Since March 2020, airlines have been fighting a battle against all odds. Even with the industry exhibiting some signs of recovery, the true test of survival is not over yet.
With IATA predicting $419 billion in lost revenue and $84.3 billion in losses, airlines are certainly feeling the impact of COVID-19 crisis. According to calculations, the world’s 20 largest airlines are facing a cumulative loss of about $17.45 billion every month.
In a normal market environment, a single narrow-body aircraft is expected to generate an average monthly revenue of approximately $800 thousand. To calculate the profit of an active commercial aircraft, continuous maintenance and servicing costs amounting to $200 thousand should be taken into account, along with a further $200 thousand in average going towards payments to leasing companies and lastly about $64 thousand in crewing costs, which adds up to a profit of around $300 thousand per month.
In contrast, a grounded aircraft generates about $300 thousand in losses per month. With the same leasing and crewing costs applicable even when an aircraft is not in commercial use and the only reduction coming from the maintenance bill being reduced to $30 thousand per month. When calculating the difference between aircraft profit in normal conditions of the market and the losses of COVID-19 affected market, the total loss amounts to $600 thousand per plane, per month.
The same calculations performed on more than 1 800 long-haul aircraft in the top 20 biggest airlines’ fleet amounts to an astounding loss of $15.8 billion per month.
With industry averages of $7.7 million in revenue per month, $700 thousand for leasing payments, $500 thousand for direct maintenance cost and $280 thousand in crew costs taken, the total monthly profit per long-haul aircraft in normal market conditions amounts to $6.2 million.
In contrast to an ideal market, a grounded long haul aircraft is currently burning through $1.04 million per month, due to still being subject to the same leasing payments and crew costs, with the only capital expenditure reduction coming in the maintenance section with a drop from $500 thousand to $60 thousand. In the end, under COVID-19 conditions, one grounded long-haul airliner deducts $7.24 million per month from an airline’s revenue.
Overall, the market’s 20 largest airlines measured by capacity, manage approximately a third (≈8300 airplanes) of the global commercial aircraft fleet. With combined losses of $17.45 billion per month, the excess number of aircraft are proving to be a burden rather than a workhorse they once were.