenger flights viable” and cargo revenues increased by almost €200m to €1.3bn with more than 4,000 cargo-only flights operating in 2020.

American Airlines:

Headquartered in Texas, American Airlines is one of the three major airlines of the United States. The airline being the big shot in the aviation industry closed the year 2020 with a net loss of $9.5 billion. According to Doug Parker the Chairman and CEO of American Airlines the airline is looking for a recovery in 2021.

In addition, Flybe (UK), Trans States Airlines (US), Compass Airlines (US), Virgin Australia and Avianca (Colombia) are airlines which went bankrupt and had to stop their operations.

Conclusion

Though many airlines did suffer in 2020, some were able to capitalize on the demand for cargo transportation and survive much more easily. Traditional semi-government backed airlines did not appear to be flexible or agile enough to cope with the demands of the Covid-19 influenced international transportation market. Therefore, most of the biggest players in the market did suffer tremendous losses, which has given rise to the conventional wisdom that Covid-19 was an ‘insurmountable’ obstacle for the “airline industry” as a whole.

However, could it be that traditional airlines were too large, too clunky and too inefficient to adapt to the drastic changes covid-19 brought about to the world economy? Many businesses were suffering, however participants in the airline industry had enjoyed windfall gains and monopolistic control for many years prior. Therefore, could it perhaps be argued that there should have been better contingency planning for the largest airlines in the world? If smaller airlines in smaller markets could survive, and even thrive, while the largest players struggled to hold their immense weight, perhaps a rethink of the legal, regulatory and economic structure of the airline industry is due.

That being said, these traditional goliaths are now starting to realize in uptick in business, as a result of fewer covid restrictions, government assistance, some diversification, and the unfortunate reality of cost cutting. There is one frightening aspect to this development, which is the fact that governments across the world will not be eager to step in and enforce safety or consumer standards too strictly when the industry appears to be reeling from “losses”. Therefore, cost cutting may be a reality which passenger’s have to accept for some time to come. The effect of this strategy on service levels and customer safety remains to be seen.