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The impact of COVID-19 on the aviation industry within the EU

The aviation industry is one of the most affected industries by the outbreak of COVID-19. There are uncertainties regarding the duration and the impact of the outbreak, but the impact is already massive.

While the aviation industry has already been affected by the Boeing crisis, they must face a new crisis with the outbreak of COVID-19. For several days now, many airlines have cancelled flights within the European Union but also to non-EU destinations.

The table below illustrates the decrease of traffic with only 20,040 flights in the EUROCONTROL Network on March 15, 2020, 6,263 (23.8%) fewer than the equivalent Sunday in 2019.

For the past few weeks, the number of passengers started to drop sharply.

First, many passengers are not willing to fly regarding the current circumstances: the fear to contract the virus or to be forced into quarantine.

Second, many major events had been cancelled all over the world such as conferences or sports competitions.

Then, certain countries discouraged their citizens to travel abroad or to specific countries.

Finally, many countries such as the United States, the European Union or Canada have decided to prohibit access to their territories to all foreigners or citizens from specific countries. On March 17, 2020, the European Union has closed its external borders, which means that all travels between non-EU countries and the EU will be suspended for 30 days.

The International Air Transport Association (IATA) provides the different governmental measures taken by countries regarding COVID-19 on the following link: https://www.iata.org/en/programs/safety/health/diseases/government-measures-related-to-coronavirus/?search=romania&ordering=DateDesc

To date, many EU airlines have suspended most of their flights by reducing flights by 75% to 90%.

This news focuses on (1) the financial impact on aviation and (2) one specific measure requested by the airlines to support them to face this crisis, the temporary airport slot waiver.

(1) Financial impact

In February 2020, IATA has declared that the potential costs of the outbreak to the global industry would amount to $29.3bn this year. At this time, the crisis concerned only China while now it concerns much more countries. On March 5, 2020, IATA published a new analysis of the financial impact of COVID-19 with a 2020 global revenue loss for the passenger business of between $63 billion (in a scenario where the virus is contained in current markets with over 100 cases as of 2 March 2020) and $113 billion (in a scenario with a broader spreading of COVID-19). However, this analysis did not take into consideration the recent travel restrictions imposed by certain countries such as the European Union or the United States.

To cut costs, airlines have adopted measures to reduce administrative budgets, offering unpaid leave and freezing recruitment, promotion and pay rises. To avoid bankruptcy, certain airlines asked their respective governments some emergency financial measures to support them. On March 16, 2020, the three global airline alliances Oneworld, SkyTeam and Star Alliance, which represent almost 60 airlines around the world, have published a joint declaration calling on governments and stakeholders to take action to alleviate the unprecedented challenges faced by the global airline industry amid the COVID-19 pandemic.

(2)  Temporary airport slot waiver

Within the European Union, the slot allocation process is provided by Regulation 95/93 on common rules for the allocation of slots at Community airports. A slot is defined as “the scheduled time of arrival or departure available or allocated to an aircraft movement on a specific date at an airport.” One specific rule concerning the slot allocation is that airlines are obliged to use slots at least 80% of the time over the scheduling period for which they have been allocated. If airlines cannot demonstrate this use, they will lose their slots. In the case of extraordinary circumstances, the European Commission can suspend the implementation of this rule. It was suspended several times in the past for instance after 9/11 terrorist attacks or in 2003 during the SARS epidemic and in 2009 in the midst of the global financial crisis.

IATA has requested that aviation regulators worldwide suspend temporarily the implementation of rules governing the use of airport slots for the 2020 season due to the impact of COVID-19. Last week, the European Commission has decided to answer to the request of airlines and its representatives IATA and A4E. The EU Commission President Ursula von der Leyen declared that “in aviation, the outbreak has a major impact on the European and international industry. The Commission will put forward very rapidly legislation because we want to make it easier for airlines to operate slots.”

de Anne-Valentine Rensonnet , Alexandre Cassart

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