An Update on the Precarious State of the Aviation Industry
March 5, 2021|Paul Lewis
COVID-19 has landed the aviation industry in the largest crisis in its history. With the pandemic still ongoing and passengers levels still significantly down, the Aviation Subcommittee of the House Transportation and Infrastructure Committee held a hearing entitled “COVID-19’s Effects on U.S. Aviation and the Flight Path to Recovery.” The hearing, chaired by Rep. Rick Larsen (D-Wash.), aimed to understand the current situation facing key parts of the industry and hear about potential policies that can support its revival. The following six witnesses testified:
- Heather Krause, Director, Physical Infrastructure U.S. Government Accountability Office
- Nicholas E. Calio, President & Chief Executive Officer, Airlines for America
- Joe DePete, President, Air Line Pilots Association
- Peter Bunce, President & Chief Executive Officer, General Aviation Manufacturers Association
- Lance Lyttle, Managing Director, Aviation Division, Port of Seattle on behalf of American Association of Airport Executives
- Edward M. Bolen, President & Chief Executive Officer, National Business Aviation Association
Rep. Peter DeFazio (D-Ore.) observed how the committee has held hearings in response to crashes, bankruptcies, terrorist attacks, and other events but they all are dwarfed by the COVID-19 crisis and its impact on the aviation industry. Nick Calio remarked how just prior to the pandemic, aviation in the United States was in a “golden age” with record passenger numbers. But by March of 2020, passenger levels were less than 5 percent of what they were in 2019. They have since recovered somewhat, but not as fast as they hoped or expected: airlines are flying only about 40 percent of passengers and 50 percent of the flights that they were one year ago.
Commercial airline booking revenue is down 80 percent, and the combined airline industry is losing around $150 million per day. But airlines are hardly the only part of the industry affected, and witnesses gave striking numbers in their remarks to illustrate the challenges. Washington-Reagan National Airport is currently processing only 33 percent of last year’s passenger levels. Airports are experiencing a combined loss of at least $20 billion in revenues from passenger facility charges and other fees, while still confronting their fixed costs. Ed Bolen cited how business flights are still only at 50 percent of pre-pandemic levels at Teterboro Airport, one of the busiest business airports in the country. Aircraft orders are also way down, and Peter Bunce cited business jet and piston aircraft orders have decreased by about $5 billion year over year.
The witnesses also cited some of the things that they did during the pandemic to proactively protect passengers and the workforce that was still flying. Airlines and airports in particular invested in better filtration, sanitation, mask requirements, testing requirements and other procedures. Bunce cited business aviation’s “humanitarian flights” during the ongoing crisis, including delivering personal protective equipment when it was scarce.
Witnesses thanked the Administration’s new executive orders requiring masks on airlines and in airports, saying that the federal mandate made it easier for compliance and enforcement. They reiterated the research that shows airline travel is relatively safe because of the enhanced ventilation on planes, and transmission between adjacent passengers is very low when wearing masks. Mr. DeFazio amplified some anecdotal complaints of problems with passengers’ mask compliance, including “jerks that sip water for six hours,” but with new federal rules and potential for fines, compliance is getting better.
Panelists spent significant time thanking Committee members for the funds that the aviation industry has received from Congress. Overall, $60 billion has been enacted so far for the industry, with perhaps more to come. From both the CARES Act and CRRSA, Congress allocated $4 billion to contractors, $12 billion to airports, $4 billion to airlines, and the remaining $40 billion to airlines via the Payroll Support Program (PSP). In particular, Calio remarked that the industry was “forever in your debt” and Joe DePete saying that the PSP is “without a doubt the most historic, worker forward, critical bridge to recovery.”
The PSP is credited with directly saving nearly 100,000 jobs, but it has had a few spinoff benefits that the panel discussed. First, by keeping employees on the payroll, airlines were able to keep pilots, attendants, and other safety critical personnel trained and certified. The federal dollars greatly increased the confidence in the sector and allowed them to access private loans. The federal assistance has allowed airports, airlines, and contractors to stem the cash bleed and ensure payments to manufacturers, and other suppliers and vendors that they regularly work with. Witnesses called the PDP well designed and crucial to the recovery.
Even with mask rules and continued federal support, the industry still faces an uncertain future. Calio quipped, “you can plan for this virus, but you cannot forecast.” The witnesses offered little in terms of what to expect in the coming months, and much will depend on the public confidence in safety protocols, vaccines, and virus variants. While the airlines had been hoping that by now they would break even financially, they are currently hoping to do so by the end of the year. Ms. Krause stated that low cost, leisure airlines are more likely to recover faster than mainline airlines, and aircraft purchases are likely to be depressed for years. Calio expected a return to 2019 levels not until 2023 or 2024.
Witnesses had advice for policymakers in the Committee, too. Mr. DePete encouraged Congress to review the Chapter 11 process, with a desire to protect collective bargaining agreements in the event of airline bankruptcies and reorganizations. Several panel members echoed a call for TSA, pilots, and other front line aviation workers to receive priority for vaccines. Rep. Thomas Massie (R-KY) cautioned against proposals to create “immunity passports,” citing potential for loopholes and unfairness. The hearing also discussed how the European Union’s and other countries’ patchwork requirements for passenger tests and quarantines might complicate a return to international travel.
Like with any aviation hearing, the Committee members also used the forum as a way to discuss other aviation related issues, foreshadowing upcoming issues that might arise alongside the recovery efforts. Included in this is the Federal Communication Commission’s auctioning of spectrum for 5G applications, security measures at airports, aircraft certification, policy for unmanned aircraft systems (UAS), and sustainable aviation fuels.