A look at airlines’ disaster financials

Since most of us love to travel — by air when we can — some of the fallout of the COVID shut-downs globally on the airline industries is now only just becoming clear and the news is seriously worrying. As if the Boeing 737 Max crashes and retrofit cost and groundings were not hard enough for the industry to bear, now comes the accounting wizards looking at airlines’ bottom lines, shaking their heads.

One of the largest aircraft leasing corporations in the world, Air Lease Corp., has an executive chairman, Steven Udvar-Hazy. In a recent interview in “AvWeek” he proclaimed, “The airline industry has lost everything they earned since World War II — all the profits are gone. And if it was not for government support in the form of guarantees, equity, loans, all kinds of medicine, the airline industry would have been crippled… [they] have mortgaged everything they’ve got — planes, slots, airport terminals, ground facilities or frequent flier programs.”

Compare this period in the airline world with 40 years ago. Back then, only 10% of aircraft were fully leased. Now more than 50% are fully leased with another 15% partially leased. All the other infrastructure — hangars, terminals, service vehicles, you name it, if they once owned it, they have borrowed on it — is now carried as debt. OK, interest rates may be low, but for how long?

The worry here is that short-staffing (people not yet back at work), reduced staffing to save money, union busting to renegotiate salaries — all these factors perhaps necessary to keep airlines from going bankrupt —  may impact air travel safety. 

And if you think the FAA has recouped from four years of cutbacks yet, you are kidding yourself. FAA inspectors are in short supply. So short in supply that some airlines, like American, have canceled flights because repaired, serviced airliners could not get inspected on time.

This all may compound itself into airlines disappearing. We’ve seen airlines fold before. But, worse, it could be a Boeing Max/Trump Administration FAA/COVID outcome leading to an air tragedy.

Writer Peter Riva, a former resident of Amenia Union, lives in New Mexico.