An Airlines Decision on Change Discussion

Read the article Below and answer the following questions: 3-4 paragraphs only, no cover page needed.

• Describe in some level of detail how the operating cost structures of any of the major airlines are impacted by COVID on their businesses? Specifically address course variable and fixed costs of an airline.
• As you remember from Module 3, fixed costs are exactly that for the airlines-fixed and unavoidable. List several examples of fixed costs for an airline that cannot be avoided because of COVID?
• Can you think of any examples of what type of business strategies an airline can employ to try to cover, at least in the meantime, some of these fixed costs until their businesses fully recover? Again, be specific and creative, please, in your initial response to this question.

3-4 paragraphs only

The lesson is clear: No matter the obstacles, there will always be people (and cargo) who will fly.

Airlines have added a number of very long international flights to schedules in December, a sign of resilience and necessity in air travel. Some of the new flights are a result of increased holiday travel and cargo demand in key cities. Many will have small passenger loads — 30 or 40 people on a wide-body jet. But with the right cargo load, that’s enough to at least break even on many trips, airlines say.

That also could mean nine, 12, even 18 hours in an enclosed space in the middle of the pandemic, a choice many would-be fliers have avoided. Robust ventilation and air filtration in cabins does reduce, but not eliminate, viral transmission risk. Even with the risks, quarantines and restrictions, the increased flying just shows that there will always be people who need to go.

“Air service is critical. People want to travel — even with a 14-day quarantine, even with all the testing — and these vital travel lanes are key to having those connections,” says Patrick Quayle, vice president of international network and alliances at United.

The number of scheduled passenger flights at least 3,400 miles long — New York-London is 3,451 miles — jumped 23% to 32,317 world-wide in December compared with November, according to Cirium, an aviation data company. December schedules still had 70% fewer flights than December 2019, but the number of flights scheduled was three times as many as the May low for long-haul international trips.

Many countries limit entry to citizens, legal residents or people who get special permission from government agencies. Many require a 14-day quarantine or a negative Covid-19 test. It’s best to check the requirements at the website of the U.S. Embassy of a particular country, or at the U.S. State Department’s travel information page.

Airlines say international passengers typically boil down to dual citizens and legal residents, government officials, health-care officials and family members flying to see dying relatives or attend weddings or other gatherings. The global diaspora of workers has created more demand for air travel even in the pandemic.

“There are still millions of people who have not been able to reunite with their friends and families,” says Mark Drusch, senior vice president of revenue management at Qatar Airways.

Qatar has been somewhat opportunistic during the pandemic, maintaining flights to 30 destinations and actually adding several new cities, including San Francisco. On Tuesday, Qatar announced it will start flying from Doha to Seattle in March — the airline’s 11th U.S. city.

Australia has some of the strictest requirements for travel. It requires 14-day quarantines in a government-designated facility, and inbound flights have restrictions on passenger load based on availability of quarantine beds.

Qantas, Australia’s flag carrier, suspended all international flights except to New Zealand because of government restrictions. But United kept going with a daily trip between San Francisco and Sydney. It has been the only airline that never stopped flying between the Americas and Australia.

Mr. Quayle says each United flight is limited to about 35 to 40 passengers, based on available government quarantine capacity. The airline is flying to Australia with a 250-seat Boeing 787. Cargo helps cover a lot of the cost of operating the trip, and with that, those few passengers are enough to make the trip worthwhile.

United added Los Angeles-Sydney flights to its schedule this fall. So did American and Delta.

Singapore Airlines, which has been flying to San Francisco and Los Angeles despite restrictions on who can enter Singapore, restarted the longest flight in the world in November — a nonstop between Singapore and New York.

There are also an average of 26 flights a day in each direction between the U.S. and London.

British Airways is flying to 12 U.S. cities, down from 22 in December 2019 but still considerable given the pandemic. And Virgin Atlantic is flying more than half its normal December schedule to the U.S., reaching Boston, New York, Washington, D.C., Atlanta, Orlando, Miami, Las Vegas, Los Angeles, San Francisco and Seattle.

Lufthansa, which flies to 11 U.S. cities, half of what it used to serve, says it evaluates flights each month and drops any that won’t be profitable based on expected cargo and passenger revenue. It helps that fuel prices are low.

The airline is using smaller planes for formerly busy routes, switching a jumbo with 509 seats for a plane with 279 seats, for example, and sometimes flying only two or three days a week instead of daily, says Larry Ryan, Lufthansa’s senior director of sales in the U.S. He says the reduced number of seats each week more closely matches demand.

“It’s very much hit and miss,” he says.

Many passengers are flying to family in Europe, the Middle East and Africa, he says.

“Presently Africa is playing a tremendous role in Lufthansa’s long-haul revenue overall, which it never would have played in the past,” Mr. Ryan says.

Nigeria closed its borders for a long period, then opened up to a few flights a week beginning the first week of December. That sparked a rush of corporate passengers, as well as Nigerians living in the U.S., Mr. Ryan says.

United is flying to Frankfurt from six U.S. hubs — the same number as last year — and Mr. Quayle says 70% of passengers are connecting from there. Before the pandemic, travelers could fly nonstop to many more cities in Europe and beyond. Now, to get to Rome or Prague on United, they must connect in Frankfurt to Lufthansa.

Airline executives expect a drop in long international flights in January — some of this surge is based on December holiday traffic. But some expansion will continue next year, too.

Credit: By Scott McCartney