Gediminas Ziemelis: The true scale of COVID-19 pandemic – losses of US$17.45 billion per month

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 US$419 billion in lost revenue and US$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 US$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 US$800 thousand. To calculate the profit of an active commercial aircraft, continuous maintenance and servicing costs amounting to US$200 thousand should be taken into account, along with a further US$200 thousand in average going towards payments to leasing companies and lastly about US$64 thousand in crewing costs, which adds up to a profit of around US$300 thousand per month.

In contrast, a grounded aircraft generates about US$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 US$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 US$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 US$15.8 billion per month.

With industry averages of US$7.7 million in revenue per month, US$700 thousand for leasing payments, US$500 thousand for direct maintenance cost and US$280 thousand in crew costs taken, the total monthly profit per long-haul aircraft in normal market conditions amounts to US$6.2 million.

In contrast to an ideal market, a grounded long haul aircraft is currently burning through US$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 US$500 thousand to US$60 thousand. In the end, under COVID-19 conditions, one grounded long-haul airliner deducts US$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 US$17.45 billion per month, the excess number of aircraft are proving to be a burden rather than a workhorse they once were.