Airlines and the COVID-19 Pandemic: Volume 11

I am concerned with insights heterodox economics, and particularly the new institution economics, can offer regarding interactions between health emergencies and the airline industry. Air services not only facilitates the transmissions of diseases among humans, and between animals, but on the positive side, can expedite the movement of medicines and the transfer of those afflicted during pandemics and epidemics. They can serve to limit the outbreak of disease by providing “mercy flights” to regions poorly served by other modes. Significant challenge confronting carriers during a major event, however, often included immediate financial shocks as well as ensuring their operations do not contribute to the spread of disease. These economic challenges for both commercial carriers and public policymakers involve sources of finance for what is, in this context, a semi-public service as well as the extent to which airlines should retain standby capacity extending resilience to the air-service supply chain. Conventional neoclassical economics, while still at the center of analyzing many of these sorts of issues, has increasingly, because of its rigid assumption and poor forecasting record, been supplemented by heterodox economic thinking. This trend has been reinforced by progress in fields such as psychology. What I demonstrate is that heterodox economics, and especially the role of institutions, offers a more complete picture of the interactions between air transportation and the spread of disease.

While the passenger airline sector has faced various crises over the past decades, including multiple oil price shocks, events like 9/11 and the ensuing “war on terror,” as well as outbreaks such as SARS and MERS, the COVID-19 pandemic, a once-in-a-century event had an unparalleled impact on both regional and global levels. The industry witnessed extensive disruptions to entire route networks for months, compelling airlines to implement substantial service cutbacks. Additionally, stringent public health measures such as lockdowns and travel bans mandated by governments worldwide severely limited airlines' ability to operate efficiently. To mitigate the financial strain caused by prolonged lockdowns, airlines sought unprecedented levels of financial relief from governments, including direct emergency subsidies and loans, to bolster their balance sheets. This chapter delves into the strategic decisions made by European airlines in bargaining and nonbargaining nonmarket strategy (compliance, avoidance, and so forth) with industry regulators as part of their comprehensive crisis management strategies. We analyze the specific actions taken by European airlines to protect their commercial interests and explore how the interplay between bargaining and nonbargaining approaches unfolded. Furthermore, we reflect on the insights gained from these experiences and consider how they may influence future regulatory strategies adopted by the airline industry. A key lesson of this period is the salience of aviation to the economies of Europe and the ability of the airlines to influence governments to offer significant levels of financial support to ensure the operating continuity of airlines.

This study examines the relationship between COVID-19 uncertainty and stock returns across US airlines. Using the pandemic uncertainty index (PUI) developed by Ahir et al. (2022), we estimate a pandemic beta by augmenting the capital asset pricing model with the PUI as an additional factor. We find that the pandemic beta varies across airlines, which indicates the risk premiums of airline stocks associate with the level of pandemic uncertainty. Also, pandemic uncertainty amplifies the market risk of airline stocks. These results are relevant for asset managers whose portfolio allocation focuses on the airline industry. Further, we find that larger airlines with higher incomes and cash balances are less sensitive to the COVID-19 pandemic. These results highlight an important managerial implication for risk management, namely, that airlines with lower financial risks (i.e., a larger financial buffer) are more resilient to the COVID-19 pandemic.

The COVID-19 pandemic, having emerged early in the year 2020, had a devastating impact on the whole aviation industry. Airlines were particularly hit hard, given unprecedented border closures, the inability to adapt to highly volatile demand, and an embarrassing lack of overall pandemic preparedness. As of summer 2022, the airline industry seems on the track of strong recovery, with many airlines returning to profits and passenger numbers occasionally exceeding those of pre-COVID-19 levels. This study investigates the induced pandemic cycle, from January 2020 to December 2022, through tools from the network science literature. We model airline networks as a collection of nodes, representing airports, and a collection of links, representing direct flights between airports. This analysis has a strong focus on spatiotemporal evolution of airlines worldwide during the COVID-19 pandemic, leading to a comprehensive description of network science effects and counter measures during this excessive health and economic shock. Such an analysis could be helpful for better dealing with future pandemics, which are likely to emerge, if potential lessons learned are not implemented by the aviation industry.

After the standstill generated by the COVID-19 outbreak, airlines were forced to adapt their operations and strategies to the new market requirements and constraints both in terms of supply and demand. The initial recovery included many short-term decisions for survival. Yet, as the market recovered, sometimes in new forms, airlines rebuilt their networks for a new long-term future. In this chapter, we compare the pre- and postpandemic network configurations of a selection of European airlines using a combination of network structure, topology, and connectivity indicators, which help understand airlines' network economics. As a general trend, low-cost carriers recovered faster than full-service ones, in many cases already exceeding prepandemic supply volumes. However, our study shows the high heterogeneity of responses and postpandemic network structures across business models. While some airlines kept very similar structures, adapting to the demand change, some opted for a bolder strategy, growing their networks compared to prepandemic levels. Also, in some cases, new regulations or other external events forced the changes in networks. Finally, although in 2022 data still showed long-haul markets a little behind compared to prepandemic figures, signs such as the continued passenger increase and the ramp up of aircraft orders by airlines point toward a full recovery leading back to a sector based on continued traffic growth.

This chapter reviews the competition between full-service carrier (FSC) and low-cost carrier (LCC) in China. More importantly, we discuss the impacts of the COVID-19 pandemic on FSC–LCC competition. Specifically, the airlines' route choices and also the market contact between FSCs and LCCs in China are examined and discussed. Our review results suggest that, despite the rapid growth of the independent LCC Spring Airlines and the establishment of new subsidiary LCCs by FSCs, China's LCC sector still plays relatively minor roles compared with many fully deregulated markets. Subsidiary LCCs serve more as competitive tools for their parent FSCs, primarily deployed on their parent FSCs' routes to jointly compete against rival FSCs. This competition is primarily focused on niche regional markets rather than engaging in full-scale competition. Spring Airlines also strategically avoided direct head-to-head competition with FSCs before the pandemic by mainly connecting with the secondary cities. However, the pandemic has introduced significant changes, notably the network differentiation between FSCs and LCCs in mainland China. With the relaxation of government's regulations on airline route entries into hub airports during pandemic, Chinese LCCs have shifted their focus toward serving more dense routes, especially those connected to the top five cities. This shift has led to an intensified head-to-head competition between LCCs and FSCs following the outbreak of the pandemic. Such a process is likely to continue in the years to come. This chapter's discussions could also provide new insights into LCC development and the impact of the pandemic on FSC–LCC competition interactions to supplement existing literature studying other major airline markets.

Given that a prerequisite for COVID-19 transmission is the interaction between individuals, it is reasonable to suspect that transportation networks may have contributed to the spread of COVID-19. This study uses the air transportation network to quantify the risk of COVID-19 spread in the United States. The proposed model is applied at the county level and identifies the risk of importing COVID-19-infected passengers into a given county. We also undertake an examination of the factors influencing the spread of COVID-19 in relation to air travel. Utilizing an extensive dataset encompassing various socioeconomic, demographic, and healthcare-related variables, our results indicate a positive relationship between these factors and the relative risk of COVID-19 spread, highlighting the pronounced impact of population density, air travel volume, and larger household sizes on increasing travel-related risk. Conversely, greater healthcare capacity, particularly in terms of hospital and intensive care unit (ICU) beds, is associated with reduced risk. We provide estimates of expected relative risk for each county and a ranking that can be useful for informing public health policies to stem the spread of the virus by devoting resources such as screening and enhanced travel protocols to airports located in at-risk counties.

This paper analyzes the impacts of COVID-19 and related policies on airport short-run costs and decomposes the percentage changes in total and average variable costs between pre-COVID-19 and COVID-19 periods. Data for the analysis are a panel of 50 medium and large US airports from 2012 to 2021. COVID-19 measures include COVID-19 cases and deaths. COVID-19-related policies include state-level face mask and COVID-19 vaccine mandates. Based upon a short-term multi-output translog cost function with three positive outputs (departures, non-aeronautical revenue, and workload), three associated negative attributes (delay, congestion, and air pollution), COVID-19 measures and policies, the analysis has three main conclusions: (1) A 1% increase in COVID-19 cases leads to a 0.077% increase in total operating costs. State-level face mask and COVID-19 vaccine mandates increase total operating costs by 15.9% and 16.8%, respectively; (2) COVID-19 and related policies increase airport total operating costs through contractual services costs; and (3) the cost decomposition finds that a 1 million increase in COVID-19 cases results in a 109% increase in average variable costs, while the time/technological progress effect leads to a decrease of 87% compared to the pre-COVID-19 period. Face mask and vaccine mandates increase the average variable costs by 8.91% and 4.19%, respectively. The positive output total effects range from 3.46% to 7.99%. The effects of input prices and negative attributes are relatively small.

This study investigates the influence of COVID-19 on technical efficiency and Malmquist productivity for combo carriers, cargo-only carriers, and passenger-only carriers for the sample period 2006–2021. We employ the DEA model to derive rankings of relative technical efficiencies annually for each company type. The technical efficiency performance measure is then regressed on standard cost determinants and (company-type)-(COVID-19) interaction variables to further examine COVID-19's influence on efficiency performance by company type. Then, we use the technical efficiency rankings to derive Malmquist productivity measures for all three types of airline companies. We hypothesize that cargo-only companies were better suited to operate during the pandemic because initially compared to combo-carriers and passenger-only carriers, these cargo-only companies operated with greater capacity due to higher shipper demand. In support of this study's hypothesis, findings show (1) combo carriers and passenger-only carriers experienced a significant technical efficiency erosion during the early stages of COVID-19. In contrast, cargo-only carriers did not experience an erosion of technical efficiency. We attribute this technical efficiency difference arising because cargo companies were able to continue operating at capacity during COVID-19. (2) These technical efficiency results contributed to declining productivity for combo and passenger carriers during the first year of COVID-19. Nonetheless, these companies were able to maintain relatively high levels of technological change.

This chapter examines business resilience and capacity management by US airlines during and after the COVID-19 pandemic. It analyzes matched data from the US Bureau of Transportation Statistics and daily flight schedules from the Official Airline Guide to compare disruption impacts across different airport categories and airlines. Simple, scalable measures of resilience are introduced, utilizing average and standard deviation measures relative to prepandemic periods. Airlines adjusted their capacity offerings swiftly in response to the pandemic-induced demand collapse, with substantial disruption initially but followed by stabilization. Throughout 2020 and 2021, there were more schedule variations compared to the postpandemic periods of 2022 and 2023. Low-cost carriers (LCCs) rebounded faster than full-service carriers (FSCs), with smaller LCCs showing the quickest recovery, expanding operations notably at smaller airports. Consequently, smaller airports regained prepandemic traffic levels faster than major ones focused on big FSC networks. Analysis reveals that while the largest airports often have more flights scheduled than performed, medium and smaller airports tend to have more flights performed than scheduled, albeit with higher variability for medium ones. The study argues that the airline scheduling process proved resilient and adaptable to the significant and prolonged disruption caused by the pandemic.

Societal response to COVID induced many changes in the way we now live. Air transportation was one of the more visible “victims” of COVID response, with several major airlines declaring bankruptcy and others downsizing to a degree not seen previously. In spite of these shocks, the international air cargo sector carried on. Anecdotal evidence suggests airlines that either specialized in cargo or in turn were able to adjust their fleets to carry more cargo (including better utilization of existing backhauls) were best able to weather the pandemic. To explore this issue further, we examine detailed international air passenger and cargo traffic data (both fronthaul and backhaul) from the US Bureau of Transportation Statistic's TranStats database before and during COVID to elucidate how the pandemic affected air carrier operations at a time of great uncertainty. Better operational flexibility seems to have been critical to success during COVID. To this end, we find that many Asian-based carriers were superior at adjusting to the new cargo refocused reality of COVID operations, while their US-based counterparts lagged substantially behind. We speculate on potential reasons for this difference and also what our findings might mean for industry investment moving forward.

This chapter explores the global impact of the COVID-19 pandemic on airline employment from the onset of the pandemic until 2023. Using data from the International Civil Aviation Organization, this chapter evaluates the employment effects of the pandemic across hundreds of airlines around the globe and provides an examination of the job loss and rebound following the onset of the pandemic. A comparative analysis of the global employment changes in varying job types – including flight operations, maintenance, and ticketing – is presented. From the sample of global airlines, results indicate that airline employment was reduced by over 180,000 employees in 2020 with maintenance personnel experiencing the greatest reduction in employment. These results are discussed in the context of government intervention and industry-targeted stimulus programs. A case study of the US airline labor market provides a more detailed examination of the employment changes across various airlines and employees. These results suggest that employees at low-cost carriers have fared better than full-service national carriers; however, airline employees were not equally affected with women’s employment more greatly impacted, and slower to recover, than men’s employment. The transformations in labor relations and industrial action are also explored as air travel demand has rebounded and an anticipated shortage of skilled airline workers threatens the industry. Finally, these changes in employment and labor actions are compared with the effects from the Great Recession and September 11, 2001, and the implications for the future of the industry are discussed.