Air crash exposes aviation industry’s “darkest moment”

On May 26, 2020, LATAM, the largest airline in Latin America, filed for bankruptcy protection

In the inspection and maintenance of the aircraft during its dormant period, the accuracy will be biased because parts that may have been degraded cannot be detected. Aircraft and pilots who are resting due to the epidemic will need some time to re-adapt to flight.

On January 9, 2021, a passenger plane carrying 62 people took off from Jakarta International Airport and lost contact with the ground around 14:40. After that, it was found crashing into the waters of the Kuril Islands in Jakarta, killing all the people on board. The aircraft type is Boeing 737-500 passenger plane.

The passenger plane that crashed belongs to Indonesia’s Sriwijaya Airlines, and its age is as high as 26 years. Due to the reduction in flights caused by the epidemic, the aircraft has been parked in the hangar since March 23, 2020. After the outbreak, only 5 of Sriwijaya Airlines, which had 18 aircraft, were still in operation during the lowest point.

The airline’s CEO declared that the company carried out a comprehensive audit in March 2020; the aircraft was in good condition before take-off; the two pilots were experienced and have good flight records. They will practice in a simulated aircraft most of the time in 2020. Ensure that its flying skills are not degraded.

The Indonesian National Traffic Safety Commission also stated at the press conference that the commission inspected the aircraft on December 14, 2020, and issued a safety license on December 17.

However, the chief executive of the International Flight Analysis Company, an air safety consulting company in Sydney, pointed out: “Inspecting and maintaining the aircraft during the dormant period of the aircraft, the accuracy will be biased because the parts that may have been degraded cannot be detected. They are parked in the hangar. In the past 9 months, the aircraft needs to operate regularly, otherwise its functions will be degraded. Both aircraft and pilots who are resting due to the epidemic will need a period of time to re-adapt to flying.”

In recent years, Indonesia’s aviation industry has seen a trend of vigorous development, but the international impression of Indonesian airlines is that the accident rate is still high.

In 2007, the European Union included Indonesian airlines on the list and prohibited them from entering European airspace. Since then, Indonesian airlines have been complying with international flight standards, so in 2018 the European Union lifted the ban on flights for more than 10 years.

The air crash just after the new year has made Indonesia’s aviation industry during the epidemic worse. Over-aged aircraft, Boeing 737 with continuous accidents, bad weather, countries where aircraft accidents often occur, and operational difficulties during the epidemic, etc., are superimposed on many unfavorable factors, making the results of the investigation less mysterious.

The “young” aviation industry
The aviation industry is a product of the second industrial revolution and a relatively young industry. With the global outbreak of the new crown epidemic in 2020, many established airlines are welcoming their centennial birthdays.

In 1926, the predecessor of the current German Lufthansa was established. By the mid-1930s, it had become the largest commercial airline in Europe.

British and French airlines are trying to expand the air force while not forgetting to seize the civilian aircraft market.

/ JAL adopts the traditional Japanese corporate management method: try not to lay off employees. /

The United States gradually rose during the two world wars. After the end of World War II in 1945, American airlines have dominated the industry.

On January 12, 2012, members of the Indonesian Navy and the search and rescue team salvaged the fragments and human remains of the crashed passenger plane

At that time, the routes opened by these veteran imperialist countries were mainly to their colonies in Asia and Africa. At that time, the average carrying capacity of the aircraft was 75 passengers and the flying speed was about 600 kilometers per hour. In 1947, the International Civil Aviation Organization was established in Montreal. It specified English as the international language for pilots and air traffic control, and specified specific terms, radar frequencies, navigation equipment, emergency procedures, runway markings, and airport signals.

On January 12, members of the Indonesian Red Cross disinfected the wreckage of the Indonesian plane crash

With the increase in aircraft seats, air tickets have become more and more accessible to the people. More and more American tourists choose to fly when they go to Europe. In terms of passenger transportation, air traffic has gradually replaced traditional maritime navigation at this time. The 400-seat Boeing 747 listed in 1969 brought about changes in the transportation industry, causing the aviation industry to show explosive growth in the United States and internationally.

In the 21st century, more and more routes and more and more low-cost airlines have led to fiercer competition in the industry. The air ticket price war brought about by competition has benefited more and more ordinary people. Airplanes have become a more popular mode of transportation in the new era.

/ In 2020, more than 43 airlines declared bankruptcy. For comparison, there were 56 in 2018 and 46 in 2019. /

The new crown epidemic brought this convenience to an abrupt end. The grounding of many routes has become the most effective strategy for many countries to contain the epidemic, and airlines have become the first victims. Globally, the epidemic has caused hundreds of thousands of aviation professionals to lose their jobs. The world’s top airlines have to rely on the financial support of the government and shareholders.

Layoffs are the best solution?

The epidemic forced this young industry to face the biggest challenge in its history, and forced the first industry reshuffle to occur. Developed countries are all energetically supporting their own airlines.

After the outbreak, the U.S. government introduced an assistance program for the aviation industry. In the case of government funding, airlines should try to retain employees’ positions. Even with the backing of the government and strong financial support, major airlines still need to reduce operating costs by eliminating older aircraft, grounding some routes, layoffs significantly, or encouraging employees to take unpaid vacations.

The French Finance Minister promised to help Air France tide over the difficulties. In 2004, Air France acquired KLM and became the largest aviation group in Europe. When the group was hit hard in 2020, it received tens of billions of euros in aid from the French government. The International Air Transport Association estimates that the group needs 80 billion euros to repay its debts and resume normal operations.

On January 12, the Indonesian Navy found the “black box” of the crashed airliner

Lufthansa, which owns Austria, Belgium, and Swiss Airlines, received 2 billion euros in aid from the German government, but at the same time sold 20% of the company’s shares to the government. In order to reduce costs, it has to continue to lay off employees.

The executive officer of British Airways told reporters in September 2020 that the new crown epidemic is the biggest crisis the company has encountered since its establishment. He was replaced in October. The union criticized him for cutting 12,000 positions during the epidemic. But he claimed that he had no better plan other than layoffs when the company asked to cut expenditures.

On January 9th, Pontianak, Indonesia, the family members of the passengers waited anxiously at the airport after the passenger plane lost connection.

Australia is the Western country with the best anti-epidemic performance, and its three domestic airlines are still in fierce competition.

Virgin Atlantic filed for bankruptcy in April 2020. In the second half of the year, shareholders have been arguing over the decision to acquire or auction. It has not yet been concluded. In the first half of 2020, Qantas cut about 10,000 positions. In the past, REX Airlines, which only operated remote domestic routes and needed experienced pilots and full-time personnel, took the opportunity to “leak out”.

Japan’s two major airlines, Japan Airlines and All Nippon Airways, have experienced bankruptcies and reorganizations in the past. JAL, which went bankrupt in 2010 and was newly listed after restructuring in 2012, has its first deficit after relisting in 2020.

October 16, 2018, the Renton plant in Seattle, USA, the production line of Boeing 737Max series aircraft

JAL has implemented a traditional Japanese corporate management approach: try not to lay off employees. Hundreds of employees were sent to other factories, enterprises, call centers or government departments to do short-term jobs. Their past experience proves that employees are more important than shareholders. When the general environment is restored, employees will maintain a higher level of loyalty to the company.

So in the face of difficulties, JAL chose to sell its shares, use the funds raised to replace the Boeing 777s with the more fuel-efficient Airbus 350, and support its low-cost airlines to use the remaining funds to repay interest-bearing debt.

More than half of the airlines eliminated by the epidemic?

The International Air Transport Association estimates that the global aviation industry lost more than 77 billion US dollars in the second half of 2020, and it will not be possible to return to the level before the epidemic until at least 2024.

The epidemic has also prevented many companies from hiding and delaying long-standing problems. On February 11, 2020, Alitalia ceased operations. Colombian Avianca Airlines, which survived the Great Depression of the last century, could no longer escape the impact of the epidemic and filed for bankruptcy in April 2020. Before the outbreak of the epidemic, South African Airways requested the government to allocate tens of billions of South African Rand. After being rejected, the company was no longer able to continue.

In 2020, more than 43 airlines declared bankruptcy. For comparison, there were 56 in 2018 and 46 in 2019. From the data point of view, the epidemic has not made the situation particularly bad. As of October 2020, there are 485 idle aircraft in the world. Compared with 431 in 2019 and 406 in 2018, there is no significant difference.

It turned out that the outbreak of the epidemic made many airlines a blessing in disguise and received government funding. Many airlines that are state-owned or part-owned by the government, such as Emirates, Qatar Airways, Thai Airways, Singapore Airlines, etc., have their governments expressing their willingness to support them and wait for the market to improve.

At the end of 2020, Sydney’s International Flight Analysis Company predicted that about half of the airlines will eventually be eliminated in the new crown epidemic, including many established and well-known companies. Compared with government-backed airlines, small airlines, airlines from some third world countries, newly established low-cost airlines, and airlines that mainly operate vacation and leisure routes are not so lucky. They may be merged in the future, or they may withdraw from the market.