INTHEBLACK December 2021 - Magazine - Page 47
(A$235 billion). In early 2020, for instance, the Hong
Kong Government announced it would spend almost
US$4 billion (A$5.5 billion) to bail out the city’s
flagship airline, Cathay Pacific. In April this year, Air
New Zealand secured an increase in its government
loan from NZ$900 million (A$870 million) to
NZ$1.5 billion (A$1.4 billion). Meanwhile, Qantas
has received A$1.1 billion in government assistance,
and Franco-Dutch airline group Air France-KLM
has collected more than €9 billion (A$14 billion) in
government aid to remain solvent.
While such government measures have been
successful in preventing wide-scale bankruptcies
of global airlines, Volodymyr Bilotkach, associate
professor with Singapore Institute of Technology
and external instructor with IATA Training, says
they can’t last forever.
“A potential problem is that governments will
expect some of this money back,” says Bilotkach,
whose research covers various issues in economics
of the aviation sector. “This will create more issues
for airlines further down the road.”
THE PRICE OF CHANGE
With airlines having limited revenues to pay off
costs and increasing debts, could consolidation
present a solution?
Korean Air, for instance, recently finalised
a merger plan with rival Asiana Airlines. The
US airline market has seen nine mergers and
acquisitions in the two decades since the 2001
terrorist attacks.
“Persistent earnings weakness for two years
is devastating to every airline,” says Webber.
“You have to expect that there will be a subset of
devastated airlines that just won’t survive. Some
airlines may take advantage of this, and we may
see some consolidation.”
However, Bilotkach sees wide-scale consolidation
as unlikely.
“There may be some low-cost airlines buying
each other, or the bigger guys buying small carriers,
but merger across borders is quite difficult,” he
says. “Also, given the wave of mergers in the US
airline market earlier this century, I can’t imagine
further mergers that wouldn’t be challenged by the
regulators. The same may be the case in Europe.”
With COVID-19 grounding the industry’s
lucrative business travel market, leisure travel is
expected to be a greater focus on the pathway to
recovery.
“Leisure travel has always been part of the airline
business, but cultivating the loyalty of business
travellers has been particularly important, because
“YOU HAVE TO
EXPECT THAT
THERE WILL BE
A SUBSET OF
DEVASTATED
AIRLINES THAT
JUST WON’T
SURVIVE. SOME
AIRLINES MAY TAKE
ADVANTAGE OF
THIS, AND WE
MAY SEE SOME
CONSOLIDATION.”
DR TONY WEBBER, UNIVERSITY
OF NEW SOUTH WALES
intheblack.com December 2021 47