Airlines first to be hit by pandemic, and will be last to recover, head of Star Alliance says

Open this photo in gallery:

The global aviation industry was the first to be hit by the COVID-19 pandemic and will be the last to recover, the head of a large airline travel group says.

Passengers and aircraft traffic will not return to 2019 levels for four or five years, and the airlines that survive the virus outbreak will emerge much smaller, said Jeffrey Goh, head of Star Alliance, a marketing group whose members include Air Canada, United, Lufthansa and 23 other airlines.

The pandemic began hitting air travel in January, and by mid-March most airlines had halted about 90 per cent of their schedules as governments closed borders and issued stay-at-home orders. Passenger and aircraft traffic plunged to levels not seen in 65 years, and many carriers will not emerge from the crisis, Mr. Goh said by phone from Frankfurt.

“It’s been a tough seven months,” Mr. Goh said. “Things got turned upside down over something that the industry didn’t cause.”

Air Canada has laid off 20,000 people – half its work force – parked planes and cancelled thousands of flights. WestJet Airlines has laid off 4,000 people, idled 140 of its 181 planes and suspended most flights to Atlantic Canada. Toronto-based regional carrier Porter Airlines stopped flying in March and has delayed its restart several times.

Mr. Goh said the domestic market for Canadian carriers is normally “resilient” and should rebound, eventually. However, the once-lucrative international travel market will be slow to recover, he said, and is dependent on a patchwork of quarantines, travel restrictions, testing protocols and, eventually, a vaccine.

The federal government is readying a package of aid for the aviation industry that includes low-interest loans and reductions in certain fees, subject to conditions that include the restart of some routes. The exact shape of the package, timing and eligible recipients have not been announced. Airlines and aviation companies welcomed the prospect of aid, but say the government has not signalled when any announcement could be made.

“The details are still very much under discussion and in reflection,” Prime Minister Justin Trudeau told reporters on Friday.

James Bogusz, chief executive of the Regina Airport Authority, said he has lobbied the federal government many times for a grant or forgivable loan but has not heard when or if help is coming. The airport, which operates on fees it collects from airlines and customers, has seen daily traffic fall to five or six flights from about 25. A recovery is three to four years away, he estimated.

“We are going to be out of cash in 60 days,” Mr. Bogusz said by phone. “We still have cargo operations … and cargo has been fairly busy, but it’s the passenger side that pays our bills.”

Nav Canada, the private company that manages domestic and transatlantic air traffic, late Thursday underscored the depth of the industry’s collapse, as it reported a $584-million annual loss for the 12 months ending on Aug. 31. Revenue fell 30 per cent to $1-billion, said Nav Canada, which laid off 720 people, or 14 per cent of its staff, raised charges for airlines and borrowed more than $1-billion to stay afloat.

Brian Boudreau, a spokesman for Nav Canada, declined to comment on the prospect of government aid. “We have been managing this on our own since March,” he said.

Airlines have called for a combination of grants, loans, reduced landing and other fees, in addition to looser travel restrictions in tandem with COVID-19 testing of passengers. The federal government has already offered wage subsidies and rent reductions at airports, as well as commercial-rate loans.

Transat AT Inc., a Montreal-based leisure airline, recently secured $250-million in financing that will allow it to operate until its takeover by Air Canada is complete, early in 2021. Export Development Canada, a government agency, will lend $100-million to $200-million of the commercial-rate loan arranged by National Bank of Canada. On top of that, Transat needs low-interest loans or grants and a “science-based” approach to reopening borders and lifting quarantines, said Christophe Hennebelle, a Transat spokesman.

“Any news that the government is finalizing plans to deliver on its promised support for the hard-hit airline sector is very welcome news, if we want the Canadian industry to be able to weather the crisis, remain competitive on the global stage and support the wider Canadian economic recovery,” he said.

With reports from Nicolas Van Praet

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.