tag:theconversation.com,2011:/au/topics/airline-industry-37730/articlesAirline Industry – The Conversation2024-03-15T12:10:30Ztag:theconversation.com,2011:article/2258572024-03-15T12:10:30Z2024-03-15T12:10:30ZWhy do airlines charge so much for checked bags? This obscure rule helps explain why<p>Five out of the six <a href="https://www.oag.com/blog/biggest-airlines-in-the-us">biggest U.S. airlines</a> have <a href="https://www.cnbc.com/2024/03/05/delta-is-the-latest-airline-to-raise-its-checked-bag-fee.html">raised their checked bag fees</a> since January 2024.</p>
<p>Take American Airlines. In 2023, it cost US$30 to check a standard bag in with the airline; <a href="https://www.usatoday.com/story/travel/airline-news/2024/02/20/american-airlines-bag-fees-mileage-earning/72669245007/">today, as of March 2024, it costs $40</a> at a U.S. airport – a whopping 33% increase.</p>
<p>As a <a href="https://www.bu.edu/questrom/">business school</a> <a href="https://www.bu.edu/questrom/profile/jay-zagorsky/">professor who studies travel</a>, I’m often asked why airlines alienate their customers with baggage fees instead of bundling all charges together. <a href="https://www.vox.com/2015/4/16/8431465/airlines-carry-on-bags">There are</a> <a href="https://www.usatoday.com/story/travel/columnist/2023/06/21/bag-fees-will-stay-a-while-cruising-altitude/70338849007/">many reasons</a>, but an important, often overlooked cause is buried in the U.S. tax code.</p>
<h2>A tax-law loophole</h2>
<p>Airlines pay the federal government <a href="https://www.ecfr.gov/current/title-26/chapter-I/subchapter-D/part-49/subpart-D">7.5% of the ticket price</a> when <a href="https://www.pwc.com/us/en/services/tax/library/aircraft-club-nov-2023-air-transport-excise-tax-rates-for-2024.html">flying people domestically, alongside other fees</a>. The airlines dislike these charges, with their <a href="https://www.airlines.org/dataset/government-imposed-taxes-on-air-transportation/">trade association arguing</a> that they boost the cost to the consumer of a typical air ticket by around one-fifth.</p>
<p>However, the U.S. Code of Federal Regulations <a href="https://www.ecfr.gov/current/title-26/chapter-I/subchapter-D/part-49/subpart-D/section-49.4261-8">specifically excludes baggage</a> from the 7.5% transportation tax as long as “the charge is separable from the payment for the transportation of a person and is shown in the exact amount.”</p>
<p>This means if an airline charges a combined $300 to fly you and a bag round-trip within the U.S., it owes $22.50 in tax. If the airline charges $220 to fly you plus separately charges $40 each way for the bag, then your total cost is the same — but the airline only owes the government $16.50 in taxes. Splitting out baggage charges saves the airline $6.</p>
<p>Now $6 might not seem like much, but it can add up. Last year, passengers took <a href="https://www.transtats.bts.gov/Data_Elements.aspx?Data=1">more than 800 million trips on major airlines</a>. Even if only a fraction of them check their bags, that means large savings for the industry.</p>
<p>How large? The government has <a href="https://www.bts.dot.gov/topics/airlines-and-airports/baggage-fees-airline-2023">tracked revenue from bag fees</a> for decades. In 2002, airlines charged passengers a total of $180 million to check bags, which worked out to around 33 cents per passenger. </p>
<p>Today, as any flyer can attest, bag fees are a lot higher. Airlines collected over 40 times more money in bag fees last year than they did in 2002.</p>
<p>When the full data is in for 2023, <a href="https://www.bts.dot.gov/baggage-fees">total bag fees</a> will likely top $7 billion, which is about $9 for the average domestic passenger. <a href="https://viewfromthewing.com/the-real-reason-airlines-charge-checked-bag-fees-and-its-not-what-you-think">By splitting out the cost of bags</a>, airlines avoided paying about half a billion dollars in taxes just last year.</p>
<p>In the two decades since 2002, flyers paid a total of about $70 billion in bag fees. This means separately charging for bags saved airlines about $5 billion in taxes.</p>
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<p>It seems clear to me that tax savings are one driver of the unbundling of baggage fees because of a quirk in the law.</p>
<p>The U.S. government doesn’t apply the 7.5% tax to <a href="https://www.ecfr.gov/current/title-26/chapter-I/subchapter-D/part-49/subpart-D/section-49.4261-3">international flights that go more than 225 miles</a> beyond the nation’s borders. Instead, there are fixed <a href="https://www.airlines.org/dataset/government-imposed-taxes-on-air-transportation">international departure and arrival taxes</a>. This is why major airlines charge $35 to $40 <a href="https://www.aa.com/i18n/travel-info/baggage/checked-baggage-policy.jsp">for bags if you’re flying domestically</a>, but don’t charge a bag fee when you’re flying to Europe or Asia.</p>
<h2>Do travelers get anything for that money?</h2>
<p>This system raises an interesting question: Do baggage fees force airlines to be more careful with bags, since customers who pay more expect better service? To find out, I checked with the Bureau of Transportation Statistics, which has been <a href="https://www.bts.gov/content/mishandled-baggage-reports-filed-passengers-largest-us-air-carriersa">tracking lost luggage for decades</a>. </p>
<p>For many years, it calculated the number of mishandled-baggage reports per thousand airline passengers. The government’s data showed mishandled bags peaked in 2007 with about seven reports of lost or damaged luggage for every thousand passengers. That means you could expect your luggage to go on a different trip than the one you are taking about once every 140 or so flights. By 2018, that estimate had fallen to once every 350 flights.</p>
<p>In 2019, the government <a href="https://www.bts.gov/topics/airlines-and-airports/number-30a-technical-directive-mishandled-baggage-amended-effective-jan">changed how it tracks</a> mishandled bags, calculating figures based on the total number of bags checked, rather than the total number of passengers. The new data show about six bags per thousand checked get lost or damaged, which is less than 1% of checked bags. Unfortunately, the data doesn’t show improvement since 2019.</p>
<p>Is there anything that you can do about higher bag fees? Complaining to politicians probably won’t help. In 2010, two senators <a href="https://www.nj.com/business/2010/04/us_senators_present_bill_to_ba.html">tried to ban bag fees</a>, and their bill went nowhere.</p>
<p>Given that congressional action failed, there’s a simple way to avoid higher bag fees: <a href="https://www.cnn.com/travel/article/packing-expert-travel-world-handbag/index.html">travel light</a> and <a href="https://www.nytimes.com/2023/07/08/opinion/carry-on-packing-airlines-lost-luggage.html">don’t check any luggage</a>. It may sound tough not to have all your belongings when traveling, but it might be the best option as bag fees take off.</p><img src="https://counter.theconversation.com/content/225857/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jay L. Zagorsky does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The answer lies in the tax code.Jay L. Zagorsky, Associate Professor of Markets, Public Policy and Law, Boston UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2231732024-03-03T14:27:09Z2024-03-03T14:27:09ZWhat Lynx Air’s failure tells us about the state of the Canadian airline industry<p>Lynx Air is the <a href="https://globalnews.ca/news/10319776/lynx-air-shutdown-low-cost-airline-failures/">latest in a long line of low-cost airlines</a> to fail in Canada. The airline ceased operations on Feb. 26, four days after <a href="https://calgary.ctvnews.ca/lynx-air-files-for-creditor-protection-final-flight-scheduled-for-feb-26-1.6780174">announcing it had entered creditor protection</a> on Feb. 22.</p>
<p>This scenario is not novel in Canadian commercial aviation; Canada has had its fair share of discount carrier failings due to poor financial health. </p>
<p>Over the last 30 years, carriers such as <a href="https://www.cbc.ca/news/business/canada-3000-timeline-1.298111">Canada 3000</a>, <a href="https://simpleflying.com/nationair-canada-what-happened/">Nationair</a>, <a href="https://www.travelweekly.com/Travel-News/Airline-News/Greyhound-Air-to-Shut-Down">Greyhound Air</a>, <a href="https://www.ctvnews.ca/business/remember-roots-airline-a-list-of-canadian-discount-airlines-that-have-left-the-skies-1.6785045">Roots Air</a> and <a href="https://www.cbc.ca/news/business/skyservice-airline-goes-under-1.733598">SkyService</a> have all succumbed to some form of financial duress and have disappeared from the Canadian discount carrier scene. </p>
<p>The closure of Lynx provides us with an opportune time to review the state of Canadian commercial air travel and identify the challenges and opportunities Canada has in maintaining, and possibly improving, the sustainability of the sector.</p>
<h2>Why did Lynx fail?</h2>
<p>For several weeks earlier this year, <a href="https://www.thestar.com/business/discount-carriers-flair-airlines-and-lynx-air-in-merger-talks-industry-insiders-say/article_66cc1896-cb7b-11ee-9c2e-3b0d7489ee49.html">speculation was rampant that a merger between Flair Airlines and Lynx was close</a>. This would have meant Canadian air travellers seeking low airfares would face an uncertain future with one fewer ultra-low-cost carrier.</p>
<p>Neither carrier publicly acknowledged the existence of such an agreement, simply stating they <a href="https://www.aerotime.aero/articles/ynx-air-flair-airlines-merger-talks">would not comment on market speculation</a>.</p>
<p>The <a href="https://www.cbc.ca/news/canada/calgary/lynx-flair-canadian-airlines-calgary-1.7127454">circumstances surrounding the financial state of Lynx</a> — a private company not required to publicly disclose its operating and financial performance — were cited as the principal drivers of the Lynx situation. </p>
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<img alt="Flair Airlines check-in counters seen in an airport" src="https://images.theconversation.com/files/579031/original/file-20240229-20-2lth77.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/579031/original/file-20240229-20-2lth77.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/579031/original/file-20240229-20-2lth77.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/579031/original/file-20240229-20-2lth77.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/579031/original/file-20240229-20-2lth77.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/579031/original/file-20240229-20-2lth77.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/579031/original/file-20240229-20-2lth77.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Flair Airlines check-in counters at Edmonton International Airport in March 2020. There was speculation in early 2024 that a merger between Flair and Lynx was going to take place.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
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<p>One would normally expect the firm <a href="https://www.travelpulse.ca/news/airlines-airports/reports-say-a-flair-airlines/lynx-air-merger-is-imminent">that was rumoured to be</a> acquiring Lynx to be able to address any and all financial considerations of the merger. But Flair seemed to have financial and legal issues of its own, ranging from <a href="https://www.thestar.com/business/ceo-says-flair-has-resolved-foreign-ownership-issue-mostly-amid-regulatory-probe/article_2643890f-051d-5f4f-8627-a147681560f4.html">corporate governance</a> to <a href="https://www.cbc.ca/news/business/flair-airlines-unpaid-taxes-cra-seizure-order-1.7098045">finances</a>.</p>
<p>The merger failed to be consummated, with <a href="https://globalnews.ca/news/10321582/lynx-air-debt-flair-airlines-purchase/">numerous claims contained in the Lynx court documents</a> pointing to the need to repay one of Lynx’s shareholders’ debt.</p>
<p>In short, there were two financially weak airlines attempting to consolidate, with neither having sufficient financial strength to complete the merger. Lynx prepared its bankruptcy filing in short order, as it was also experiencing significant financial stress.</p>
<h2>Why haven’t airlines learned from these failures?</h2>
<p>Airline entrepreneurs that launch discount carriers are driven by the belief that the success of their airlines is closely tied to their ability to attract a substantial number of passengers. They aim to <a href="https://aeroxplorer.com/articles/a-quick-reference-guide-to-starting-your-own-airline.php">stimulate travel demand and maintain their competitive stance in the markets they serve</a>.</p>
<p>A common element among most of these entrepreneurial-focused airlines has been to use pricing as a <a href="https://www.cnn.com/travel/article/airline-pricing-secrets/index.html">key tactic for market stimulation and capture</a>.</p>
<p>Throughout most of 2022 and early 2023, <a href="https://globalnews.ca/news/8973662/how-to-find-cheaper-flights-canada-airfare/">Lynx and Flair were price leaders in North America, sometimes by significant margins</a>. They primarily competed with one another, introducing new services across Canada and the United States, <a href="https://www.theglobeandmail.com/investing/personal-finance/household-finances/article-price-of-flights-fall-2022-travel/">providing airfare savings to Canadians and creating demand</a>. </p>
<p>But this price competition did not create enough revenue to generate even marginal profitability. The established airline duopoly in Canada — Air Canada and WestJet — did not actively respond to these price initiatives, as they were occupied with <a href="https://globalnews.ca/news/8338817/canada-airlines-restoring-capacity-flights/">rebuilding their capacities following COVID-related layoffs</a>.</p>
<p>In the fall of 2023, after the absorption of both Swoop and Sunwing into the WestJet family, both WestJet an Air Canada undertook a number of pricing actions. They began offering competitive routes overlapping with Flair and Lynx, which <a href="https://www.theglobeandmail.com/business/article-airlines-ramp-up-growth-plans-amid-increased-competition-setting-stage/">narrowed the price gap among Canadian carriers</a>.</p>
<p>The countdown had begun on the longevity of discount carriers. Lynx ran out of time and money in February 2024 and the clock is most likely ticking on Flair’s ability to remain viable.</p>
<h2>Is the duopoly once again to blame?</h2>
<p>The pricing actions undertaken in fall 2023 seem to point to very specific initiatives designed to lessen the attraction of discount carriers, particularly among WestJet and Air Canada’s customers. </p>
<p>Despite the power of frequent flyer reward programs and the inclusion of travel elements that are considered ancillary to discount carrier fare offerings, <a href="https://globalnews.ca/news/8983216/canada-recession-inflation-leger-poll/">the fear of a recession has significantly lessened the demand for air travel</a> in Canada. Corresponding pricing actions have followed.</p>
<p>The pricing allure of discount carriers faded rapidly and forced them to further reduce airfares to <a href="https://globalnews.ca/news/10282017/flair-airlines-2024-travel-forecast/">maintain their position in the marketplace</a>. </p>
<p>The Canadian government has steadfastly maintained its belief that the air carrier marketplace should be free of government oversight and that carrier survivability is best <a href="https://globalnews.ca/news/9409483/poilievre-conservatives-safety-inflation-travel/">judged by air travellers themselves</a>.</p>
<h2>A new approach is needed</h2>
<p>The time might now be ripe to consider a new regime for managing pricing behaviour among airlines that are pricing below a profitable return. There is also a need to address the actions of WestJet and Air Canada, which have been engaging in aggressive pricing actions aimed at undermining discount carrier sustainability.</p>
<p>An ever-increasing number of potential amendments to the Canadian commercial air travel model have been suggested, most notably those that look to the creation of a civil aviation agency similar to the <a href="https://www.faa.gov/about">Federal Aviation Administration in the United States</a> and the <a href="https://www.gov.uk/government/organisations/civil-aviation-authority">Civil Aviation Authority in the United Kingdom</a>. This would separate the commercial oversight from the regulatory actions, both of which are currently administered by Transport Canada.</p>
<p>Another opportunity would be to create a regulated airfare pricing regime that would establish floor pricing for discount carriers, as well as pricing limits for larger scheduled carriers competing with discount carriers. This would allow discount carriers the breathing room to offer fares without threat from aggressive pricing actions. </p>
<p>The lessons of discount carriers’ failures and the subsequent angst felt by both air travellers and airline staff must be recognized and action taken to change course. The reputation of the Canadian air travel marketplace deserves better.</p><img src="https://counter.theconversation.com/content/223173/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Gradek does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The closure of Lynx is an opportune time to review the state of Canadian commercial air travel and identify the challenges and opportunities Canada has in improving the sector.John Gradek, Faculty Lecturer and Academic Program Co-ordinator, Supply Network and Aviation Management, McGill UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2195912023-12-12T17:30:11Z2023-12-12T17:30:11ZThe NZ aviation industry is making bold climate claims – and risking anti-greenwashing litigation<p>On the same day last week that Air New Zealand announced the purchase of its <a href="https://www.rnz.co.nz/news/business/504050/air-new-zealand-purchases-its-first-battery-powered-electric-aircraft">first fully electric aircraft</a>, Christchurch Airport <a href="https://www.christchurchairport.co.nz/about-us/who-we-are/media/2023/cop28-christchurch-airport-among-first-ten-in-the-world-to-achieve-new-standard-for-decarbonisation/">announced</a> it had reached “a new standard for decarbonisation”. On the face of it, great news for reducing aviation emissions in Aotearoa. </p>
<p>The reality is a little more complex – and risky. As the climate warms, so too is the temperature in boardrooms and courtrooms. The aviation industry is under increasing scrutiny for its sustainability claims, and climate litigation is on the rise.</p>
<p>At the same time, “net zero” strategies in general are being challenged. The United Nations <a href="https://www.un.org/en/climatechange/high-level-expert-group">High-Level Expert Group</a> was established at last year’s COP27 summit, as Secretary General António Guterres explained, because “net zero suffers from a surplus of confusion and a deficit of credibility”. </p>
<p>The expert group has put forward a set of net-zero guidelines to put a “red line through greenwashing”. The guidelines underpin the UN’s approach to net zero, which requires corporate entities to advance ambitious climate mitigation actions based on rigorous and comprehensive <a href="https://sciencebasedtargets.org/about-us">science-based targets</a>. </p>
<p>Among other things, the targets must include emissions reductions from the entity’s <a href="https://zerotracker.net/insights/un-hleg-net-zero-recommendations">full value chain and activities</a>. These include emissions from sources the entity owns and controls directly (known as scope 1); emissions the entity causes indirectly (scope 2); and emissions not produced by the entity itself, but arising up and down its value chain (scope 3). </p>
<p>The expert group also notes that voluntary carbon credits (offsets) <a href="https://zerotracker.net/insights/un-hleg-net-zero-recommendations">cannot be counted</a> towards interim emissions reductions required on the pathway to Net Zero 2050. This is because carbon offsetting has been shown to be <a href="https://theconversation.com/were-burning-too-much-fossil-fuel-to-fix-by-planting-trees-making-net-zero-emissions-impossible-with-offsets-217437">troublesome at best</a>, and in many cases a <a href="https://www.stuff.co.nz/environment/climate-news/79031600/government-allowed-climate-fraud-to-reach-emission-reduction-targets--report">scam</a>. </p>
<h2>Airlines in the firing line</h2>
<p>Key players in the global aviation industry that make unsupportable claims have become <a href="https://theconversation.com/airlines-are-being-hit-by-anti-greenwashing-litigation-heres-what-makes-them-perfect-targets-214501">targets for climate litigation</a>. </p>
<p>A recent greenwashing complaint to the European Commission, for example, was filed by consumer groups in 19 countries against 17 airlines. Virgin Atlantic and British Airways are <a href="https://www.theguardian.com/business/2023/nov/30/airlines-virgin-atlantic-british-airways-face-formal-complaints-over-contested-sustainability-claims">facing formal complaints</a> filed by a climate charity and law firm over sustainable flight claims. </p>
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Read more:
<a href="https://theconversation.com/airlines-are-being-hit-by-anti-greenwashing-litigation-heres-what-makes-them-perfect-targets-214501">Airlines are being hit by anti-greenwashing litigation – here's what makes them perfect targets</a>
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<p>Advertisements for Air France, Lufthansa and Etihad <a href="https://www.bbc.com/news/business-67625200">have been banned</a> in the UK for greenwashing, following complaints to the UK Advertising Standards Board that phrases such as “protecting the future”, “sustainable avitaion” and “low-emissions airline” are misleading consumers.</p>
<p>Delta faces a <a href="https://www.bloomberg.com/news/articles/2023-06-13/a-greenwashing-lawsuit-against-delta-aims-to-set-a-precedent">class action lawsuit</a> for claiming to be “the first carbon neutral airline on a global basis” in a case brought by a California resident claiming the airline has grossly misrepresented its climate impact. </p>
<p>And KLM is <a href="https://www.reuters.com/business/aerospace-defense/greenwashing-lawsuit-against-klm-can-proceed-dutch-court-2023-06-07/">being sued</a> for greenwashing by law firm Client Earth, which successfully argued the Dutch airline’s “Fly Responsibly” campaign consitutes <a href="https://www.clientearth.org/latest/press-office/press/klm-tells-dutch-court-it-will-pull-fly-responsibly-ads-following-greenwashing-lawsuit/">misleading advertising</a> under EU law while KLM is growing its number of flights rather than reducing emissions.</p>
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<h2>Long-haul growth versus decarbonisation</h2>
<p>Cases like these raise questions about Air New Zealand’s “<a href="https://www.airnewzealand.co.nz/sustainability-carbon-reduction-management">Flight NZ0</a>” <a href="https://flightnz0.airnewzealand.co.nz/">strategy and marketing</a>, which focuses on sustainable aviation fuel and next-generation aircraft (including its recently bought electric <a href="https://www.beta.team/aircraft/">Beta Alia</a>), complemented by carbon offsetting and operational efficiency.</p>
<p>The focus on sustainable fuel will have to overcome significant scientific, energy, scalability and cost <a href="https://www.sciencedirect.com/science/article/pii/S0048969723025044">barriers</a>. Solutions to these <a href="https://royalsociety.org/topics-policy/projects/low-carbon-energy-programme/net-zero-aviation-fuels/">complex problems</a> are likely to be decades away at least.</p>
<p>While Air New Zealand promotes the Beta Alia – with its inherent altitude, payload and range limitations – it also aims to <a href="https://www.airnewzealandnewsroom.com/press-release-2023-air-nz-attracting-offshore-visitors-with-expanded-capacity-and-fleet-investment">significantly increase</a> its long haul network, and is <a href="https://www.stuff.co.nz/business/industries/128136504/air-new-zealand-sets-lofty-goal-for-ultralonghaul-aucklandnew-york-flights">setting its sights</a> on the “ultra long haul experience”.</p>
<p>The contradiction between long-haul growth and decarbonisation strategies is expressed in the airline’s own 2017 <a href="https://p-airnz.com/cms/assets/PDFs/sustainability-report-2017-v2.pdf">sustainability report</a>, in which the sustainability advisory panel chair wrote:</p>
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<p>And that’s the dilemma for anyone who cares passionately about addressing the multiple threats of climate change: either stop flying altogether (the logical but somewhat unworldly idealist’s position), or fly as little and as discriminatingly and responsibly as possible (the often uncomfortable pragmatist’s position). </p>
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<p>As consumers and environmentalists focus more on the validity of climate claims and the viability of carbon reduction strategies, Air New Zealand may find it harder to defend its net zero pathway.</p>
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Read more:
<a href="https://theconversation.com/high-court-decision-on-125-million-fine-for-volkswagen-is-a-warning-to-all-greenwashers-171733">High Court decision on $125 million fine for Volkswagen is a warning to all greenwashers</a>
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<h2>Airports on the radar</h2>
<p>The environmental claims of other players in the wider aviation system – notably airports – are also likely to attract critical attention.</p>
<p>Airports Council International (ACI) is the <a href="https://aci.aero/">global industry body</a> for airports, with over 550 airports taking part in its <a href="https://www.airportcarbonaccreditation.org/">Airport Carbon Accreditation</a> program, including many in New Zealand (most recently <a href="https://www.airportcarbonaccreditation.org/invercargill-airport-joins-airport-carbon-accreditation/">Invercargill Airport</a>).</p>
<p>Christchurch Airport has been in the program for longer, and makes significant climate claims. In April 2022, it <a href="https://www.christchurchairport.co.nz/about-us/who-we-are/media/2022/another-world-class-sustainability-achievement-for-christchurch-airport/">announced</a> “another world class sustainability achievement”, going “beyond carbon neutral, to become climate positive”.</p>
<p>But this doesn’t account for scope 3 emissions, mainly associated with flights in and out of the airport, which make up 95.39% of <a href="https://www.christchurchairport.co.nz/globalassets/about-us/sustainability/carbon/fy2022-23-independent-ghg-inventory-report">total emissions</a>. Airports can only appear to be climate-neutral by not accounting for the high and growing emissions of the planes that are their core business.</p>
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Read more:
<a href="https://theconversation.com/boys-will-be-boys-why-consumers-dont-punish-big-polluters-for-greenwashing-lies-194902">'Boys will be boys': why consumers don't punish big polluters for greenwashing lies</a>
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<h2>Stakeholder reputations on the line</h2>
<p>Key stakeholders are also exposed to any potential accusations of greenwashing. Christchurch City Council own 75% of the airport through a holding company, and the government owns 25%. Both have <a href="https://newsline.ccc.govt.nz/news/story/christchurch-city-council-declares-climate-emergency">declared climate emergencies</a> and made emissions reduction commitments.</p>
<p>Industry groups are involved, too. Tourism Industry Aotearoa, which represents businesses across the tourism industry, last month announced Christchurch Airport the <a href="https://www.tia.org.nz/news-and-updates/industry-news/new-zealand-tourism-awards-winners-for-2023/">winner of its Tourism Environment Award</a>. </p>
<p>It cited the airport’s “climate positive” status and hailed it as being “at the forefront of airport environmental initiatives globally”. Such claims can be technically true if one accepts the limited parameters used to measure them.</p>
<p>But the Tourism Industry Aotearoa will need to ensure its environmental awards keep pace with developments in this rapidly changing field – including the increasing risk of litigation over unsustainable claims about sustainability.</p><img src="https://counter.theconversation.com/content/219591/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>James Higham does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Airlines and airports face increased scrutiny – and possibly legal action – over the contradictions between their sustainability claims and the reality of their high-emissions businesses.James Higham, Professor of Tourism, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2169832023-11-03T03:37:28Z2023-11-03T03:37:28ZThe fury on show at the Qantas AGM couldn’t have come at a worse time for the airline<p>Fielding tough questions from a furious audience is no one’s idea of fun. But as Richard Goyder and Vanessa Hudson – Qantas chairman and chief executive, respectively – dealt with angry question after angry question at the airline’s annual general meeting today, the pair knew their main audience was not those in the room. It was, in fact, the decision-makers in Canberra. </p>
<p>The AGM comes at a critical time for the national carrier. The federal government is considering a suite of aviation policy reforms, many of which Qantas would rather stay unreformed.</p>
<p>Qantas can ill afford further damage to its public image now.</p>
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Read more:
<a href="https://theconversation.com/even-if-qantas-is-fined-hundreds-of-millions-it-is-likely-to-continue-to-take-us-for-granted-213754">Even if Qantas is fined hundreds of millions it is likely to continue to take us for granted</a>
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<h2>Shareholder and community anger</h2>
<p>Qantas had a good year financially, as demonstrated by its <a href="https://www.theguardian.com/business/2023/aug/24/qantas-delivers-record-247bn-profit">A$2.47 billion</a> full-year profits. But consumers are less happy.</p>
<p>These profits have been delivered in part by <a href="https://www.smh.com.au/business/companies/qantas-passengers-to-pay-more-for-flights-as-fuel-costs-bite-20231020-p5edvo.html">rapidly rising air fares</a>.</p>
<p>The Qantas board has also had to deal with anger on executive remuneration, especially around former chief executive Alan Joyce’s <a href="https://www.abc.net.au/news/2023-09-20/qantas-alan-joyce-21-4-million-final-payout/102880572">multimillion-dollar payout</a>. </p>
<p>This rage over executive pay was on full display at today’s AGM, when <a href="https://www.smh.com.au/business/companies/qantas-agm-2023-live-updates-20231102-p5eh5z.html">83%</a> of shareholders voted against Qantas’ remuneration report for the 2023 financial year. <a href="https://www.smh.com.au/business/companies/qantas-agm-2023-live-updates-20231102-p5eh5z.html">Reported</a> as “one of the biggest strikes ever recorded in corporate history”, it is a clear rejection Joyce’s payout.</p>
<p>Qantas has also had to manage allegations it <a href="https://news.yahoo.com/qantas-apologizes-over-tickets-phantom-075506638.html#:%7E:text=STORY%3A%20Qantas%20issued%20an%20apology,a%20hit%20over%20recent%20times.">sold tickets for flights it knew had been cancelled</a>, on top of a suite of PR disasters around <a href="https://www.theaustralian.com.au/subscribe/news/1/?sourceCode=TAWEB_WRE170_a_GGL&dest=https%3A%2F%2Fwww.theaustralian.com.au%2Fbusiness%2Faviation%2Fqantas-reveals-plan-to-tackle-flight-delays-and-lost-bags%2Fnews-story%2Fbd03a7806ef237daa78b541708b92349&memtype=anonymous&mode=premium&v21=HIGH-Segment-1-SCORE&V21spcbehaviour=append">flight delays and lost luggage issues</a>. </p>
<h2>The aviation white paper and Qantas’s optics problem</h2>
<p>The federal government released a new green paper on aviation policy in September and is consulting stakeholders, ahead of publishing a <a href="https://www.infrastructure.gov.au/infrastructure-transport-vehicles/aviation/aviation-white-paper">new white paper</a> on aviation policy next year.</p>
<p>There are several contentious areas of policy Qantas would prefer to remain unchanged. </p>
<p>The white paper panel will no doubt also take into account public sentiment. Optics matter in politics, and so Federal Transport Minister Catherine King and her department would have been taking the pulse of today’s AGM. </p>
<p>The anger on show from shareholders – with Goyder facing jeers, boos and cries of “<a href="https://www.9news.com.au/national/qantas-annual-general-meeting-shareholders-chairman-richard-goyder/945180fd-8ac8-4a4f-982f-edd01b841fcd">shame on you!</a>” – can’t have helped Qantas’s optics.</p>
<p>Any political advisor watching would likely caution the government that now is not a good time to be seen cosying up to the airline.</p>
<p>The 2024 aviation white paper (itself a sequel to Anthony Albanese’s <a href="https://australianaviation.com.au/2009/12/albanese-releases-aviation-white-paper/">2009 aviation white paper</a> while he was transport minister) aims to set a new aviation policy framework out to 2050. </p>
<p>Unlike its predecessor, it will take into account consumer and worker rights – so the angry scenes at today’s meeting will not help Qantas in its efforts to stave off the kind of regulation being discussed in the aviation white paper. </p>
<h2>Mandatory compensation</h2>
<p>One policy under consideration is the idea of mandatory compensation for flight cancellations and delays. </p>
<p>For almost 20 years, air travellers flying from European Union airports have been able to access a guaranteed compensation scheme that is tiered according to length of delay and inconvenience.</p>
<p>Airlines in Europe fought the introduction of the mechanism in 2004. It’s unlikely Qantas would welcome such policies in Australia either.</p>
<h2>Bilateral air service agreements</h2>
<p>Another issue on the table is the negotiation of bilateral air service agreements. These agreements between nation states govern the number of flights between countries, but are seen as archaic in many other OECD countries.</p>
<p>In their place, “<a href="https://theconversation.com/under-open-skies-the-market-not-the-minister-would-decide-how-often-airlines-could-fly-into-australia-213214">open skies</a>” agreements allow unfettered access to foreign carriers and often deliver lower fares to consumers.</p>
<p>Qantas and Virgin Australia both rely on a bilateral air service agreement with the United Arab Emirates for the bulk of their international connections. This agreement still has ample expansion room, but the agreement with neighbouring Qatar is already at capacity. </p>
<p>The seemingly opaque way in which the application by Qatar to enlarge this quota was denied by the federal government angered many in the industry. It led to a senate committee inquiry.</p>
<p>Indeed, a freedom-of-information request was required to discover the decision was, in part, linked to the treatment of <a href="https://www.reuters.com/world/middle-east/australia-says-qatar-strip-searches-women-2020-factor-blocking-extra-flights-2023-09-07/#:%7E:text=SYDNEY%2C%20Sept%207%20(Reuters),pressure%20from%20rival%20Qantas%20Airways.">women strip-searched at Doha airport in 2020</a>. </p>
<p>It’s likely the government will reform the way these bilateral service agreements are negotiated (at least to add greater transparency). </p>
<p>Goyder and Hudson wanted the focus at today’s AGM to be partly on their plan to boost non-stop international flights, all of which hinge on bilateral service agreements with European countries. So Qantas may be nervous about any proposed changes to the negotiation process that make it easier for their would-be rivals to also expand services. </p>
<h2>Greater competition monitoring</h2>
<p>The white paper panel is also considering greater monitoring of competition in air transport. </p>
<p>Airports operate as monopolies in their cities and are regulated as such. Airlines, on the other hand, operate in a competitive landscape. </p>
<p>But the playing field is not level for all airlines and potential entrants, not least because capacity restraints such as takeoff and landing slots can be engineered to favour incumbents. As such, Qantas would no doubt prefer no reform in these areas. </p>
<p>So the terrible optics of today’s Qantas AGM come at a moment when it is very keen to mould the legislative landscape of aviation in its favour. In other words, it couldn’t have come at a worse time.</p>
<p>As Goyder and Hudson fronted shareholders today, their promise to work harder to address customer concerns was aimed as much at Canberra as it was to the Melbourne audience. </p>
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Read more:
<a href="https://theconversation.com/qantas-wont-like-it-but-australian-travellers-could-be-about-to-get-a-better-deal-on-flights-214718">Qantas won't like it, but Australian travellers could be about to get a better deal on flights</a>
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<img src="https://counter.theconversation.com/content/216983/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Justin Wastnage was previously director of two industry groups, Aviation/Aerospace Australia and the Tourism & Transport Forum, which are both funded in part by Australian and international airlines and airports.</span></em></p>The terrible optics of today’s Qantas AGM come at a moment when it is very keen to mould the legislative landscape of aviation in its favour.Justin Wastnage, Adjunct Industry Fellow, Griffith Institute for Tourism, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2127932023-09-06T20:13:52Z2023-09-06T20:13:52ZBooking customers on cancelled flights – how could Qantas do that?<p>Fining Qantas <a href="https://www.atn.aero/#/article.html?id=87951">A$600 million</a> if it is found to have knowingly sold so-called “ghost flights” would be fair, according to the Australian Competition and Consumer Commission.</p>
<p>The commission this week <a href="https://www.accc.gov.au/media-release/accc-takes-court-action-alleging-qantas-advertised-flights-it-had-already-cancelled">launched action</a> in the Federal Court alleging Qantas engaged in false, misleading or deceptive conduct by selling tickets on flights that had already been cancelled, and not informing passengers of cancellations in a timely manner. </p>
<p>The regulator’s charges against the airline, which last month reported a record <a href="https://www.theguardian.com/business/2023/aug/24/qantas-delivers-record-247bn-profit">$2.47 billion profit</a>, have precipitated the early exit of longtime chief executive Alan Joyce, who quit this week two months ahead of schedule. This court challenge will certainly add to the workload of his successor, Vanessa Hudson.</p>
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Read more:
<a href="https://theconversation.com/qantas-chief-alan-joyce-quits-early-amid-customer-fury-at-the-airline-212845">Qantas chief Alan Joyce quits early, amid customer fury at the airline</a>
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<p>Qantas <a href="https://www.atn.aero/#/article.html?id=87951">has acknowledged</a> that service standards might have slipped as the airline was struggling to recover after the pandemic. </p>
<p>The nature of the oversights that led to the airline’s errors will determine the airline’s liability – both to the consumer regulator and to individual claims for compensation. </p>
<p>Importantly, the case also points to the need for greater regulatory protection of the airline’s passengers, in line with other jurisdictions.</p>
<h2>How did Qantas get in this mess?</h2>
<p>The short answer, most likely, is that the carrier did not handle flight cancellations promptly due to the sheer volume of work and labour shortages as it sought to resume operations following the end of pandemic restrictions. </p>
<p>The consumer regulator’s allegations relate specifically to May and June 2022. Australia lifted many of its COVID-related travel restrictions in <a href="https://www.voanews.com/a/australia-lifts-covid-restrictions-and-welcomes-travelers-/6451955.html">March</a>, and travellers entering the country <a href="https://www.travelpulse.com/news/destinations/australia-lifts-remaining-covid-19-travel-restrictions">after July 6</a> were not required to show proof of vaccination. The airline was trying to bring its planes back into service and hire or retrain its employees, and generally was struggling to get back to more or less normal operations.</p>
<p>In its statement, the competition watchdog noted the carrier cancelled nearly one in four flights scheduled during that period; and for two out of three cancelled flights it either continued selling tickets or failed to inform the passengers –sometimes for extended periods of time – or both. </p>
<p>Flight cancellations are a normal part of an airline’s operations. However, the “usual” cancellation rate is <a href="https://www.transportation.gov/briefing-room/air-travel-consumer-report-march-2023-and-1st-quarter-2023-numbers#:%7E:text=DOT%20remains%20committed%20to%20ensuring,first%20three%20months%20of%202022.">less than 2%</a>, less than a tenth of what Qantas experienced in May and June 2022. What is unusual is that Qantas did not immediately remove cancelled flights from its booking system. This is something I have never heard of. </p>
<p>One also suspects the airline has had enough “practice” with schedule adjustment during the pandemic to know better. There are clearly gaps in the carrier’s management. It has lessons to learn from this debacle.</p>
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Read more:
<a href="https://theconversation.com/qantas-cant-charge-these-prices-forever-the-challenge-ahead-for-new-chief-vanessa-hudson-204903">Qantas can't charge these prices forever: the challenge ahead for new chief Vanessa Hudson</a>
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<h2>What is Qantas’ liability?</h2>
<p>The question of the extent of the airline’s liability is not straightforward. Obviously, a business willingly selling a product or service it has no intention to deliver is at fault, and has to face consequences. </p>
<p>At the same time, a business selling a product that has defects it is unaware of, despite doing its best to prevent such defects from occurring, will face certain costs (such as those associated with a product recall) but may be spared sanctions. </p>
<p>The onus will be on Qantas to demonstrate it made an honest mistake rather than a lapse of judgement. But considering the scale of the problem, the airline faces a very difficult task here.</p>
<h2>Individual claims pending</h2>
<p>As well as a potential fine, Qantas should brace for a flood of claims from individual passengers who bought a ticket for an already cancelled flight or were not informed in a timely manner. </p>
<p>Timing will be of the essence here. If a passenger incurred expenses assuming the flight was operating when it had already been cancelled, such as making a non-refundable hotel reservation, there is a case to request compensation for such expenses.</p>
<p>Otherwise, the standard policy will apply: the airline is not usually responsible for any non-refundable and uninsured expenses a passenger incurs prior to the flight cancellation.</p>
<h2>Closing the regulatory gap</h2>
<p>The regulator should, however, also take a closer look at the existing air passenger rights in Australia. </p>
<p>Currently, <a href="https://www.accc.gov.au/consumers/specific-products-and-activities/travel-delays-and-cancellations">the consumer is entitled to replacement or refund</a> if an airline does not provide services “in a reasonable time” - that is, in the event of a lengthy delay or a flight cancellation. However, the definition of “reasonable time” and the specifics of the compensation policies are left to the airlines. </p>
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Read more:
<a href="https://theconversation.com/will-it-be-greener-pastures-for-qantas-as-alan-joyce-takes-off-212848">Will it be greener pastures for Qantas as Alan Joyce takes off?</a>
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<p>In other parts of the world, actions have been or are being taken to strengthen customer protection. For instance, in <a href="https://europa.eu/youreurope/citizens/travel/passenger-rights/air/index_en.htm">the European Union</a>, lengthy delays that are the airlines’ fault lead to the carriers paying out cash compensation as well as the cost of accommodation and meals. </p>
<p>Similar regulations <a href="https://www.transportation.gov/briefing-room/dot-propose-requirements-airlines-cover-expenses-and-compensate-stranded-passengers">were proposed in the United States</a> earlier this year. </p>
<p>Perhaps, if stronger consumer protection rules had been in place in Australia in 2022, Qantas would have managed the aftermath of flight cancellations more diligently.</p><img src="https://counter.theconversation.com/content/212793/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Volodymyr Bilotkach does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Qantas might not be facing such a scandal if stronger consumer protection rules had been in place in Australia in 2022.Volodymyr Bilotkach, Associate Professor, Purdue UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2049962023-05-07T12:38:13Z2023-05-07T12:38:13ZCanadian airlines brace for a summer of change as U.S. airlines consider reforms<figure><img src="https://images.theconversation.com/files/524221/original/file-20230503-19-okemwv.JPG?ixlib=rb-1.1.0&rect=399%2C296%2C2510%2C1836&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">An Air Canada jet takes off from Montréal's Pierre Elliott Trudeau International Airport on June 30, 2022.</span> <span class="attribution"><span class="source">THE CANADIAN PRESS/Graham Hughes</span></span></figcaption></figure><iframe style="width: 100%; height: 100px; border: none; position: relative; z-index: 1;" allowtransparency="" allow="clipboard-read; clipboard-write" src="https://narrations.ad-auris.com/widget/the-conversation-canada/canadian-airlines-brace-for-a-summer-of-change-as-u-s--airlines-consider-reforms" width="100%" height="400"></iframe>
<p>The United States Government Accountability Office (GAO) recently issued a report <a href="https://www.gao.gov/assets/gao-23-105524-highlights.pdf">on the causes of flight disruptions before and after the pandemic</a>. The report also outlined the challenges airlines faced managing and responding to these flight disruptions.</p>
<p><a href="https://www.gao.gov/assets/gao-23-105524.pdf">The report</a> was the result of requests made by the U.S. Congress to the GAO to examine key changes in the U.S. passenger airline industry resulting from the pandemic.</p>
<p>For those of us who experienced <a href="https://theconversation.com/air-canada-flight-reductions-faqs-about-the-chaos-in-the-airline-industry-185750">the chaotic Canadian aviation environment last summer</a> — especially those that used Toronto’s Pearson Airport and Montréal’s Trudeau Airport — it is difficult to forget the lines of <a href="https://www.cbc.ca/news/canada/toronto/toronto-pearson-airport-delays-1.6481605">passengers waiting in queues for hours</a>, <a href="http://prod-test.thestar.com/news/gta/2022/06/28/you-%20think-you-have-baggage-luggage-is-piling-up-at-pearson-perplexing-travellers.html">mishandled baggage</a> and <a href="https://globalnews.ca/news/8970277/air-canada-pearson-rank-no-1-delays-worldwide-montreal-check-%20in-freezes/">unprecedented flight delays</a>.</p>
<p>For an industry with extensive regulatory oversight provided by the federal government, it has been interesting to examine and contrast the <a href="https://www.ourcommons.ca/DocumentViewer/en/44-1/TRAN/meeting-26/evidence">parliamentary efforts made in Canada to address flight disruptions</a> with similar efforts being made by U.S. Congress.</p>
<h2>Canadian airline reforms</h2>
<p>Canada’s Standing Committee on Transport, Infrastructure and Communities <a href="https://www.ourcommons.ca/DocumentViewer/en/44-1/TRAN/meeting-27/evidence">held a meeting on Aug. 19, 2022 to hear Omar Alghabra</a>, the minister of transport, voice his concerns about flight delays and cancellations. </p>
<p>The meeting focused on the need to better protect air travellers’ rights in the face of such events. </p>
<p>This focus on passenger rights continues to this day. <a href="https://globalnews.ca/news/9646294/air-passenger-rights-changes-compensation-loopholes/">At the end of April, Alghabra announced reforms</a> for the Canadian Transportation Agency’s appeal-handling process and the Canadian Transportation Act. Airlines will be required to handle claims and provide a response to complaints within 30 days.</p>
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<img alt="A man wearing a suit and glasses speaks from behind a microphone on a desk. A row of Canadian flags stand behind him." src="https://images.theconversation.com/files/524217/original/file-20230503-17-n9r1yz.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/524217/original/file-20230503-17-n9r1yz.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/524217/original/file-20230503-17-n9r1yz.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/524217/original/file-20230503-17-n9r1yz.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/524217/original/file-20230503-17-n9r1yz.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/524217/original/file-20230503-17-n9r1yz.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/524217/original/file-20230503-17-n9r1yz.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Minister of Transport Omar Alghabra speaks at a news conference on proposed changes to air passenger rights, in Ottawa, on April 24, 2023.</span>
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<p>The amendments, which are currently tabled in the House of Commons as part of a budget implementation bill, will affect the penalties air carriers face for violating air passenger protection rights. </p>
<p>In particular, the amendments will increase the maximum fine for violations to $250,000 and charge carriers with the regulatory cost of complaints.</p>
<p>The GAO’s analysis and recommendations, by comparison, are much more detailed.</p>
<h2>U.S. airline reforms</h2>
<p>The U.S. Department of Transportation has <a href="https://www.businessinsider.com/flight-delays-would-mean-compensation-for-customers-under-proposed-rule-2022-8">recently initiated passenger protection regulation development</a> similar to the ones Canada has had in place since 2019.</p>
<p>However, the Department of Transportation has yet to address specific compensation levels for passengers that have experienced flight delays — provisions that have already been adopted by Canada and are <a href="https://eur-lex.europa.eu/legal-%20content/EN/TXT/?uri=LEGISSUM%3Al24173">similar to those in effect in the European Union</a>.</p>
<p>An intriguing element of the GAO report is its review of the U.S. Department of Transportation’s awareness of airline scheduling practices and how such practices have impacted flight delays and cancellations.</p>
<p><a href="https://www.gao.gov/assets/820/819136.pdf">In its report, the GAO stated</a> the department of transportation has the authority to “regulate unfair and deceptive practices of airlines, which includes unrealistic scheduling practices.”</p>
<p>The Department of Transportation defines unrealistic scheduling as “the scheduling of flights that airlines cannot generally and reasonably be expected to fulfill.”</p>
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<img alt="A woman walks in front of a screen displaying flight schedules." src="https://images.theconversation.com/files/524216/original/file-20230503-24-1sjo91.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/524216/original/file-20230503-24-1sjo91.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/524216/original/file-20230503-24-1sjo91.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/524216/original/file-20230503-24-1sjo91.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/524216/original/file-20230503-24-1sjo91.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/524216/original/file-20230503-24-1sjo91.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/524216/original/file-20230503-24-1sjo91.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Cancelled flights are seen in red on the flight schedules at the Southwest terminal at Los Angeles International Airport in December 2022.</span>
<span class="attribution"><span class="source">(AP Photo/Damian Dovarganes)</span></span>
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</figure>
<p>The report concludes that various stakeholders, including several airlines and worker unions, published unrealistic flight schedules, which carriers cannot reasonably be expected to fulfill.</p>
<p>The Department of Transportation indicated it will make an effort next year to build and sustain its oversight and analysis of airline scheduling practices. This will ensure airlines maintain realistic schedules and minimize the impact of flight disruptions on passengers.</p>
<h2>Lessons for Canada</h2>
<p>It is critical that effort be made to provide fair and meaningful compensation in a timely manner to air passengers that have been subjected to airline delays and cancellations. But it is equally — if not more — important to address the underlying causes of such disruptions.</p>
<p>Effective oversight of published airline schedules must be provided. Canadian air travellers should be able to trust an airline’s published schedule — especially as air travellers often purchase tickets long before their flight. </p>
<p>Should Transport Canada step into this oversight role? It might be time to seriously consider establishing a distinct civil aviation authority, separate from Transport Canada.</p>
<p>Canadians’ patience with the actions of various organizations in Canada’s aviation sector has been wearing thin. At the same time, <a href="https://www.commondreams.org/news/united-ceo-airlines-scheduling-flights">rumblings of a return to regulation is starting up</a> in the U.S. airline industry.</p>
<p>Canada’s <a href="https://www.thecanadianencyclopedia.ca/en/article/transportation-regulation">experiment with deregulation occurred close to 40 years ago</a>, but airline scheduling oversight might be one of several areas ripe for similar scheduling reforms in the face of airline disruptions.</p><img src="https://counter.theconversation.com/content/204996/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Gradek does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>While it is critical that air passengers be compensated for airline delays and cancellations, it is equally — if not more — important to address the underlying causes of such disruptions.John Gradek, Faculty Lecturer and Program Co-ordinator, Supply Chain, Logistics and Operations Management, McGill UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2049032023-05-05T02:27:30Z2023-05-05T02:27:30ZQantas can’t charge these prices forever: the challenge ahead for new chief Vanessa Hudson<p>Vanessa Hudson, who will <a href="https://www.abc.net.au/news/2023-05-02/who-is-vanessa-hudson-the-new-qantas-chief-executive-officer/102291738">replace Alan Joyce</a> as Qantas Airlines’ chief executive in November, inherits an airline still struggling to resume services after the pandemic and border closures shuttered much of the global aviation industry in 2020. </p>
<p>The silver lining for Qantas has been that high demand for air travel has enabled it to charge <a href="https://edition.cnn.com/2023/03/24/business/asia-airfares-flights-travel-recovery-intl-hnk/index.html">higher airfares</a>. It even managed to report a <a href="https://www.reuters.com/business/aerospace-defense/qantas-swings-first-half-profit-announces-buyback-plans-2023-02-22/">A$1.43 billion profit</a> in the second half of 2022. </p>
<p>But these conditions won’t last. As Hudson – an accountant who <a href="https://investor.qantas.com/FormBuilder/_Resource/_module/doLLG5ufYkCyEPjF1tpgyw/file/gmc/executive-bio-vanessa-hudson.pdf">joined Qantas in 1994</a> and has been chief customer officer since 2018 – deals with the highly unusual short-term challenges that come with recovery, she will increasingly have to turn her mind to all the long-term challenges that existed for Australia’s flagship airline before 2020. </p>
<h2>High demand, but not enough planes or staff</h2>
<p>There are two main reasons demand for air travel is recovering faster than supply. </p>
<p>First is the time and effort to return to service the aircraft stored during the pandemic, <a href="https://www.smh.com.au/traveller/reviews-and-advice/grounded-aircraft-during-covid19-pandemic-what-it-takes-to-get-a-plane-back-in-the-air-20211031-h1zi0t.html">parked at regional inland airports</a> and plane storage sites. Qantas put about <a href="https://onemileatatime.com/qantas-787-storage/">100 of its 126 planes</a> into storage, retired six ageing Boeing 747s and deferred delivery of new Airbus A321neo and Boeing 787-9 planes.</p>
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<img alt="A Qantas plane parked at Southern California Logistics Airport in Victorville, California, in December 2022." src="https://images.theconversation.com/files/524536/original/file-20230504-27-72jqhp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/524536/original/file-20230504-27-72jqhp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/524536/original/file-20230504-27-72jqhp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/524536/original/file-20230504-27-72jqhp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/524536/original/file-20230504-27-72jqhp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/524536/original/file-20230504-27-72jqhp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/524536/original/file-20230504-27-72jqhp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">A Qantas plane parked at Southern California Logistics Airport in Victorville, California, in December 2022.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
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<p>Never in the history of civil aviation have airlines had to store so many aircraft. Returning them to service requires exhaustive maintenance checks and tests. Limited skilled maintenance crew can only ready so many aircraft to return to flying.</p>
<p>Which leads to the second, more important, issue: the need to fill jobs.</p>
<p>Even before the pandemic, the industry was grappling with a global shortage of experienced pilots. Now it’s grappling with replacing all the workers – air and ground crew – retrenched when borders were closed in 2020. </p>
<p>Qantas <a href="https://www.smh.com.au/business/companies/qantas-commits-to-hiring-thousands-unveils-new-engineering-academy-20230303-p5cp2n.html">laid off almost a third</a> of its 30,000 employees, included unlawfully retrenching almost 2,000 ground-crew workers. It is now looking to recruit about <a href="https://www.travelandleisure.com/qantas-airline-job-hiring-training-academy-7229086">2,000 workers by the end of 2024</a> and a total of 8,500 by the end of the decade.</p>
<p>Many who have found employment in different industries are not returning. Some in the industry fear aviation is no longer an attractive career. And the pilots, flight attendants and mechanics that are being re-employed all require refresher training before being cleared to work. </p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/averting-a-plane-crash-what-to-do-about-the-global-pilot-shortage-102784">Averting a plane crash: what to do about the global pilot shortage</a>
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<p>Labour shortages are affecting the entire aviation supply chain, including manufacturers. Qantas currently faces delays of about <a href="https://www.reuters.com/business/aerospace-defense/qantas-swings-first-half-profit-announces-buyback-plans-2023-02-22/">six months</a> on new aircraft deliveries.</p>
<h2>Competing for customers</h2>
<p>Competition for customers will be a relatively minor concern as Qantas struggles to catch up to demand. But this won’t last as airlines rebuild fleet capability, and current high prices for air travel decline. In the US market, for instance, airfares <a href="https://www.bts.gov/content/national-level-domestic-average-fare-series">returned to their pre-pandemic levels</a> (in inflation-adjusted terms) at the end of 2022. </p>
<p>By the end of 2023 or early 2024, I expect Qantas will be grappling with substantially the same competitive pressures that drove its pre-pandemic cost-cutting and outsourcing. For this, it can partly blame global government assistance to airlines, which had the perverse consequence of fewer airline collapses in 2020 <a href="https://theconversation.com/the-airline-industry-hasnt-collapsed-but-thats-the-only-good-news-for-overseas-travel-158867">than in 2018 or 2019</a>. </p>
<p>While Qantas <a href="https://investor.qantas.com/FormBuilder/_Resource/_module/doLLG5ufYkCyEPjF1tpgyw/file/annual-reports/2019-Annual-Report-ASX.pdf">turned a profit for each year between 2015-2019</a>, profit margins were quite thin. </p>
<p>There has been a lot of talk that the pandemic changed the air-travel market irrevocably. Business travel, for example, may never recover. Consulting firm McKinsey predicted in February 2021 that the post-pandemic market of business travel would <a href="https://www.mckinsey.com/featured-insights/future-of-work/the-future-of-work-after-covid-19">be 20% smaller</a>.</p>
<p>With the jury still out on this and other questions, the challenge for Qantas and other airlines will be to plan and adapt services accordingly.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/qantas-the-trying-kangaroo-why-things-wont-get-better-any-time-soon-189558">Qantas, the trying kangaroo: why things won't get better any time soon</a>
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</p>
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<h2>New challenges for an ageing fleet</h2>
<p>Longer term, Qantas must reduce its environmental footprint. </p>
<p>From 2027, all international air carriers will be required to offset the carbon emissions associated with flights – a condition set by the International Civil Aviation Organization’s <a href="https://www.icao.int/environmental-protection/CORSIA/Pages/default.aspx">Carbon Offsetting and Reduction Scheme for International Aviation</a>.</p>
<p>More generally, the drive to decarbonise commercial aviation also makes stricter domestic environmental requirements very likely. </p>
<p>This will be harder for Qantas than competitors, due to airline’s extensive network of medium and long-haul flights (which use more fuel) and ageing, less fuel-efficient fleet. </p>
<p>The average age of the Qantas fleet is <a href="https://www.theguardian.com/news/datablog/2022/oct/04/qantas-planes-are-relatively-old-it-doesnt-mean-theyre-unsafe-just-less-efficient">just over 15 years</a>, more than double that of rivals such as Singapore Airlines. Fleet renewal will be a formidable task.</p><img src="https://counter.theconversation.com/content/204903/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Volodymyr Bilotkach is an External Instructor for IATA Training. </span></em></p>From not enough staff to get planes in the air, to reducing the environmental footprint of an ageing fleet – an international aviation expert on why the next few years will be a bumpy ride for Qantas.Volodymyr Bilotkach, Associate Professor, Purdue UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1856632022-06-30T18:44:46Z2022-06-30T18:44:46ZAir traffic control funding model ravaged by pandemic as industry struggles to recover<figure><img src="https://images.theconversation.com/files/471233/original/file-20220627-14-u2wv8a.jpg?ixlib=rb-1.1.0&rect=0%2C233%2C6000%2C3727&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Airlines experienced their worst year on record in 2020, with passenger numbers down by 60 per cent compared to 2019.</span> <span class="attribution"><span class="source">THE CANADIAN PRESS/Darryl Dyck</span></span></figcaption></figure><p>Commercial aviation is critical to the global economy. In 2019, it supported more than <a href="https://www.icao.int/sustainability/Documents/AVIATION-BENEFITS-2019-web.pdf">65 million jobs</a> and had a global economic impact of US$2.7 trillion. The COVID-19 pandemic has been unlike any crisis, both in terms of depth and duration, and damaged the aviation industry more than most sectors. </p>
<p>The global economy contracted by more than three per cent in 2020 — more than enough to cause a severe decline in air transport. The economic downturn was <a href="https://www.washingtonpost.com/graphics/2020/business/coronavirus-airline-industry-collapse/">compounded by the closure of international borders and strict quarantine procedures</a> imposed by governments around the world. </p>
<p>As a result, airlines experienced their worst year on record in 2020, with passenger numbers down by <a href="https://www.icao.int/sustainability/Documents/Covid-19/ICAO_coronavirus_Econ_Impact.pdf">60 per cent</a> compared to 2019. The total revenue generated by passengers fell by 69 per cent and net losses were more than <a href="https://www.iata.org/en/pressroom/pr/2021-08-03-01/">US$126 billion</a>. </p>
<p>The collapse in traffic was mirrored in the number of flights handled by air navigation service providers. These service providers are responsible for the safety of flights on departure from and arrival at airports and in transit. In North America, losses exceeded <a href="https://data.icao.int/coVID-19/ansp.htm">US$448 million</a> in 2020. </p>
<p>Our international team, based in the United Kingdom, Ireland and Canada, has spent two years researching the impact of the pandemic and the financing of air navigation services in the airline industry. <a href="https://www.bristol.ac.uk/media-library/sites/management/documents/2022%20NAVIGATING%20THE%20COVID19%20CRISIS%20Turnbull%20Thomas%20Harvey%202022.pdf">Our full report found</a> the COVID-19 pandemic severely impacted air navigation service providers, and raises concerns about the industry’s current finance model.</p>
<h2>Current airline ‘user-pays’ model</h2>
<p>Air navigation service providers are a public good — just like street lighting — that serves the interests of all. Because of this, it’s not possible to prevent people or clients from using the service. It also means that, when the good or service is consumed, it does not reduce its availability to others. </p>
<p>Nonetheless, as airlines and their passengers are the most direct recipients of air navigation services, many air navigation service providers have adopted a “user-pays” model. The user-pays model is an approach to funding where customers pay the full cost of the good or service they consume.</p>
<figure class="align-center ">
<img alt="People walking through an airport" src="https://images.theconversation.com/files/471230/original/file-20220627-21-g7rvk5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/471230/original/file-20220627-21-g7rvk5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/471230/original/file-20220627-21-g7rvk5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/471230/original/file-20220627-21-g7rvk5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/471230/original/file-20220627-21-g7rvk5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/471230/original/file-20220627-21-g7rvk5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/471230/original/file-20220627-21-g7rvk5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">The airline industry suffered massive layoffs during the COVID-19 pandemic.</span>
<span class="attribution"><span class="source">(AP Photo/Nam Y. Huh)</span></span>
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<p>For the user-pays model of air navigation services charges are typically determined by a <a href="https://www.investopedia.com/terms/c/cost-plus-contract.asp">cost-plus system</a>. The calculation is determined by the air navigation service providers’ costs divided by airline traffic, plus a markup that allows service providers to make a small profit. This model does not reward performance. Otherwise, charges are determined by a pure price cap whereby the regulator sets the price, giving air navigation service providers the incentive to reduce costs.</p>
<p>The purpose of these models is to make air navigation service providers more efficient, but in the absence of competition — service providers are natural monopolies — this system does not work as intended. Some have even pointed to the <a href="http://afgelocal200.org/wp-content/uploads/2017/01/2003-Pitfalls-Of-Air-Traffic-Control-Privatization-Columbia-University.pdf">dangers of air navigation service provider commercialization</a>.</p>
<h2>Labour challenges</h2>
<p>These models have proved inadequate in the face of a crisis, like the one created by the pandemic. Consequently, <a href="https://airlines.iata.org/news/new-figures-highlight-potential-job-losses">staff costs were cut, resulting in job losses</a>, recruitment freezes and a reduction in training. These measures might achieve cost savings in the short term, but they also create a problem for the organization when passengers return and traffic increases. </p>
<p>Many airlines have faced problems in serving returning passengers, leading to the <a href="https://worldfinancialreview.com/covid-19-labour-cost-minimisation-and-its-consequences-in-civil-aviation/">cancellation of flights</a> and <a href="https://www.ctvnews.ca/world/airport-chaos-european-travel-runs-into-pandemic-cutbacks-1.5959561">chaos at airports</a>, as a direct result of the cuts made in response to the pandemic. </p>
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<img alt="People wait in long lines at an airport" src="https://images.theconversation.com/files/471231/original/file-20220627-24-xk7tlc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/471231/original/file-20220627-24-xk7tlc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/471231/original/file-20220627-24-xk7tlc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/471231/original/file-20220627-24-xk7tlc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/471231/original/file-20220627-24-xk7tlc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/471231/original/file-20220627-24-xk7tlc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/471231/original/file-20220627-24-xk7tlc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Travellers wait in long lines to check in and board flights at Amsterdam’s Schiphol Airport, Netherlands, on June 21. Airlines have struggled to accommodate the influx of travellers now that COVID-19 restrictions have been lifted.</span>
<span class="attribution"><span class="source">(AP Photo/Peter Dejong)</span></span>
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<p>At several European air navigation service providers, the age profile of the workforce also complicates matters. A considerable number of air traffic control officers are approaching retirement as traffic returns to its pre-pandemic level. </p>
<p>It would be disastrous to both stop recruitment and to reduce headcount in such circumstances, because the training of new air traffic control officers is a long process. In fact, rising traffic delays across Europe prior to the pandemic were attributed to the <a href="https://www.gatco.org/wp-content/uploads/2020/09/GATCO-NATS-TATCs.pdf">declining number of air traffic control officer trainees</a>. </p>
<h2>Problems with ‘user-pays’ model in air navigation</h2>
<p>There is a fundamental problem with the user-pays model of air navigation that is disrupting the industry’s recovery from the current crisis. The problem is this: as the airline industry begins recovering from the pandemic, airlines will be expected to pay more for air navigation services, at a time when they can least afford to.</p>
<p>At the same time, air navigation service providers will be expected to invest more in skills and equipment while trying to recover lost and deferred revenue from their exhausted cash reserves. We need only point to the case of WestJet and NAV CANADA to illustrate this point clearly. </p>
<p>NAV CANADA could have raised its rates by 42 per cent to cover all its financial needs, but WestJet’s CEO described the price hike as “<a href="https://simpleflying.com/westjet-nav-canada-price-hikes">scandalous</a>” and launched an appeal to Canada’s national transport regulator — Canadian Transport Agency. The agency agreed with NAV CANADA, dismissed WestJet’s appeal and prices increased by almost 30 per cent. </p>
<p>The pandemic has demonstrated, beyond doubt, that the user-pays system of air navigation services is neither resilient enough, nor sustainable. Just as a nation’s road network is typically funded by general taxation and road tolls, a similar approach is entirely feasible for air navigation services. General taxation would allow air navigation service providers to fund minimum level of service and staffing levels.</p><img src="https://counter.theconversation.com/content/185663/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Geraint Harvey has received funding from the International Transport Workers' Federation.. </span></em></p><p class="fine-print"><em><span>Huw Thomas has received funding from the International Transport Workers' Federation and European Transport Workers' Federation.</span></em></p><p class="fine-print"><em><span>Peter Turnbull's research on air traffic management received financial support from the International Transport Workers' Federation (ITF). </span></em></p>The COVID-19 pandemic has been unlike any crisis, both in terms of depth and duration, and has damaged the aviation industry more than most sectors.Geraint Harvey, DANCAP Private Equity Chair in Human Organization, Western UniversityHuw Thomas, Lecturer in Work, Employment, Organization & Public Policy, University of BristolPeter Turnbull, Professor of Management, University of BristolLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1721492021-12-29T21:25:51Z2021-12-29T21:25:51ZWhy COVID-19 means the era of ever cheaper air travel could be over<figure><img src="https://images.theconversation.com/files/436608/original/file-20211209-141213-jryu8s.jpg?ixlib=rb-1.1.0&rect=0%2C255%2C4270%2C2141&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>After its worst two years since the second world war, 2022 is looking brighter for the global airline industry. For passengers, though, the chance to travel at low cost again may prove short-lived. </p>
<p>In 2020 international passenger demand was <a href="https://www.iata.org/en/pressroom/pr/2021-02-03-02/">less than 25%</a> that of 2019, according to the International Air Transport Association. 2021 data isn’t yet available, but the hiccups of the Delta and Omicron variants make the association’s forecasts of 50% of 2019 levels look optimistic.</p>
<p>With international and domestic routes reopening, airlines are offering a range of special deals on airfares. These deals are partly to entice back uncertain travellers and partly to compensate passengers for costs required to travel internationally, such as fees for COVID tests.</p>
<p>But don’t expect the cheap fares to last. </p>
<p>They are likely to have a brief lifespan, as the industry come to grips with post-pandemic realities minus the government support that enabled so many, <a href="https://theconversation.com/once-the-pandemic-is-over-we-will-return-to-a-very-different-airline-industry-134124">contrary to predictions</a>, to survive.</p>
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Read more:
<a href="https://theconversation.com/the-airline-industry-hasnt-collapsed-but-thats-the-only-good-news-for-overseas-travel-158867">The airline industry hasn't collapsed, but that's the only good news for overseas travel</a>
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<p>Now comes a reckoning, as surviving airlines seek to return to viability, repair their debt-laden balance sheets and future-proof their operations, with no guarantee they’ll get the same government support when the next crisis hits. </p>
<p>What this may mean is abandoning the business model of wafer-thin profit margins that delivered ever cheaper airfares from the 1970s until the beginning of 2020. </p>
<h2>Regulation and jumbo jets</h2>
<p>Up until the 1970s the airline industry was highly regulated. </p>
<p>Domestically, this was often done by governments to protect state-owned airlines. Australia’s “<a href="https://www.taamuseum.org.au/TwoAirlinePolicy/">two-airline policy</a>”, for example, restricted competition on major routes to just two airlines – the government-owned Trans Australia Airlines and a private competitor (Ansett Airlines for most that time).</p>
<p>Internationally, airfares were kept high by price cooperation through the International Air Transport Association (IATA), often described as a cartel. There were two ticket pricing levels – first-class and economy.</p>
<p>Until 1970 the biggest commercial jet aircraft was a Boeing 707, which could accommodate 180 passengers at a squeeze. Airfares had to be high to cover the high cost of operations (especially jet fuel). Most airlines accepted the IATA fare levels. Discounting was rare.</p>
<p>Then in 1970 came the Boeing 747 jumbo jet, which more than doubled flights’ passenger capacity, from 180 to 440. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/436818/original/file-20211209-136652-1tkvgop.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/436818/original/file-20211209-136652-1tkvgop.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/436818/original/file-20211209-136652-1tkvgop.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/436818/original/file-20211209-136652-1tkvgop.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/436818/original/file-20211209-136652-1tkvgop.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/436818/original/file-20211209-136652-1tkvgop.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/436818/original/file-20211209-136652-1tkvgop.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/436818/original/file-20211209-136652-1tkvgop.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">A Boeing 707-138B alongside a Boeing 747 at the Qantas Founders Outback Museum, Longreach, Queensland.</span>
<span class="attribution"><a class="source" href="http://www.airliners.net/photo/Qantas-(Qantas-Foundation/Boeing-707-138B/1569939/L/">Wal Nelowkin</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>This led to many changes in aviation operations and costs. Jumbo jets also enabled greater seat-pricing flexibility, with the introduction of business and premium economy classes.</p>
<h2>Airfares plummet</h2>
<p>When I began work as a travel consultant in 1981 the regulation of air fares was beginning to unravel. </p>
<p>The official IATA economy return fare from Sydney to London was about A$3,500. But you could find fares on selected airlines for about A$2,500. (This was still several months’ wages for most, with Australian average weekly full-time earnings in 1981 being <a href="https://aifs.gov.au/media-releases/families-then-and-now-how-income-and-employment-changed-australian-households-between-1980-and-2019">A$311 for men and A$241 for women</a>.)</p>
<p>In the 1980s and 1990s, travel agents began to set themselves up as “bucket shops” specialising in offering discounted air fares to fill empty seats on less popular airlines. </p>
<p>This was how Flight Centre started. It opened its first shopfront <a href="https://www.fctgl.com/our-brands/leisure/flight-centre/">in Sydney in 1982</a>, followed by stores in Melbourne and Brisbane. (It now has more than 650 shops in Australia, and more than 550 in 10 other countries.)</p>
<p>Lower costs and plummeting air fares made the IATA’s fares increasingly irrelevant. With the global rise of low-cost carriers, many of which were not IATA members, the IATA finally abandoned <a href="https://www.iata.org/en/pressroom/pr/2017-07-06-02/">so-called “YY” fare-setting in 2017</a>.</p>
<p>Government regulation was also unwinding. Australia’s two-airline policy <a href="https://www.bitre.gov.au/sites/default/files/report_073.pdf">ended in October 1990</a>. Deregulation permitted more competitors, and airfares were driven by the market rather than set by regulatory bodies. </p>
<p>By 2019, a return fare between Sydney and London on a reputable airline could be bought for about A$1,250, less than Australia’s average full-time adult average <a href="https://www.abs.gov.au/statistics/labour/earnings-and-work-hours/average-weekly-earnings-australia/nov-2019">weekly earnings of A$1,658</a>. </p>
<p>A Sydney-Perth return fare that cost about A$1,100 in 1981 could be bought in 2019 for less than A$300. </p>
<h2>Why the cheap fare era may end</h2>
<p>These price falls depended on airlines embracing a business model based on lower profits per customer but flying a lot more customers, cutting fixed overheads by using larger-capacity aircraft. </p>
<p>This business model contributed to the number of global tourists increasing from about 166 million in 1970 to <a href="https://ourworldindata.org/tourism">1.5 billion in 2019</a>. But it also meant airlines needed planes full of passengers to make a profit. By 2019 the average pre-COVID profit margin per passenger on a long-haul international return flight was <a href="https://www.ainonline.com/aviation-news/air-transport/2019-12-11/iata-again-cuts-airline-profitability-outlook-2019">about US$10</a>.</p>
<p>It’s difficult to see how running on razor-thin margins can continue to be the industry model. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-end-of-global-travel-as-we-know-it-an-opportunity-for-sustainable-tourism-133783">The end of global travel as we know it: an opportunity for sustainable tourism</a>
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<p>During 2022 it is likely we will see consolidation within the industry, with the airlines that survive looking to diversify into other businesses, such as catering or insurance.</p>
<p>Low-cost carriers may still be viable, but only by convincing customers to pay for “ancilliaries” beyond the airline seat, such as in-flight snacks, extra luggage capacity or a booking a hire car.</p>
<p>Although most airlines are committed to limiting price increases, there is no escaping the fact they have two years of massive losses to make up and the continuing extra cost of COVID-related regulations to absorb.</p>
<p>Higher margins with lower passenger volumes looks the more probable model.</p><img src="https://counter.theconversation.com/content/172149/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Beirman is a senior lecturer in Tourism and Risk Management at the Univeristy of Technology Sydney and an honorary board member of the Australian Travel Careers Council. </span></em></p>Travellers have experienced progressively cheaper air fares since the 1970s. That era may be over.David Beirman, Senior Lecturer, Tourism, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1598922021-05-09T10:35:50Z2021-05-09T10:35:50ZThe COVID-19 pandemic has created regional tourism hotspots as big cities suffer<figure><img src="https://images.theconversation.com/files/399284/original/file-20210506-16-1m2netd.jpg?ixlib=rb-1.1.0&rect=0%2C40%2C5472%2C3596&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The Northern Bruce Peninsula in Ontario has been a popular domestic tourism destination during COVID-19.</span> <span class="attribution"><span class="source">Luke Smith/Unsplash</span></span></figcaption></figure><p>International travel restrictions during the COVID-19 pandemic have prompted many travel enthusiasts to explore local and regional tourist destinations. However, communities have been affected very differently from increased numbers of homegrown tourists.</p>
<p>In Canada, the impact on international travel due to COVID-19 was immediate, with <a href="https://www150.statcan.gc.ca/n1/pub/45-28-0001/2021001/article/00007-eng.htm">a decrease of 614,000 international arrivals to Canada in March 2020</a>. That represented a 92-per-cent decrease over 2019 — a loss that has not yet been recovered. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/399280/original/file-20210506-13-16vnmr5.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Monthly international tourist arrivals in 2019 and 2020" src="https://images.theconversation.com/files/399280/original/file-20210506-13-16vnmr5.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/399280/original/file-20210506-13-16vnmr5.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=335&fit=crop&dpr=1 600w, https://images.theconversation.com/files/399280/original/file-20210506-13-16vnmr5.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=335&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/399280/original/file-20210506-13-16vnmr5.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=335&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/399280/original/file-20210506-13-16vnmr5.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=421&fit=crop&dpr=1 754w, https://images.theconversation.com/files/399280/original/file-20210506-13-16vnmr5.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=421&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/399280/original/file-20210506-13-16vnmr5.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=421&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Monthly international tourist arrivals in 2019 and 2020.</span>
<span class="attribution"><span class="source">Authors’ calculations based on Statistics Canada data</span></span>
</figcaption>
</figure>
<p>At the same time, travel restrictions played a role in shifting up to 20 million holiday and leisure trips abroad by Canadian residents to domestic destinations. Boosting domestic travel has been at <a href="https://www.forbes.com/sites/sandramacgregor/2020/06/24/canadian-government-pledges-70-million-to-encourage-domestic-summer-travel/?sh=3802dcd17523">the heart of federal</a> <a href="https://www.newswire.ca/news-releases/government-of-canada-supports-quebec-s-tourism-sector-821810986.html">and provincial</a> government strategies to limit losses in the tourism sector.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/397400/original/file-20210427-17-18l8ou6.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A graph shows travels by Canadian residents in Canada and abroad by trip purpose in 2019" src="https://images.theconversation.com/files/397400/original/file-20210427-17-18l8ou6.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/397400/original/file-20210427-17-18l8ou6.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/397400/original/file-20210427-17-18l8ou6.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/397400/original/file-20210427-17-18l8ou6.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/397400/original/file-20210427-17-18l8ou6.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/397400/original/file-20210427-17-18l8ou6.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/397400/original/file-20210427-17-18l8ou6.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Travels by Canadian residents in Canada and abroad by trip purpose in 2019.</span>
<span class="attribution"><span class="source">Authors’ calculations based on Statistics Canada data</span></span>
</figcaption>
</figure>
<h2>The loss of international tourists</h2>
<p>Canadians opting to visit domestic destinations over the past year have contributed to an increase in the share of domestic tourism in total tourism expenditures from <a href="https://www.lapresse.ca/voyage/quebec-et-canada/2021-03-31/chute-de-pres-de-50-des-depenses-touristiques-au-canada.php">78.4 per cent in 2019 to 92.7 per cent in 2020</a>. But trips made by Canadians in Canada only partially compensated for the losses associated with international tourists, as <a href="https://www.vicnews.com/news/tourism-spending-in-canada-dropped-by-almost-50-per-cent-in-2020/">tourism spending in Canada fell by nearly 50 per cent in 2020 from 2019 levels</a>.</p>
<p>Not all destinations have been equally affected, however. There has been a variation in employment levels in the accommodation and food services sector in large Canadian cities like Toronto, Montréal and Vancouver compared to other small and mid-sized cities in 2020. Some of these municipalities are located on the fringes of larger cities, while others are in more remote areas.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/397401/original/file-20210427-15-1a9f4xh.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Employment variation in the accommodation and food services industry between January and September 2020" src="https://images.theconversation.com/files/397401/original/file-20210427-15-1a9f4xh.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/397401/original/file-20210427-15-1a9f4xh.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=355&fit=crop&dpr=1 600w, https://images.theconversation.com/files/397401/original/file-20210427-15-1a9f4xh.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=355&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/397401/original/file-20210427-15-1a9f4xh.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=355&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/397401/original/file-20210427-15-1a9f4xh.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=446&fit=crop&dpr=1 754w, https://images.theconversation.com/files/397401/original/file-20210427-15-1a9f4xh.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=446&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/397401/original/file-20210427-15-1a9f4xh.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=446&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Employment variation in the accommodation and food services industry between January and September 2020.</span>
<span class="attribution"><span class="source">Authors’ compilation from Statistics Canada data</span></span>
</figcaption>
</figure>
<h2>Big cities versus regional destinations</h2>
<p>The largest Canadian cities, which are usually major tourist destinations and gateways for international visitors, have experienced drastic declines in tourists and tourism spending. </p>
<p>For instance, Toronto lost <a href="https://globalnews.ca/news/7676334/toronto-covid-19-impact-tourism/">$8.35 billion in 2020</a> due to the cancellations of many tourism activities related to events, festivals, conventions and business conferences. <a href="https://www.journaldequebec.com/2020/11/30/covid-19-des-pertes-majeures-en-tourisme-a-quebec">The number of international visitors to Montréal in 2020</a> decreased by 94 per cent over 2019, and the city experienced its lowest hotel occupancy rate ever of around 15 per cent. In Ottawa, <a href="https://ottawa.ctvnews.ca/covid-19-hits-ottawa-s-tourism-sector-hotel-bookings-down-70-per-cent-in-2020-1.5277153">hotel occupancy rates fell by 70 per cent during the pandemic</a>, and the tourism sector lost almost half of the revenue generated in 2019.</p>
<figure class="align-center ">
<img alt="Two people wearing masks walk along a street." src="https://images.theconversation.com/files/399279/original/file-20210506-14-nvpcl2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/399279/original/file-20210506-14-nvpcl2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=446&fit=crop&dpr=1 600w, https://images.theconversation.com/files/399279/original/file-20210506-14-nvpcl2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=446&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/399279/original/file-20210506-14-nvpcl2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=446&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/399279/original/file-20210506-14-nvpcl2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=561&fit=crop&dpr=1 754w, https://images.theconversation.com/files/399279/original/file-20210506-14-nvpcl2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=561&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/399279/original/file-20210506-14-nvpcl2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=561&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">People walk the deserted streets of Old Montréal in November 2020.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Ryan Remiorz</span></span>
</figcaption>
</figure>
<p>In contrast, several destinations outside of major urban centres have benefited from the rise in domestic tourism to offset the loss of international tourists. However, not all of them have the same capacity to welcome visitors during the pandemic.</p>
<p>Some destinations had sufficient capacity in terms of space, accommodation and services. This was the case for many places close to large cities that offer outdoor activities and have been able to ensure adequate management of tourist flows.</p>
<p>In Canada, destinations such as <a href="https://www.sherbrookerecord.com/bromont-sees-spike-in-tourism-despite-ongoing-pandemic/">Bromont in Québec</a> and <a href="https://www.nationalparkstraveler.org/2021/03/visitor-stats-reveal-how-canadas-parks-and-historic-sites-fared-2020">Rouge National Urban Park in Ontario</a>, which both offer summer and winter outdoor activities, have implemented specific measures to cope with a high increase in demand reported by tourism operators. </p>
<p>The situation is similar elsewhere in the world, including <a href="https://www.francebleu.fr/infos/culture-loisirs/frequentation-touristique-estivale-en-hausse-dans-le-massif-vosgien-1598618250">in France</a>, <a href="https://www.sudinfo.be/id381565/article/2021-03-17/coronavirus-en-belgique-les-nuitees-en-hebergement-touristique-ont-diminue-de">Belgium</a> <a href="https://www.letemps.ch/economie/premiers-chiffres-paralysie-touristique">and Switzerland</a>, where regional tourist destinations are attracting more travellers than big cities.</p>
<p>Some regional destinations in Canada have been overwhelmed by too many visitors, and they’ve struggled to accommodate them without affecting the environment and the quality of life of local residents.</p>
<p>The problems have included: significant increases of motorists, causing congestion and parking problems; so many visitors that it was difficult to follow preventive COVID-19 health measures; and the saturation of public places. In Canada, this has happened <a href="https://globalnews.ca/news/7213311/quebec-vacation-tensions-flare-coronavirus/">in the Gaspé</a> <a href="https://www.ledevoir.com/politique/regions/581583/l-afflux-de-touristes-preoccupe-des-villes-proches-de-montreal">and Rawdon</a> in Québec and at <a href="https://www.chathamthisweek.com/news/glen-morris-residents-overwrought-with-over-tourism">Glen Morris, Grey Sauble</a>, <a href="https://www.niagaranow.com/news.phtml/3817-covid19-tourists-still-flocking-to-niagaraonthelake">Niagara-on-the-Lake</a> and <a href="https://www.owensoundsuntimes.com/news/local-news/over-tourism-is-overwhelming-northern-bruce-peninsula">the Northern Bruce Peninsula</a> in Ontario. </p>
<figure class="align-center ">
<img alt="A photographer takes a photo of the view in the Gaspé" src="https://images.theconversation.com/files/399276/original/file-20210506-24-nqde7a.jpg?ixlib=rb-1.1.0&rect=59%2C0%2C4809%2C3164&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/399276/original/file-20210506-24-nqde7a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=397&fit=crop&dpr=1 600w, https://images.theconversation.com/files/399276/original/file-20210506-24-nqde7a.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=397&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/399276/original/file-20210506-24-nqde7a.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=397&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/399276/original/file-20210506-24-nqde7a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=499&fit=crop&dpr=1 754w, https://images.theconversation.com/files/399276/original/file-20210506-24-nqde7a.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=499&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/399276/original/file-20210506-24-nqde7a.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=499&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A photographer captures the vista in Forillon National Park, in Gaspésie, Que., in August 2016. The region has been a popular domestic tourist destination during the pandemic.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/AP, Cal Woodward</span></span>
</figcaption>
</figure>
<p>Destinations in the <a href="https://www.npr.org/2020/08/11/900270344/we-had-to-get-out-despite-the-risks-business-is-booming-at-national-parks">United States</a>, <a href="https://www.dailypost.co.uk/news/north-wales-news/visitors-flock-north-wales-resort-18735147">the United Kingdom</a>, <a href="https://www.thescottishsun.co.uk/news/6881411/scots-beauty-staycation-summer-overcrowding/">Scotland</a> and <a href="https://www.ledauphine.com/economie/2021/03/23/tourisme-comment-l-ardeche-et-la-drome-tirent-leur-epingle-du-jeu">France</a> have also struggled with too many tourists.</p>
<h2>How to manage tourists</h2>
<p>With the next travel season upon us, governments can use various strategies tailored to the geographical trends of COVID-19 tourism.</p>
<p>Some government interventions have already been implemented, and it’s important they continue even with the end of the pandemic in view as vaccination efforts go into overdrive. That includes <a href="https://www.ic.gc.ca/eic/site/134.nsf/eng/00004.html">government financial assistance programs</a> for tourism operators to help mitigate their income losses and enable them to continue to operate. </p>
<p>These programs are vital for metropolitan destinations like Toronto, Montréal and Vancouver, <a href="https://thoughtleadership.rbc.com/canadian-city-finances-ailing-from-covid-19/">where the recorded economic losses have been the highest</a>. The assistance has included wage support, rent subsidies and help in accessing credit.</p>
<p>Governments should also continue to <a href="https://www.forbes.com/sites/sandramacgregor/2020/06/24/canadian-government-pledges-70-million-to-encourage-domestic-summer-travel/?sh=4624dc757523">support the promotion of domestic tourism for a greater number of destinations</a> so that popular hotspots don’t become overcrowded. Additional measures should also be put in place to address the risk of an overflow of tourists in certain destinations as the pandemic continues.</p>
<figure class="align-center ">
<img alt="Riders and their horses pass through autumn colours" src="https://images.theconversation.com/files/399297/original/file-20210506-21-hmjfkb.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/399297/original/file-20210506-21-hmjfkb.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/399297/original/file-20210506-21-hmjfkb.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/399297/original/file-20210506-21-hmjfkb.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/399297/original/file-20210506-21-hmjfkb.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/399297/original/file-20210506-21-hmjfkb.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/399297/original/file-20210506-21-hmjfkb.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Riders and their horses pass through autumn colours near Cremona, Alta., in September 2020. In some areas of Canada, ‘leaf peeping’ tourism is a major contribution to economic activity.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Jeff McIntosh</span></span>
</figcaption>
</figure>
<p>With government support, cities should also develop strategies to establish acceptable limits on accommodations for tourists and visitors. Such measures would help preserve the environment and respect the quality of life of residents. This could mean, for example, establishing a limit on expanding parking lots in certain commercial sectors or on additional camping spaces near tourist attractions.</p>
<p>To be effective, such measures require <a href="https://www.barrietoday.com/coronavirus-covid-19-local-news/town-unveils-new-measures-to-control-crowds-at-innisfil-beach-2538656">monitoring and control</a>, and laws and regulations must be enforced, including fines.</p>
<p>The popularity of some tourist destinations during the COVID-19 pandemic has brought economic opportunities to many communities. These tourist hotspots can seize upon those opportunities while respecting the need to control the number of visitors. Efficient management of tourist flows is critical, especially when several regions are aiming to attract permanent new residents and new businesses.</p><img src="https://counter.theconversation.com/content/159892/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Large Canadian cities, usually major tourist destinations, have have experienced drastic declines in tourists and tourism spending while some regional hotspots have been overwhelmed with visitors.Juste Rajaonson, Professor of Urban Studies and Sustainability, Université du Québec à Montréal (UQAM)Georges A. Tanguay, Professor of Urban Studies and Economics, Université du Québec à Montréal (UQAM)Licensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1588672021-04-14T20:08:13Z2021-04-14T20:08:13ZThe airline industry hasn’t collapsed, but that’s the only good news for overseas travel<p>We thought things would be so much better by now.</p>
<p>A year ago I wrote about <a href="https://theconversation.com/once-the-pandemic-is-over-we-will-return-to-a-very-different-airline-industry-134124">the future of the airline industry</a>. Along with many other experts, I expected international air travel by this point would still be below pre-pandemic levels but well on its way to recovery. </p>
<p>We are not even close. </p>
<p>After a disastrous 2020, in which passenger traffic globally fell by two-thirds, the International Air Transport Association’s <a href="https://centreforaviation.com/members/direct-news/2020-worst-year-in-history-for-air-travel-demand-550629">latest forecast</a> (published in February) doesn’t expect this year’s total traffic to be more than halfway back to pre-pandemic levels. Full recovery isn’t expected before 2023. </p>
<p>For some countries it might be even longer. </p>
<p>Deloitte Access Economics in Australia, for example, published a report on Monday predicting international air travel may <a href="https://themarketherald.com.au/deloitte-australian-economy-is-roaring-back-but-full-international-travel-is-years-away-2021-04-12/">not fully recover until 2024</a>; and that prediction was locked in before the Australian government announced on Sunday it was abandoning its target to have all Australians vaccinated <a href="https://theconversation.com/as-australias-vaccination-bungle-becomes-clear-morrisons-political-pain-is-only-just-beginning-158704">by the end of October</a> – a time frame on which the opening of international borders was predicated. </p>
<p>That’s particularly bad news for Qantas, Australia’s main airline, which last year hoped to resume international operations by July. Now its plan (<a href="https://www.bloomberg.com/news/articles/2021-02-24/qantas-pushes-backs-expected-restart-of-international-travel">announced in February</a>) to restart 22 of its 25 overseas routes in November also looks unlikely.</p>
<h2>No large-scale bankruptcies</h2>
<p>But things could be worse. </p>
<p>A year ago I (and others) expected many airlines to fail as prolonged revenue losses strained their liquidity positions beyond breaking point. I was wrong. </p>
<p>According to aviation and travel analytics company Cirium, <a href="https://www.cnbc.com/2020/10/08/over-40-airlines-have-failed-in-2020-so-far-and-more-are-set-to-come.html">43 airlines</a> went out of business in 2020. But this was fewer than 2019 (when 46 carriers went bust) and in 2018 (when 56 airlines went out of business). </p>
<p>Most of the bankruptcies were smallish regional carriers, such as Britain’s <a href="https://www.theguardian.com/business/2020/mar/05/flybe-collapses-two-months-after-government-announces-rescue">Flybe</a> or AirAsia’s Japanese subsidiary <a href="https://asia.nikkei.com/Business/Transportation/AirAsia-Japan-files-for-bankruptcy-leaving-23-000-flyers-without-refunds">AirAsia Japan</a>. </p>
<p>So far no mid-sized and larger carriers went out of business, though a few have come close. For example, <a href="https://www.thaiairways.com/en/news/news_announcement/news_detail/news98.page">Thai Airways</a> and Columbia’s <a href="https://www.reuters.com/article/us-avianca-bankruptcy-idUSKBN26Q2ZJ">Avianca</a> (Latin America’s second-biggest airline) requested bankruptcy protection. Australia’s second major airline, Virgin Australia, also went into <a href="https://theconversation.com/voluntary-administration-isnt-a-death-sentence-for-virgin-australia-or-for-competition-136832">voluntary administration</a> but was saved from collapse – at least temporarily – by being sold to <a href="https://theconversation.com/virgin-sacrifice-boardroom-bloodletting-signals-a-classic-private-equity-hijacking-148244">US private equity firm Bain Capital</a>. These are the kinds of airlines I expected to collapse a year ago.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/cutbacks-may-keep-virgin-australia-alive-for-now-but-its-long-term-prospects-are-bleak-141876">Cutbacks may keep Virgin Australia alive for now, but its long-term prospects are bleak</a>
</strong>
</em>
</p>
<hr>
<h2>But at what cost?</h2>
<p>The main reason for the lack of large-scale airline bankruptcies has been government assistance. The International Air Transport Association’s latest tally puts the amount of state aid to airlines globally at <a href="https://travelweekly.co.uk/news/air/state-aid-to-airlines-now-exceeds-225bn">US$225 billion</a>. That’s equal to more than a quarter of the global airline industry’s revenues in 2019. </p>
<p>IATA’s analysis of <a href="https://www.iata.org/en/iata-repository/publications/economic-reports/government-aid-and-airlines-debt/">the first US$123 billion</a> (published in May 2020) shows about 60% of the aid has been in loans or loan guarantees (with the balance being wage subsidies, equity financing, tax relief, operating subsidies and direct cash injections). Those loans must eventually be repaid.</p>
<p>As I predicted, governments have put little care into directing aid to the airlines with the best chance of surviving in the longer term. IATA’s analysis shows no correlation between the airlines’ likely viability <a href="https://www.iata.org/en/iata-repository/publications/economic-reports/government-aid-and-airlines-debt/">and the amount of aid received</a>.</p>
<p>This means many carriers could struggle to repay their debts post-crisis. It also means lending governments have greater incentives to keep them afloat so they can.
One possible consequence is governments offering further support by protecting struggling airlines from competition post-COVID. A government could restrict flights, for example, to make routes more profitable. That would mean higher airfares.</p>
<figure class="align-center ">
<img alt="Passengers at Roissy Airport, near Paris, April 11 2021." src="https://images.theconversation.com/files/394707/original/file-20210413-17-sjmh61.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/394707/original/file-20210413-17-sjmh61.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/394707/original/file-20210413-17-sjmh61.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/394707/original/file-20210413-17-sjmh61.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/394707/original/file-20210413-17-sjmh61.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/394707/original/file-20210413-17-sjmh61.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/394707/original/file-20210413-17-sjmh61.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Passengers at Roissy Airport, near Paris, April 11 2021.</span>
<span class="attribution"><span class="source">Christophe Petit Tesson/EPA</span></span>
</figcaption>
</figure>
<p>But at least the industry concentration I feared would result from collapses, mergers and acquistions – leading to less competition and higher prices for customers – <a href="https://airlines.iata.org/ceo-interviews/the-business-of-freedom-will-fly-again-alexandre-de-juniac-former-iata-director">looks unlikely</a>.</p>
<h2>The world is not as global as we thought</h2>
<p>The single biggest disappointment of the past year has been governments’ inability to effectively collaborate to relax international travel restrictions. Even between countries that have managed COVID-19 well, such as Australia and New Zealand. Their “<a href="https://www.bbc.com/news/world-australia-56645990">travel bubble</a>” could and should have started much earlier.</p>
<p>IATA’s efforts to have governments embrace a system of COVID tests for travellers before departures, rather than quarantine of arrival, <a href="https://www.cityam.com/iata-calls-for-worldwide-airport-testing-to-replace-quarantine/">fell on deaf ears</a>. </p>
<p>Travel bubbles have proved difficult to agree on and maintain. Taiwan’s bubble with Palau, for example, only allows for miniscule travel numbers. The Singapore-Hong Kong arrangement was suspended days before it was scheduled to commence following a minor outbreak in Hong Kong. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/a-quarantine-free-trans-tasman-bubble-opens-on-april-19-but-flyer-beware-remains-the-reality-of-pandemic-travel-158423">A quarantine-free trans-Tasman bubble opens on April 19, but 'flyer beware' remains the reality of pandemic travel</a>
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<p>Pretty much all such discussions have been bilateral. These are a start, but what is really needed are multilateral agreements for regional safe-travel areas. Australia and New Zealand, for example, could team up with countries with similar epidemiological situations such as Singapore, Taiwan, China and Vietnam.</p>
<p>Had governments adopted a more cooperative approach, they might have saved money paying local airlines for not flying. This lack of cooperation, if it continues, will ensure international travel resumes slower than it could have.</p>
<figure class="align-center ">
<img alt="New self-service check-in machines introduced by Japan Airlines at Tokyo's Haneda airport enable passengers to complete the procedure without touching the screen." src="https://images.theconversation.com/files/394946/original/file-20210414-23-1oc47as.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/394946/original/file-20210414-23-1oc47as.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=392&fit=crop&dpr=1 600w, https://images.theconversation.com/files/394946/original/file-20210414-23-1oc47as.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=392&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/394946/original/file-20210414-23-1oc47as.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=392&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/394946/original/file-20210414-23-1oc47as.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=492&fit=crop&dpr=1 754w, https://images.theconversation.com/files/394946/original/file-20210414-23-1oc47as.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=492&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/394946/original/file-20210414-23-1oc47as.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=492&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">New self-service check-in machines introduced by Japan Airlines at Tokyo’s Haneda airport enable passengers to complete the procedure without touching the screen.</span>
<span class="attribution"><span class="source">Kyodo/AP</span></span>
</figcaption>
</figure>
<h2>Vaccines are now the key</h2>
<p>The IATA’s February forecast of global travel volumes being back to 80% of 2019 levels by the last quarter of the year now principally rests on the speed of vaccination programs around the globe, and what happens with new COVID-19 variants. </p>
<p>Until a considerable share of people are vaccinated, protective measures (masks, distancing, reduced capacity at events, track-and-trace) will remain necessary, both during travel and while out and about on the ground. </p>
<p>Crucial to international travel returning to normal will be “<a href="https://www.usatoday.com/story/travel/news/2021/03/22/vaccine-passport-who-covid-travel-will-you-need-one/4762495001/">vaccine passports</a>”, some form of which will likely be needed for most international travel for at least the next five years.</p>
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<em>
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Read more:
<a href="https://theconversation.com/vaccination-passport-apps-could-help-society-reopen-first-they-have-to-be-secure-private-and-trusted-157219">Vaccination passport apps could help society reopen – first they have to be secure, private and trusted</a>
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<p>I expect requirements such as the need to quarantine will start to be lifted for those who have been vaccinated between July and October. But there will be big differences between nations. Some may open their borders to everyone as soon as a sufficient share of domestic population has been vaccinated. Others may open quarantine-free travel only to vaccinated individuals for the next several years. </p>
<p>The more governments cooperate and learn from each other’s successes, though, the quicker we can return to a world of unfettered travel. The livelihoods of tens of millions of people worldwide depend on it.</p><img src="https://counter.theconversation.com/content/158867/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Volodymyr Bilotkach is an External Instructor with IATA Training.</span></em></p>We thought things would be so much better for international air travel by now, though things could be worse for the airlines themselves.Volodymyr Bilotkach, Associate Professor, Singapore Institute of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1482442020-10-16T04:13:19Z2020-10-16T04:13:19ZVirgin sacrifice: boardroom bloodletting signals a classic private-equity hijacking<figure><img src="https://images.theconversation.com/files/363806/original/file-20201015-15-9z550m.jpg?ixlib=rb-1.1.0&rect=746%2C773%2C3740%2C2159&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Richard Wainwright/AAP</span></span></figcaption></figure><p>US private equity firm Bain Capital won’t formally assume control of Virgin Australia until November. But its <a href="https://asx.api.markitdigital.com/asx-research/1.0/file/2924-02294197-2A1256598?access_token=83ff96335c2d45a094df02a206a39ff4">coup this week</a> against chief executive Paul Scurrah, dumping him for Jayne Hrdlicka, a former Bain employee with a reputation for toughness, signals the start of a classic private equity smash-and-grab operation.</p>
<p>When Virgin’s administrators and creditors formally accepted Bain’s bid for the stricken airline, they did so in part due to undertakings job losses would be minimised. Administrator Vaughan Strawbridge optimistically <a href="https://asx.api.markitdigital.com/asx-research/1.0/file/2924-02277430-2A1248212?access_token=83ff96335c2d45a094df02a206a39ff4">said in September</a> the deal would provide “certainty for employees and customers” as well as “maintaining a competitive Australian aviation industry for the benefit of consumers”. </p>
<p>Now, just weeks later, Scurrah’s exit indicates Bain’s intentions. He <a href="https://www.theaustralian.com.au/business/aviation/virgin-australia-to-aim-lower-asceo-paul-scurrah-flies-off/news-story/82a806ac0bc5713cb3eb73a908ff39b8">was reportedly reluctant</a> to undertake the cost-cutting Bain wants as part of a plan to position Virgin Australia between Qantas and its budget carrier Jetstar.</p>
<h2>Hand-picked appointment</h2>
<p>Hrdlicka spent about 15 years working for Bain in both the US and Australia. She joined Qantas as a senior executive in 2010, where she reportedly gained a <a href="https://www.afr.com/chanticleer/virgin-s-epic-fight-with-unions-20201015-p565e0">reputation for being tough on unions</a>. She was appointed group chief executive of Jetstar in 2012 (a position she held until 2017). </p>
<p>Replacing the existing boss with a hand-picked replacement is standard practice in private equity deals. It is one of the most important strategic decisions (and typically the first) a private equity owner makes. </p>
<p>As such, the choice says a great deal about what an owner hopes to achieve, and how it plans to achieve it.</p>
<p>In contrast to the chief executive of a public company (the shares of which are traded on a stock exchange) who must act on behalf of a multitude of shareholders, the head of a private-equity company answers solely to the private equity owners. </p>
<p>This relationship, therefore, is an intensely personal one, with private-equity partners being very “hands-on” owners. </p>
<h2>Urgency trumps empathy</h2>
<p>What are the qualities private-equity owners look for in a chief executive?</p>
<p>According to researchers who interviewed 32 managing partners of private-equity firms to find out what they valued, <a href="https://www.huffpost.com/entry/how-to-pick-ceos-when-you_b_10362104">a handful of key</a> qualities are particularly sought after. </p>
<p>They want candidates with a track record in overcoming setbacks, who are team builders, and who won’t shy away from telling their bosses (the private equity firm) how things are. Previous experience is less important. So too is empathy. As one interviewee told them:</p>
<blockquote>
<p>I’m not down on empathy, but there are times when empathy needs to take a back seat to urgency. Some highly empathetic leaders are not able to make the tough personnel decisions that need to be made - which compromises performance.</p>
</blockquote>
<p>In this vein, Bain’s jettisoning of Scurrah for Hrdlicka is highly suggestive of the management approach Bain would like to see.</p>
<p>Among other things, it is likely to involve a more combative approach to employee relations with a view to aggressively, and quickly, driving down Virgin’s cost base. </p>
<p>Scurrah’s dumping has already reportedly led to the Transport Workers Union (representing the biggest proportion of Virgin Australia employees) <a href="https://www.theguardian.com/business/2020/oct/14/union-walks-away-from-virgin-australia-talks-after-reports-ceo-is-leaving">suspending negotiations with management</a>. Unions had reportedly been <a href="https://www.afr.com/rear-window/bain-installs-hrdlicka-at-virgin-having-promised-not-to-20201015-p565js">assured months ago</a> Hrdlicka would not be made chief executive.</p>
<h2>Private equity’s poor track record</h2>
<p>Yesterday, Virgin’s administrator Vaughan Strawbridge again (somewhat optimistically) “<a href="https://newsroom.virginaustralia.com/release/virgin-australia-holdings-limited-subject-deed-company-arrangement-virgin-australia-group">reaffirmed</a>” that “Virgin Australia will not be repositioned as a low-cost airline”:</p>
<blockquote>
<p>Virgin Australia will be a ‘hybrid’ airline, delivering high value to its customers by delivering a distinctive Virgin experience at competitive prices. </p>
</blockquote>
<p>But Bain’s dumping of Scurrah for Hrdlicka fits the classic narrative of how private-equity players squeeze money for themselves out of takeover targets before bailing out before those companies nose-dive.</p>
<p>As <a href="https://theconversation.com/cutbacks-may-keep-virgin-australia-alive-for-now-but-its-long-term-prospects-are-bleak-141876">I wrote</a> after Virgin Australia’s August announcement that it would axe its budget brand Tigerair and sack about 3,000 of its 9,000 staff:</p>
<blockquote>
<p>Private-equity owners have a poor track record in creating strong, sustainable companies with long-term prospects. At their worst they can act a bit like used-car salesmen who know how to spruce up and turn a profit on a vehicle with underlying mechanical problems. </p>
</blockquote>
<p>If the typical private-equity experience is anything to go by, Bain, having acquired Virgin with mostly borrowed money, will seek to maximise cash flow by operating only high-margin, high-volume routes (consistent with servicing “premium corporate” and “budget-focused” travellers). It will abandon other low-margin, mostly regional routes to the vagaries of the Qantas monopoly. </p>
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<strong>
Read more:
<a href="https://theconversation.com/cutbacks-may-keep-virgin-australia-alive-for-now-but-its-long-term-prospects-are-bleak-141876">Cutbacks may keep Virgin Australia alive for now, but its long-term prospects are bleak</a>
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<p>Bain will also likely seek to reduce staffing costs through renegotiating pilot and cabin-crew employment contracts, using the threat of further redundancies as leverage. On the most popular trunk routes, where it will provide a parallel service to Qantas, customers will face cosy duopoly prices.</p>
<p>The upshot of all this: to allow Bain and its co-investors to pay themselves handsome dividends upfront, thereby facilitating an exit at the earliest opportunity at a tidy profit. This would be a classic debt-fuelled private-equity play. </p>
<p>In public-interest terms, however, it will be a costly missed opportunity to build a robust long-term domestic competitor to Qantas. </p>
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<strong>
Read more:
<a href="https://theconversation.com/home-away-from-home-reflecting-on-past-airline-collapses-in-australia-136840">'Home away from home': reflecting on past airline collapses in Australia</a>
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<p>Inevitably, once the private equiteers have left the building, a once-proud airline will be left labouring under a mountain of debt, marking time until it capitulates at the onset of the next economic crisis; the unfortunate plaything of financial, not aeronautical, engineers.</p><img src="https://counter.theconversation.com/content/148244/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mark Melatos has received funding from the Australian Research Council. </span></em></p>In pushing out Virgin Australia’s chief executive Paul Scurrah, new owner Bain Capital has signalled more cost-cutting is on the cards.Mark Melatos, Associate Professor of Economics, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1473742020-10-07T11:15:27Z2020-10-07T11:15:27ZGrímsvötn: Iceland’s most active volcano may be about to erupt<p>The ice-covered Grímsvötn volcano on Iceland produced an unusually large and <a href="https://earthobservatory.nasa.gov/images/50684/eruption-of-grimsvotn-volcano-iceland">powerful eruption in 2011</a>, sending ash 20km into the atmosphere, causing the cancellation of about 900 passenger flights. In comparison, the much smaller 2010 eruption of <a href="http://news.bbc.co.uk/1/hi/world/europe/8634944.stm">Eyjafjallajökull</a> led to the <a href="https://ec.europa.eu/commission/presscorner/detail/en/MEMO_11_346">cancellation of about 100,000 flights</a>.</p>
<p>Understandably, any mention of another explosive eruption from an Icelandic volcano will raise concerns in the air travel industry, which is <a href="https://theconversation.com/why-airlines-that-can-pivot-to-ultra-long-haul-flights-will-succeed-in-the-post-coronavirus-era-140466">currently reeling</a> from the COVID-19 pandemic. But there are clear signs that the Grímsvötn volcano is getting ready to erupt again. As a result, the authorities have recently <a href="https://en.vedur.is/about-imo/news/the-aviation-color-code-for-grimsvotn-changed-from-green-to-yellow">raised the threat level</a> for this volcano.</p>
<p>Grímsvötn is a peculiar volcano, as it lies almost wholly beneath ice, and the only permanently visible part is an old ridge on its south side which forms the edge of a large crater (a caldera). And it is along the base of this ridge, under the ice, that most recent eruptions have occurred.</p>
<p>Another peculiarity is that the heat output from the volcano is extraordinarily high (2000-4000MW), and this melts the overlying ice and produces a hidden subglacial lake of meltwater. This is up to 100 metres deep and has ice up to about 260 metres thick floating on it. Fresh ice is continually flowing into the caldera, where it melts, and so the water level just keeps rising and rising.</p>
<figure class="align-center ">
<img alt="Picture of the lake at Grímsvötn." src="https://images.theconversation.com/files/362147/original/file-20201007-14-1ecfns.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/362147/original/file-20201007-14-1ecfns.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=328&fit=crop&dpr=1 600w, https://images.theconversation.com/files/362147/original/file-20201007-14-1ecfns.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=328&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/362147/original/file-20201007-14-1ecfns.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=328&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/362147/original/file-20201007-14-1ecfns.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=413&fit=crop&dpr=1 754w, https://images.theconversation.com/files/362147/original/file-20201007-14-1ecfns.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=413&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/362147/original/file-20201007-14-1ecfns.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=413&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The roughly 1.5km wide hole melted in the ice by the 2011 eruption.</span>
<span class="attribution"><span class="source">Dave McGarvie</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>This meltwater can escape suddenly, and after travelling southwards beneath the ice for about 45km it emerges at the ice margin as a flood, which in the past has <a href="https://www.irishtimes.com/news/bridges-destroyed-as-icelandic-flood-triggered-by-volcano-peaks-1.103502">washed away roads and bridges</a>. Fortunately, the passage of meltwater beneath the ice to its outlet can be tracked, and so roads are closed in good time to avoid travellers getting caught in the flood and killed.</p>
<p>Yet another important peculiarity of Grímsvötn is that it can have a hair-trigger response to pressure. This happens when the meltwater lake drains – removal of the water from across the top of the volcano rapidly reduces the pressure. This can trigger an eruption – it’s like lifting the lid off a pressure cooker. This has happened many times at Grímsvötn.</p>
<p>Grímsvötn is Iceland’s most frequently erupting volcano, and over the past 800 years some 65 eruptions <a href="https://volcano.si.edu/volcano.cfm?vn=373010">are known</a> with some certainty. The time gaps between eruptions are variable – and, for example, prior to the larger 2011 eruption there were smaller eruptions in 2004, 1998 and 1983 with gaps of between four and 15 years. Crucially, and with the next eruption in mind, Grímsvötn appears to have a pattern of infrequent larger eruptions that occur every 150-200 years (for example 2011, 1873, 1619), with smaller and more frequent eruptions occurring roughly once a decade in between. </p>
<h2>Signs of activity</h2>
<p>A high frequency of eruptions at a volcano allows scientists to detect patterns that lead to eruptions (precursors). And if these are repeated each time a volcano erupts then it becomes possible for scientists to be more confident that an eruption is likely to happen in the near future. It is, however, <a href="https://theconversation.com/why-cant-we-predict-when-a-volcano-will-erupt-53898">seldom possible to be precise</a> about the exact day.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/362150/original/file-20201007-22-ywpmmo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/362150/original/file-20201007-22-ywpmmo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=340&fit=crop&dpr=1 600w, https://images.theconversation.com/files/362150/original/file-20201007-22-ywpmmo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=340&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/362150/original/file-20201007-22-ywpmmo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=340&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/362150/original/file-20201007-22-ywpmmo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=427&fit=crop&dpr=1 754w, https://images.theconversation.com/files/362150/original/file-20201007-22-ywpmmo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=427&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/362150/original/file-20201007-22-ywpmmo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=427&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Old ridge of Grímsvötn.</span>
<span class="attribution"><span class="source">Dave McGarvie</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>Icelandic scientists have been carefully monitoring Grímsvötn since its 2011 eruption, and have seen <a href="http://icelandicvolcanoes.is/?volcano=GRV#">various signals</a> that suggest the volcano is getting ready to erupt. For example, the volcano has been inflating as new magma moves into the plumbing system beneath it (think of burying a balloon in the sand and then inflating it). Increasing thermal activity has been melting more ice and there has also been a recent increase in earthquake activity.</p>
<p>So what happens next? Again, based on the pattern observed at past eruptions, an intense swarm of earthquakes lasting a few hours (one to ten hours) will signal that magma is moving towards the surface and that an eruption is imminent. In cases where the hidden subglacial lake drains and triggers the eruption, the earthquakes occur after the lake has drained and just before the eruption.</p>
<p>The smaller Grímsvötn eruptions expend a lot of energy when they interact with water and ice at the surface. That means the resulting ash gets wet and sticky and so falls from the sky relatively quickly. Ash clouds therefore only travel a few tens of kilometres from the eruption site. This is a good scenario for Icelanders and also for air travel, as it prevents the formation of substantial ash clouds that could drift around and close off airspace.</p>
<p>But will it be a small eruption? If Grímsvötn’s past pattern of occasional large eruptions with more numerous smaller eruptions occurring in between continues into the future, then the next eruption should be a small one (given there was a large one in 2011). And the word “should” is important here – Iceland’s volcanoes are complex natural systems and patterns are not always followed faithfully.</p><img src="https://counter.theconversation.com/content/147374/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dave McGarvie does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Icelandic authorities have recently raised the threat level of the Grímsvötn volcano.Dave McGarvie, Volcanologist, Lancaster UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1418762020-08-05T05:27:19Z2020-08-05T05:27:19ZCutbacks may keep Virgin Australia alive for now, but its long-term prospects are bleak<p>Virgin Australia’s plan <a href="https://www.abc.net.au/news/2020-08-05/virgin-australia-airline-to-slim-down-post-coronavirus/12525186">to sack about 3,000</a> of its 9,000 staff, axe its budget brand Tigerair, streamline its fleet to only Boeing 737s and suspend long-haul international flying indefinitely should come as no surprise. </p>
<p>Its main competitor, Qantas, announced <a href="https://theconversation.com/qantas-cutbacks-signal-hard-years-before-airlines-recover-141522">its cutbacks in June</a>.</p>
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Read more:
<a href="https://theconversation.com/qantas-cutbacks-signal-hard-years-before-airlines-recover-141522">Qantas cutbacks signal hard years before airlines recover</a>
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<p>“Demand for domestic and short-haul international travel is likely to take at least three years to return to pre-COVID-19 levels, with the real chance it could be longer,” Virgin Australia chief executive Paul Scurrah said. “Which means as a business we must make changes to ensure the Virgin Australia Group is successful in this new world.”</p>
<p>The big question, though, is whether Virgin can ever become a sustainable competitor to Qantas.</p>
<p>That seems highly unlikely under its new owner, US private equity firm Bain Capital, which acquired <a href="https://thenewdaily.com.au/finance/consumer/2020/06/28/virgin-australia-bain-capital/">the ailing airline in June</a> after it went <a href="https://theconversation.com/voluntary-administration-isnt-a-death-sentence-for-virgin-australia-or-for-competition-136832">into administration in April</a>.</p>
<p>Even before the impact of the COVID-19 pandemic, Virgin had posted years of losses with debts <a href="https://www.livewiremarkets.com/wires/virgin-australia-s-very-junky-debt-raising">approaching A$7 billion</a>. </p>
<p>Private equity owners have a poor track record in creating strong, sustainable companies with long-term prospects. At their worst they can act a bit like used-car salesmen who know how to spruce up and turn a profit on a vehicle with underlying mechanical problems. </p>
<p>They are undoubtedly masters of financial (not necessarily aeronautical) engineering; generally ill-equipped to provide the long-term investments in physical capital and service quality that an airline like Virgin Australia needs to be competitive. </p>
<h2>How private equity works</h2>
<p>Private equity firms raise money from private investors such as wealthy individuals and superannuation funds. That money is <a href="https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.23.1.121">pooled into a fund</a>, which the private equity firm manages for a fee. Funds are typically used to buy undervalued and often financially distressed businesses, such as Virgin.</p>
<p>These funds have a short life – <a href="https://pitchbook.com/news/articles/pe-hold-times-keep-going-up#:%7E:text=LPs%20take%20heed%3A%20Private%20equity,years%2C%20according%20to%20PitchBook%20data">about six years on average</a>. They acquire a portfolio of companies, nurture those businesses to apparent commercial health and then sell them off (usually through a public float on a stock exchange) at a large profit. They can then divest themselves of their remaining ownership stake while the share price remains high.</p>
<p>Private ownership can be advantageous for a struggling company, because it removes the regulatory and other distractions that come with being a listed public company. It means management can make decisions without worrying about the short-term stock implications, for example.</p>
<p>But private equity players often fail to create long-term profitable companies, as the fate of some iconic Australian companies shows.</p>
<h2>Take the money and run</h2>
<p>In 2006 the then Coles-Myer group sold its Myer department store business to a US private equity consortium led by TPG Capital. In 2009 the private equity owners floated Myer on the Australian Stock Exchange and <a href="https://www.smh.com.au/business/private-equity-owners-exit-myer-20091029-hm7l.html">sold all their shares</a>, making almost six times their <a href="https://www.afr.com/companies/retail/ten-years-on-myer-float-still-rankles-20191024-p533uv">original investment</a>. </p>
<p>Six months after its float, Myer issued a profit warning. It has never traded above its issue price of A$4.10 a share. Its share price now is about 20 cents. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/seven-ways-to-tell-whether-a-private-equity-backed-ipo-should-be-avoided-60851">Seven ways to tell whether a private equity-backed IPO should be avoided</a>
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<p>Dick Smith Electronics suffered even worse when Woolworths sold it in 2012 to Australian private equity investor <a href="https://www.abc.net.au/news/2012-09-27/dick-smith-sold-to-private-equity/4283098">Anchorage Capital Partners</a> <a href="https://www.afr.com/chanticleer/dick-smith-exam-puts-private-equity-back-in-the-hot-seat-20160905-gr9csm">for A$94 million</a>. </p>
<p>Its new owner floated the company 15 months later at a valuation of A$520 million, (and a share price of $2.20). By September 2014 Anchorage <a href="http://www.anchoragecapital.com.au/investments-dick-smith/">sold its entire stake</a>. By the end of 2015 the share price was about 30 cents. In January 2016 the company <a href="https://www.afr.com/chanticleer/dick-smith-exam-puts-private-equity-back-in-the-hot-seat-20160905-gr9csm">went into administration</a>.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-ugly-story-of-dick-smith-from-float-to-failure-55625">The ugly story of Dick Smith, from float to failure</a>
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<h2>Maximising short-term profit</h2>
<p>The fact that private equity firms are short-term investors who eschew regulatory oversight means they are ill-suited to own and operate any business - such as an airline - that is heavily regulated and requires large, long-term investments. </p>
<p>For a start, Bain has bought Virgin using mostly borrowed money. This debt will most likely, and in large part, be used to front-load dividend payments to Bain and its co-investors, allowing them to recoup their original investment before Virgin’s performance under its new owners can be adequately judged.</p>
<p>Bain will likely need to maximise cash flow to pay these dividends. How will it do this? We can predict the probable strategy:</p>
<ul>
<li><p>only operate on the highest-margin, highest-volume routes</p></li>
<li><p>zealously control costs, with potentially significant implications for service quality and employee conditions</p></li>
<li><p>charge the highest possible prices the market will bear in a cosy duopoly with Qantas</p></li>
</ul>
<p>Such a strategy will do nothing for Virgin’s long-term reputation, customer loyalty or indeed its commercial viability after Bain sells out. Bain will likely exit as soon as it can, when the stock market looks particularly frothy and it can find buyers prepared to buy Virgin Australia shares at a big premium. </p>
<p>None of this will make Virgin Australia a robust and long-term competitor to Qantas. It will in all probability be left with a debt-laden balance sheet, an orphan engaged in a fight to the death with a much stronger Qantas. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/home-away-from-home-reflecting-on-past-airline-collapses-in-australia-136840">'Home away from home': reflecting on past airline collapses in Australia</a>
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<p>In short, Virgin will most likely find itself in exactly the same vulnerable position it was before the COVID-19 pandemic, in no shape to survive the inevitable next aviation crisis without a taxpayer bailout.</p>
<p>It means a duopoly in the short term and an effective monopoly for Qantas in the longer term. And for Australian travellers that will mean higher ticket prices and lower quality service.</p><img src="https://counter.theconversation.com/content/141876/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mark Melatos has received funding from the Australian Research Council. He serves on the HSC Standards Committee of the NSW Education Standards Authority and on the Reserve Bank of Australia's Educators Advisory Panel.</span></em></p>Virgin Australia’s cutbacks leave a big question unanswered. Can it ever become a sustainable competitor to Qantas under private equity ownership?Mark Melatos, Associate Professor of Economics, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1401182020-07-13T11:53:42Z2020-07-13T11:53:42ZAirlines got travelers comfortable about flying again once before – but 9/11 and a virus are a lot different<figure><img src="https://images.theconversation.com/files/346702/original/file-20200709-38-1t8rnkl.jpg?ixlib=rb-1.1.0&rect=71%2C128%2C4674%2C3031&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Chicago's O'Hare and other U.S. airports remain largely empty despite increased mask wearing and other measures to prevent COVID-19 spread. </span> <span class="attribution"><span class="source">AP Photo/Nam Y. Huh</span></span></figcaption></figure><p>The U.S. airline industry has generally faced two obstacles in enticing more people to fly: fear and fares. </p>
<p>Before the novel coronavirus, few feared flying thanks to the <a href="https://blueskypit.com/2020/02/10/trouble-in-the-air-rare-for-u-s-commercial-flights">extreme rarity</a> of airline crashes in the U.S., and domestic inflation-adjusted fares that <a href="https://transtats.bts.gov/AIRFARES/">were about the lowest ever</a>. As a result, a <a href="https://www.bts.dot.gov/newsroom/final-full-year-2019-traffic-data-us-airlines-and-foreign-airlines-us-flights">record 811 million people flew</a> within the U.S. in 2019. </p>
<p>Today, fares are at rock bottom, but Americans’ fear of flying may be the highest it’s ever been, as the risk of sitting in an enclosed space with several hundred strangers – seemingly the perfect <a href="https://www.bbc.com/news/business-52822913">conditions for an infectious disease</a> – is <a href="https://thehill.com/policy/transportation/aviation/502972-fewer-than-half-willing-to-fly-shortly-after-coronavirus">making most people</a> avoid the skies. Passenger traffic <a href="https://www.tsa.gov/coronavirus/passenger-throughput">plummeted 95%</a> in April from a year earlier and remains significantly lower than normal.</p>
<p>As an <a href="https://udayton.edu/directory/artssciences/history/bednarek_janet.php">aviation historian</a>, I feel a bit of deja vu. Almost two decades ago, demand similarly evaporated after the 9/11 terrorist attacks led to a nationwide grounding and fear of flying that persisted for several years. Here’s how the industry overcame passenger jitters – and what lessons it holds for today. </p>
<h2>Overcoming aviophobia</h2>
<p>Although the odds of being on a plane that gets hijacked are extremely slim, the perception of this changed significantly after 9/11. In a <a href="https://news.gallup.com/poll/4909/terrorism-united-states.aspx">poll taken immediately after the attack</a>, more than 40% of Americans said they were less willing to fly. </p>
<p>The U.S. government ordered all airports closed for three days. When they reopened, passenger traffic <a href="https://traveltips.usatoday.com/effects-911-airline-industry-63890.html">was still down almost 30%</a> from the previous year. Simply put, if people were going to take to the skies again, the airports knew they had to provide a level of security that made people feel safe. </p>
<p>That’s why passengers returning to the airports in the days after 9/11 found a much different environment that included armed military patrols, heightened scrutiny of identification and more careful screening of both people and bags <a href="https://www.cntraveler.com/story/how-airport-security-has-changed-since-september-11">before they were allowed on the aircraft</a>. While the soldiers were eventually replaced by uniformed agents of the newly created <a href="https://www.tsa.gov/timeline">Transportation Security Administration</a>, the other measures put in place remain to this day.</p>
<p>Airports and airlines were able to quickly get the new infrastructure into place because much of the basic equipment had been developed in response to a <a href="https://www.vox.com/2016/3/29/11326472/hijacking-airplanes-egyptair">long history of hijackings</a> and other terrorist attacks against aviation. And over the years, they had developed <a href="https://www.britannica.com/technology/airport/Airport-security">X-ray machines, magnatometers and explosive detection equipment</a>. </p>
<p>In other words, they knew just what they needed to do to address passenger fear and already had the tools to do it. It took several years, but the airline industry eventually did recover, and Americans once again were flying in record numbers. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/346704/original/file-20200709-18-7suhbr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/346704/original/file-20200709-18-7suhbr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=447&fit=crop&dpr=1 600w, https://images.theconversation.com/files/346704/original/file-20200709-18-7suhbr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=447&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/346704/original/file-20200709-18-7suhbr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=447&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/346704/original/file-20200709-18-7suhbr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=562&fit=crop&dpr=1 754w, https://images.theconversation.com/files/346704/original/file-20200709-18-7suhbr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=562&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/346704/original/file-20200709-18-7suhbr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=562&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Heavily armed guards were a common sight at airports in the days after 9/11.</span>
<span class="attribution"><span class="source">AP Photo/Michael Dwyer</span></span>
</figcaption>
</figure>
<h2>A novel challenge</h2>
<p>In 2020, however, the aviation industry is faced with a new challenge: an evolving pandemic that <a href="https://www.washingtonpost.com/health/2020/05/27/coronavirus-endemic/">shows no signs of ending</a> for months if not years. </p>
<p>The coronavirus crisis has not only made people more afraid to fly, it’s taken away most of our reasons for flying in the first place. Why fly if there is nothing to fly to – <a href="https://www.businessinsider.com/major-events-cancelled-or-postponed-due-to-the-coronavirus-2020">no conferences</a>, no in-person business meetings, <a href="https://washington.org/dc-information/coronavirus-travel-update-washington-dc">no or limited</a> open <a href="https://www.forbes.com/sites/tamarathiessen/2020/07/01/us-europe-eu-travel-ban-5-things-americans-must-know/#d9f36756c4c5">vacation spots</a>? </p>
<p>In June, <a href="https://www.tsa.gov/coronavirus/passenger-throughput">passenger traffic through U.S. airports</a> was down about 81% from last year’s levels, only a slight improvement from May and April, when most of the world <a href="https://www.businessinsider.com/countries-on-lockdown-coronavirus-italy-2020-3#new-zealand-has-essentially-lifted-all-restrictions-and-is-now-limiting-the-number-of-citizens-trying-to-return-home-1">was under lockdown</a>. </p>
<p>Unlike terrorism, the aviation world has little history dealing with pandemics and no broadly agreed-upon set of accepted equipment or procedures. Past outbreaks, such as SARS in 2003 and MERS in 2005, had only a modest effect on international travel.</p>
<p>In 2003, for example, the World Health Organization said the danger of SARS transmission on an <a href="https://www.who.int/csr/sars/travel/airtravel/en/.">aircraft was quite low</a>, and the <a href="https://www.cdc.gov/about/history/sars/timeline.htm">entire outbreak lasted only a few months</a> and infected a little over 8,000 people in 29 countries. </p>
<p>In 2015, MERS was recognized as a <a href="https://www.reuters.com/article/us-airshow-france-mers/mers-outbreak-now-no-1-aviation-sector-risk-lessor-idUSKBN0OZ2A720150619">threat to aviation</a> but, even more so than SARS, proved difficult to transmit and was <a href="https://www.medicalnewstoday.com/articles/how-do-sars-and-mers-compare-with-covid-19#Coronaviruses-past-and-present">largely confined to the Arabian peninsula</a>. </p>
<p>That’s likely why the TSA and the industry were rather slow to adopt new policies dealing with the COVID-19 threat. Although the virus <a href="https://www.nytimes.com/2020/05/15/us/coronavirus-first-case-snohomish-antibodies.html">reportedly</a> had been in the U.S. as early as December, the TSA didn’t begin notifying passengers when and where its agents had <a href="https://www.tsa.gov/coronavirus">tested positive</a> until mid-March, shortly before the first stay-at-home order on March 19. The Centers for Disease Control and Prevention issued its <a href="https://www.cdc.gov/coronavirus/2019-ncov/prevent-getting-sick/cloth-face-cover.html">first guidance on the use of masks</a> on April 3. It was another month, though, before airlines <a href="https://www.afar.com/magazine/face-masks-now-required-provided-on-these-us-airlines">began requiring passengers</a> to wear masks – and even today, <a href="https://www.forbes.com/sites/advisor/2020/06/19/master-list-of-us-airline-seating-and-mask-covid-19-policies/#1cf6e9216690">not all carriers do</a>. And then it was weeks later before airports <a href="https://blueskypit.com/2020/05/18/pit-sets-new-safety-requirements-for-travelers-staff/">began introducing</a> new cleaning and health procedures, including requiring all employees to wear masks. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/346703/original/file-20200709-50-1lvbves.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/346703/original/file-20200709-50-1lvbves.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/346703/original/file-20200709-50-1lvbves.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/346703/original/file-20200709-50-1lvbves.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/346703/original/file-20200709-50-1lvbves.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/346703/original/file-20200709-50-1lvbves.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/346703/original/file-20200709-50-1lvbves.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Back in May, passengers were few and far between.</span>
<span class="attribution"><span class="source">AP Photo/Charlie Riedel</span></span>
</figcaption>
</figure>
<h2>A mishmash of policies</h2>
<p>After 9/11, Washington – the Federal Aviation Administration, Congress and the White House – provided strong and largely consistent action and messaging aimed at facilitating a rapid recovery of air travel in the U.S. The COVID-19 challenge to aviation seems to lack the same response from Washington, leaving most actions to the airlines and local airport officials.</p>
<p>[<em>Get our most insightful politics and election stories.</em> <a href="https://theconversation.com/us/newsletters/politics-weekly-74/?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=politics-most">Sign up for The Conversation’s Politics Weekly</a>.]</p>
<p>The result has been a mishmash of policies and procedures with largely empty airports and airlines struggling to balance passenger loads, social distancing and dwindling revenues. As a result, <a href="https://thehill.com/policy/transportation/489259-nearly-80-airlines-cut-capacity-100-percent-over-coronavirus">cuts to capacity</a> mean many planes are once again <a href="https://www.bts.gov/archive/publications/special_reports_and_issue_briefs/issue_briefs/number_13/entire">packed to the brim</a>, even as the <a href="https://www.nytimes.com/2020/07/09/world/coronavirus-updates.html?action=click&module=Top%20Stories&pgtype=Homepage">pandemic worsens in the U.S.</a>. While some airlines have promised to continue social distancing on planes by <a href="https://thepointsguy.com/guide/airline-social-distancing-policies/">keeping middle seats open</a>, others, such as <a href="https://www.wbtv.com/2020/06/28/american-airlines-will-start-booking-flights-full-capacity-again-july">American</a>, are aiming for full capacity. </p>
<p>The novel coronavirus represents a new threat to aviation, and it may take a long time for the industry to develop the equipment, policies and procedures to deal with it. It may be too late for the current pandemic, but hopefully we’ll be ready for the next one.</p><img src="https://counter.theconversation.com/content/140118/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Janet Bednarek does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Airlines and airports reacted quickly after 9/11 to put new procedures in place that overcame passengers’ newfound fears of flying. An aviation historian explains why it may be harder to so today.Janet Bednarek, Professor of History, University of DaytonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1415222020-06-26T08:14:01Z2020-06-26T08:14:01ZQantas cutbacks signal hard years before airlines recover<p>Qantas’ <a href="https://www.smh.com.au/business/companies/qantas-to-sack-more-than-6000-workers-launch-1-9-billion-raising-20200625-p555yh.html">announcement</a> this week of severe job cuts comes as little surprise. The COVID-19 pandemic and closed borders have brought the global aviation industry to its knees. </p>
<p>According to global travel data provider <a href="https://www.oag.com/coronavirus-airline-schedules-data">OAG</a> (formerly the Official Airline Guide), this week airlines worldwide scheduled about 63% fewer flights to the week a year ago. In Australia, there were about 78% fewer flights.</p>
<p>Qantas’ decision to shed about 6,000 of its 29,000 workers (a further 15,000 have been stood down without pay) is part of its plan to reduce costs by A$15 billion over three years of anticipated “lower activity”.</p>
<p>It would be years before international flying returned to what it was, <a href="https://www.smh.com.au/business/companies/qantas-to-sack-more-than-6000-workers-launch-1-9-billion-raising-20200625-p555yh.html">said Qantas chief executive Alan Joyce</a>:</p>
<blockquote>
<p>We have to position ourselves for several years where revenue will be much lower, and that means becoming a smaller airline in the short term.</p>
</blockquote>
<p>About 100 of the airline’s 130 jets will be grounded for at least a year – some probably longer.</p>
<p>Qantas is far from alone. Airlines all around the world are furloughing or laying off workers, along with retiring aircraft ahead of schedule, grounding large planes such as A-380s and postponing new aircraft orders.</p>
<p>The latest <a href="https://www.transtats.bts.gov/Employment/">US Department of Transportation</a> data, for example, shows the number of US airline jobs fell 5% in April (representing more than 36,000 lost jobs) compared to March. May figures (yet to be published) will definitely be worse. There’s talk of a “<a href="https://edition.cnn.com/2020/05/01/business/airlines-job-cuts-coronavirus/index.html">tsunami</a>” of airline job losses in Europe.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/once-the-pandemic-is-over-we-will-return-to-a-very-different-airline-industry-134124">Once the pandemic is over, we will return to a very different airline industry</a>
</strong>
</em>
</p>
<hr>
<h2>Past crises</h2>
<p>The aviation industry has not faced a crisis like this since the world’s first scheduled passenger airline service took off in 1914. </p>
<p>Since 2000, however, it has suffered lesser blows. </p>
<p>The first was the grounding of fleets following the September 11, 2001 terrorist attacks on New York’s World Trade Center and the Pentagon, coupled with recession in the US and Europe. Then came the SARS outbreak in China from 2002 to 2004. Then the recession caused by the Global Financial Crisis of 2008. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/grounded-aircraft-could-make-weather-forecasts-less-reliable-138067">Grounded aircraft could make weather forecasts less reliable</a>
</strong>
</em>
</p>
<hr>
<p>Airlines shed jobs in all these crises. In the US, the number of airline jobs only returned to pre-2008 levels in 2016; and to pre-2001 levels in 2019. </p>
<p>But the slowness of that jobs recovery is mostly attributable to airlines deploying new technology, such as automated check-in and baggage handling. </p>
<p>This may be less of an issue in the next decade, with there being evidence most airlines have exhausted most of their capacity to replace people with machines. For example, employment in the US airline industry the five years to 2020 increased at a faster rate than the demand for air travel.</p>
<h2>Recovery within five years</h2>
<p>Nonetheless the general consensus among industry experts is that recovery this time around will not be quick. Qantas, for example, only expects to operating 75% of its pre-pandemic international flights by 2023. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/plane-cabins-are-havens-for-germs-heres-how-they-can-clean-up-their-act-134552">Plane cabins are havens for germs. Here's how they can clean up their act</a>
</strong>
</em>
</p>
<hr>
<p>My own view is a bit more optimistic. I expect recovery to 2019 levels by the end of 2022, assuming the virus “behaves itself”. </p>
<p>However, most experts believe the industry will return to its pre-pandemic growth path within about five years. </p>
<p>In 2019 global passenger numbers grew by 4.1% (to more than 4.5 billion). At that rate, passenger numbers would double in 18 years. The impact of COVID-19 means it may now take to 25 years to get to 9 billion passengers. But the aviation sector’s long-term prospects remain robust.</p>
<p>So if your dream is to work in the aviation sector, don’t give up. </p>
<p>I expect the jobs recovery in the aviation business to more closely match the recovery in demand for air travel than the experience of the previous crises mentioned, when jobs growth lagged well behind passenger demand.</p><img src="https://counter.theconversation.com/content/141522/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Volodymyr Bilotkach is an External Instructor for IATA Training. </span></em></p>The scale of the COVID-19 crisis for the global airline industry is unprecedented. But the history of lesser past crises also tells us it will recover.Volodymyr Bilotkach, Associate Professor, Singapore Institute of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1361382020-04-27T12:08:03Z2020-04-27T12:08:03ZCoronavirus bailouts will cost taxpayers hundreds of billions of dollars – unlike past corporate rescues that actually made money for the US Treasury<figure><img src="https://images.theconversation.com/files/330432/original/file-20200424-163122-16ka2t6.jpg?ixlib=rb-1.1.0&rect=0%2C649%2C6979%2C4925&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Fire up the printing presses.</span> <span class="attribution"><span class="source">Nerthuz/Getty Images</span></span></figcaption></figure><p>The U.S. government <a href="https://www.bloomberg.com/news/articles/2020-04-24/congress-braced-for-a-bruising-fight-over-next-virus-relief-bill?srnd=premium&sref=Hjm5biAW">has now pledged almost US$3 trillion</a> to save the economy and Americans from the coronavirus recession. </p>
<p>Most of that is aimed at individual Americans in the form of <a href="https://www.vox.com/future-perfect/2020/3/24/21188470/coronavirus-unemployment-benefits-senate-stimulus">additional unemployment insurance</a> or the so-called <a href="https://www.irs.gov/coronavirus/economic-impact-payments">economic impact checks</a>. About $1.2 trillion – and counting – represent bailouts for American companies, large and small. </p>
<p>And more than 60% of that is in the form of grants or other financial assistance that will likely become grants – funds that will not be recovered by taxpayers. The Congressional Budget Office estimated on April 23 that the company-related coronavirus bailouts, excluding the <a href="https://www.nytimes.com/2020/04/23/us/politics/house-passes-relief-for-small-businesses-and-aid-for-hospitals-and-testing.html">fourth one just signed into law</a>, will <a href="https://www.cbo.gov/system/files/2020-04/hr748.pdf">ultimately cost more than $400 billion</a> over 10 years. Given that most of the latest bailout, worth $484 billion, will most likely end up becoming grants to small businesses as well, the price tag is bound to get a lot higher. </p>
<p>It may not come as a surprise that taxpayers ultimately foot the bill when lawmakers spend their money to bail out a corporate industry – such as <a href="https://www.rasmussenreports.com/public_content/business/federal_bailout/october_2011/60_oppose_financial_bailouts_74_say_wall_street_benefited_most">Wall Street during the Great Recession</a> – or the entire economy today. But this is actually the exception, not the rule. </p>
<p>The truth is, as my research shows, the vast majority of business bailouts passed by Congress over the past half century have either broken even or generated a profit. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/330567/original/file-20200426-163122-19o7xo4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/330567/original/file-20200426-163122-19o7xo4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=479&fit=crop&dpr=1 600w, https://images.theconversation.com/files/330567/original/file-20200426-163122-19o7xo4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=479&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/330567/original/file-20200426-163122-19o7xo4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=479&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/330567/original/file-20200426-163122-19o7xo4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=603&fit=crop&dpr=1 754w, https://images.theconversation.com/files/330567/original/file-20200426-163122-19o7xo4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=603&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/330567/original/file-20200426-163122-19o7xo4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=603&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The U.S. aided Lockheed after the defense contractor struggled to secure financing for its new large luxury jetliner, the L-1011 TriStar.</span>
<span class="attribution"><span class="source">Bettmann/Getty Images</span></span>
</figcaption>
</figure>
<h2>Profitable bailouts</h2>
<p>As part of <a href="https://politics.ucsc.edu/graduate/graduate-student-directory/index.php?uid=swnewsom">my ongoing research</a> on economic policymaking during recessions, I studied 10 corporate bailouts approved by Congress since 1969.</p>
<p>I only looked at bailouts that involved direct assistance – in the forms of loans, guarantees, grants or capital injections – by Congress to a company or industry in financial distress. I excluded the <a href="https://www.investopedia.com/terms/s/sl-crisis.asp">Savings and Loan crisis</a> of the 1980s and 1990s because that was less of a bailout and more of an expensive regulatory wind-down. All of the figures below have been adjusted for inflation. </p>
<p>I found that half of the bailouts made a clear profit for taxpayers. </p>
<p>For example, Lockheed Martin ran into <a href="https://www.nytimes.com/1971/02/02/archives/lockheed-accepts-a-loss-of-200million-on-c5a-lockheed-accepts-a.html">financial difficulties</a> in 1971 because the planes, helicopters and other military equipment it was making for the U.S. Department of Defense cost more than the Pentagon agreed to pay, which led to significant losses and fees. The defense contractor pinned its survival on making money off its <a href="https://www.lockheedmartin.com/en-us/news/features/history/l-1011.html">state-of-the-art TriStar airliner</a> but struggled to secure enough financing to finish the project. </p>
<p>Congress, concerned with the loss of at least 25,000 jobs if Lockheed went bankrupt, provided Lockheed with a lifeline in the form of loan guarantees. That is, it agreed to back a $1.62 billion private loan in exchange for a fee. Although the TriStar was a flop, it was enough to keep Lockheed solvent, and taxpayers earned $198 million. </p>
<p>Similarly, automaker Chrysler <a href="https://www.washingtonpost.com/archive/business/1979/11/04/the-bottom-line-details-of-the-chrysler-bailout/a7175793-ac11-4b4f-bbce-3cfbf620f77c/">found itself in financial peril</a> in late 1979 in part due to its slow reaction to market shifts brought about by the 1970s energy crisis. Consumers wanted more fuel efficient cars; Chrysler made too many gas guzzlers. <a href="https://publishing.cdlib.org/ucpressebooks/view?docId=ft4x0nb2jj&chunk.id=d0e2181&toc.depth=1&toc.id=d0e2181&brand=ucpress">Post-bailout studies</a> suggested the company <a href="https://books.google.com/books/about/Riding_the_Roller_Coaster.html?id=aQhTq18vi7AC">was headed toward insolvency</a>.</p>
<p>The potential loss of 250,000 jobs and the adverse impact on automotive dealers and suppliers spurred Congress to offer Chrysler up to $4.98 billion in loan guarantees. As a precondition for this help, Chrysler, in addition to paying fees on the loans, granted the U.S. government rights to buy 14.4 million company shares at a set price. This arrangement provided taxpayers with $1.03 billion – on $4 billion worth of loans – when the <a href="https://www.nytimes.com/1983/09/13/business/chrysler-top-bids-to-buy-back-stock-rights.html">government sold the shares</a> in 1983.</p>
<p>And more recently, Congress <a href="https://www.bloomberg.com/news/articles/2012-09-14/tallying-the-full-cost-of-the-financial-crisis?sref=Hjm5biAW">pledged trillions of dollars</a> saving the financial system in 2008. For my purposes, I split the aid to companies into four distinct bailouts, three of which made large profits. </p>
<p>One in particular, the <a href="https://ftalphaville.ft.com/2010/09/17/346281/why-does-everyone-hate-tarp/">much-derided</a> <a href="https://www.treasury.gov/initiatives/financial-stability/TARP-Programs/Pages/default.aspx">Troubled Asset Relief Program</a>, was a $854 billion bailout for financial companies. Ultimately, $382 billion was dispersed to Wall Street firms like Citigroup, JPMorgan and AIG in exchange for preferred stock and other compensation. Taxpayers earned $32.5 billion. </p>
<p>A <a href="https://fas.org/sgp/crs/misc/R44525.pdf">separate bailout</a> to Fannie Mae and Freddie Mac was <a href="https://www.bloomberg.com/quicktake/fannie-mae-and-freddie-mac-irbtxzdk">even more lucrative</a>. The U.S. government received preferred stock for the $234 billion invested in the two housing giants. Taxpayers got its money back as well as $123 billion in profits. </p>
<p>There were also two bailouts – for the <a href="https://fas.org/sgp/crs/misc/RS21278.pdf">Farm Credit System</a> in 1987 and the <a href="https://www.congress.gov/106/plaws/publ51/PLAW-106publ51.pdf">Steel and Oil and Gas industries</a> in 1999 that likely made money, but I was unable to find all the details necessary to do the full analysis. At a minimum, my review suggests both broken even. </p>
<p><iframe id="vnpqz" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/vnpqz/7/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<h2>Losses (mostly) by design</h2>
<p>Three bailouts approved by Congress since 1969 cost taxpayers’ money. In two of the cases, this was by design. </p>
<p>The railroad industry, from 1960 to 1970, <a href="https://www.nytimes.com/1973/02/11/archives/collapse-of-penn-central-reflects-ills-of-railroads-collapse-of.html">saw its total net income cut in half due</a>, in part, to mismanagement, market shifts in transportation from rail to vehicles and poor oversight by regulatory agencies. Its collapse not only ensured a large spike in unemployment, it meant losing a mode of transportation that, at the time, moved 41% of the nation’s goods and shipped U.S. military equipment domestically. </p>
<p>Congress, seeing this industry as vital to U.S. commerce and defense, <a href="https://fas.org/sgp/crs/misc/R46277.pdf">wanted to ensure the railroad industry remained afloat</a>. Beginning in 1970, several ailing railroad companies received $25.3 billion worth of loan guarantees and grants that were never meant to be repaid. Eventually, seven bankrupt rail companies were consolidated into one profit-making corporation on the taxpayers’ dime. </p>
<p>The terrorist attacks on 9/11 <a href="https://link.springer.com/chapter/10.1057/9780230100060_7">shut down the national aviation system</a> for three days and significantly reduced airline traffic for the remainder of 2001. The airline industry, which made up close to 10% of U.S. GDP at the time, was expected to lose $5 billion by the end of 2001. </p>
<p>Congress quickly <a href="https://www.washingtonpost.com/archive/politics/2001/09/22/congress-passes-15-billion-airline-bailout/964da954-32ef-4689-b5e5-cf3ef8f6f982/">provided the industry</a> with $22.1 billion in financial assistance to ensure its stability and viability. A third of this assistance came in the form of grants never meant for repayment as compensation for losses stemming from 9/11 and the three-day shutdown of the national aviation system. The remainder came in the form of loan guarantees that produced a slight profit. </p>
<p>And with extra money left over from the Troubled Asset Relief Program, the <a href="https://www.treasury.gov/initiatives/financial-stability/reports/Documents/2020.03%20March%20Monthly%20Report%20to%20Congress.pdf">U.S. Treasury loaned automakers</a> General Motors and Chrysler and their financing units about $97.2 billion in exchange for the right to purchase stock at a set price. This was in addition to a <a href="https://money.cnn.com/2008/09/29/autos/federal_loans/index.htm?section=money_latest">$30.5 billion loan</a> issued in September 2008 to finance more fuel-efficient cars. While most of the aid actually disbursed was paid back, taxpayers lost $14.9 billion after both companies went bankrupt.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/330569/original/file-20200426-163062-9eygsl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/330569/original/file-20200426-163062-9eygsl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/330569/original/file-20200426-163062-9eygsl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/330569/original/file-20200426-163062-9eygsl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/330569/original/file-20200426-163062-9eygsl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/330569/original/file-20200426-163062-9eygsl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/330569/original/file-20200426-163062-9eygsl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Chrysler’s second bailout wasn’t as successful as its first.</span>
<span class="attribution"><span class="source">Joe Raedle/Getty Images</span></span>
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<h2>Coronavirus bailouts</h2>
<p>Like the bailouts for the railroad and airline industries, a large chunk of the coronavirus aid is never meant to be paid back. </p>
<p>As long as small businesses keep workers on their payrolls, they won’t have to pay back the <a href="https://www.marketwatch.com/story/house-set-to-pass-bill-that-replenishes-coronavirus-aid-program-for-small-businesses-2020-04-23">$659 billion in total assistance</a> under the payroll protection program. </p>
<p>The <a href="https://fortune.com/2020/04/19/airlines-coronavirus-travel-industry-bailout/">airline industry has received $61 billion</a> in financial assistance from Congress, including a little more than half in grants. Small passenger airlines, the bulk of applicants, will not repay this assistance, while large airlines are expected to. </p>
<p>Congress also authorized Treasury Secretary Steven Mnuchin to provide distressed corporations and state and local governments <a href="https://www.schiffhardin.com/insights/publications/2020/cares-act-500-billion-economic-stabilization-fund-for-severely-distressed-businesses">with up to $454 billion in loans</a> and $17 billion for public companies <a href="https://www.bloomberg.com/news/articles/2020-04-24/mnuchin-asks-for-equity-stakes-in-exchange-for-17-billion-aid">deemed critical to national security</a>. Taxpayers will get interest and possibly equity stakes in some cases. </p>
<p>At the end of the day, Congress knows that when literally tens of millions of jobs, millions of small businesses and dozens of vital industries are at stake, you don’t haggle over the details. You just rescue them.</p>
<p>[<em>You need to understand the coronavirus pandemic, and we can help.</em> <a href="https://theconversation.com/us/newsletters?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=upper-coronavirus-help">Read The Conversation’s newsletter</a>.]</p><img src="https://counter.theconversation.com/content/136138/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Scott Newsome does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Seven of the past 10 business bailouts since 1969 have either broke even, or more frequently, ended up making a tidy profit for taxpayers.Scott Newsome, Ph.D. candidate in Politics, University of California, Santa CruzLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1368322020-04-21T05:41:22Z2020-04-21T05:41:22ZVoluntary administration isn’t a death sentence for Virgin Australia – or for competition<p>With its plea for a A$1.4 billion government loan rebuffed, Australia’s second major airline has entered voluntary administration.</p>
<p>Virgin Australia’s chief executive, Paul Scurrah, said <a href="https://www.asx.com.au/asxpdf/20200421/pdf/44h3kq7kcb12fl.pdf">the decision to appoint external administrators</a> (from Deloitte) “was about securing the future of the Virgin Australia Group and emerging on the other side of the COVID-19 crisis”.</p>
<p>Voluntary administration means the board of an insolvent company – one that can’t pay its bills – hands full control to independent administrators. They then work out if it can be saved by being restructured or sold to other investors. This is similar to what is called Chapter 11 bankruptcy protection in the United States.</p>
<p>If the administrators can’t save the company, their job is to wind up operations and sell off assets to pay creditors (including staff owed entitlements). </p>
<p>For now, with almost all of Virgin Australia’s fleet grounded and the federal government subsidising it flying a few critical routes, voluntary administration won’t make much difference to customers. The company says it will continue to operate its scheduled international and domestic flights.</p>
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Read more:
<a href="https://theconversation.com/government-funding-to-qantas-and-virgin-to-ensure-air-services-on-key-routes-136554">Government funding to Qantas and Virgin to ensure air services on key routes</a>
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<h2>Administration is not a death sentence</h2>
<p>Virgin Australia isn’t the first airline victim of the COVID-19 pandemic. </p>
<p>Norway’s largest airline, Norwegian Air, <a href="https://www.flightglobal.com/strategy/four-of-norwegians-crew-subsidiaries-file-for-bankruptcy/137975.article">announced on Monday</a> it had “no choice but to apply for bankruptcy” for three subsidiaries in Denmark and one in Sweden. </p>
<p>Like Virgin, it too entered this crisis in far from tip-top shape, as it struggled over several years to make its long-haul low-cost airline model work.</p>
<p>Virgin Australia has long been financially fragile. Last financial year it posted a <a href="https://www.abc.net.au/news/2019-08-28/virgin-to-chop-750-jobs-as-it-posts-349m-loss/11455840">A$349 million loss</a>, its <a href="https://www.reuters.com/article/us-virgin-australia-strategy-focus/turnaround-may-prove-tricky-for-new-virgin-australia-ceo-scurrah-idUSKCN1VG01O">seventh consecutive</a> annual loss. In response the airline announced a “<a href="https://www.theguardian.com/business/2019/aug/28/virgin-australia-to-cut-750-jobs-after-349m-full-year-loss">rightsizing</a>” program that included cutting about 750 jobs (about 7.5% of its workforce). </p>
<p>The question now is whether the Deloitte administrators can do better.</p>
<p>It is possible. </p>
<p>Three of the world’s biggest airlines – Delta, United, and American Airlines – have survived near-death experiences. </p>
<p>Delta filed for Chapter 11 bankruptcy <a href="https://www.reuters.com/article/us-delta-bankruptcy/delta-exits-bankruptcy-after-19-month-restructuring-idUSWNAS850820070430">in 2005</a>, United <a href="https://www.theguardian.com/world/2002/dec/09/usa.theairlineindustry">in 2002</a>, and American Airlines <a href="https://marketrealist.com/2016/06/american-airlines-turnaround-bankruptcy/">in 2011</a>. All were restructured over several years and all emerged from the process as more efficient operations. They are now the world’s first, second and fourth-biggest airlines (<a href="https://viewfromthewing.com/the-10-biggest-airlines-in-the-world-ranked/">by passenger capacity</a>). </p>
<p>Reports suggest, however, that Virgin Australia’s administrators are looking for a <a href="https://www.afr.com/street-talk/deloitte-targets-quick-deal-for-virgin-australia-20200421-p54lo9">much shorter timeline</a> – about eight weeks – to find new owners for the airline.</p>
<p>This would make the process far different to that of Ansett Australia, the last major Australian airline to go into voluntary administration. Ansett entered administration on September 12 2001. Its last flight landed in Sydney on March 5 2002. Liquidating its assets and paying money owed to creditors and staff <a href="https://www.smh.com.au/national/ansett-workers-get-closure-10-years-on-20110902-1jpqa.html">took almost a decade</a>. </p>
<p>If the administrators can work out a deal that injects new investments and wipes Virgin’s debts of about A$5 billion – a major obstacle to the federal government lending it A$1.4 billion – Australia’s airline industry will arguably be more competitive than it is now. </p>
<h2>Consequences for customers</h2>
<p>If new owners cannot be found, Virgin Australia’s collapse would leave the Australian market dominated by Qantas (and its budget subsidiary Jetstar) – at least in the short to medium term. </p>
<p>Less competition almost always means reduced services and higher prices for customers. </p>
<p>But the airline market is complicated. As I’ve <a href="https://theconversation.com/prix-fixe-is-airline-consolidation-to-blame-for-sky-high-airfares-45086">noted previously of the US market</a>, there can be many competitors yet still effective monopolies on some “thin” routes. What economists call “multi-market contact” can lead to “tacit collusion”, in which competition is tempered without any explicit agreement among the market participants. </p>
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Read more:
<a href="https://theconversation.com/prix-fixe-is-airline-consolidation-to-blame-for-sky-high-airfares-45086">Prix fixe: is airline consolidation to blame for sky-high airfares?</a>
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<p>Research shows, for example, that airfares are about 5% higher in markets with two legacy airline competitors than on the monopoly routes. But when a legacy carrier faces new competition from a low-cost airline, the prices can go down by as much as a third.</p>
<h2>Demand factors</h2>
<p>Tempering the likelihood that market dominance by one company will lead to higher prices is that demand will take time to return to pre-pandemic levels after restrictions are lifted. </p>
<p>In China, for example, domestic passenger numbers for 2020 are expected to be <a href="https://www.scmp.com/business/companies/article/3080361/chinas-airlines-are-poised-bout-revenge-travelling-bookings">20% lower than 2019</a>, and international passenger numbers 50% lower.</p>
<p>Fuel costs, which <a href="https://www.iata.org/contentassets/ebdba50e57194019930d72722413edd4/fact-sheet-fuel.pdf">accounted for about 24%</a> of the global airline industry’s operating costs in 2019, are also likely to be lower. The oil price is at its lowest level in history – so low, in fact, oil producers are now paying customers to take it. </p>
<p>Both these factors suggest ticket prices won’t rise in the short term.</p>
<p>In the medium term, once demand recovers, lack of competition could well lead to higher airfares. </p>
<p>But in the long run there is better news. </p>
<p>As any economics textbook will tell you, profitable markets attract new competitors. </p>
<p>With more airline bankruptcies around the world quite likely, conditions will be ripe for new airlines to be established. There will be no shortage of aircraft and skilled workers. If oil prices stay low, new entrants could even be competitive using older, less fuel-efficient aircraft.</p>
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Read more:
<a href="https://theconversation.com/once-the-pandemic-is-over-we-will-return-to-a-very-different-airline-industry-134124">Once the pandemic is over, we will return to a very different airline industry</a>
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<p>For the sake of Virgin Australia’s 10,000 employers, and the jobs of thousands more that depend on it indirectly, I hope the airline survives administration and emerges better for it, as US carriers have done with Chapter 11 bankruptcies. </p>
<p>But if it doesn’t, the pain for customers through higher prices is likely to be temporary. The laws of economics tell us that, so long as governments ensure markets remain open to new entrants, monopolies do not last.</p><img src="https://counter.theconversation.com/content/136832/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Volodymyr Bilotkach is an External Instructor with IATA Training.</span></em></p>Virgin Australia could emerge from this crisis in better shape.Volodymyr Bilotkach, Associate Professor, Singapore Institute of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1363992020-04-17T02:23:22Z2020-04-17T02:23:22ZVirgin Australia gets a lifeline, but will it be enough?<p>With commercial airline fleets grounded due to lack of demand, the Australian government will pay the nation’s two biggest airlines, Qantas and Virgin Australia, $A165 million to ensure they keep flying critical metropolitan and regional routes over the next two months. </p>
<p>This measure comes on top of a <a href="https://minister.infrastructure.gov.au/mccormack/media-release/additional-new-support-critical-regional-aviation-services-through-covid-19">A$198 million assistance package</a> for regional airlines and the waiver of A$715 million in fees and charges for domestic airlines. </p>
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Read more:
<a href="https://theconversation.com/government-funding-to-qantas-and-virgin-to-ensure-air-services-on-key-routes-136554">Government funding to Qantas and Virgin to ensure air services on key routes</a>
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<p>It’s particularly important for the cash-strapped Virgin Australia. The company this week asked the Australian Stock Exchange to <a href="https://www.businessnewsaus.com.au/articles/virgin-suspended-from-asx.html">suspend trading of its shares</a> after the federal government rebuffed its request for a $A1.4 billion loan. </p>
<p>Without a significant cash injection, <a href="https://www.abc.net.au/news/2020-03-17/coronavirus-airline-support-package-qantas-rex/12064316">industry experts</a> say, the airline will collapse within six months. Prior to the government’s latest announcement there were reports it <a href="https://www.theguardian.com/business/2020/apr/14/virgin-australia-considers-going-into-administration-as-labor-calls-for-government-rescue">could go into administration</a> within weeks. </p>
<p>Virgin Australia is 90% owned by five international companies – Etihad Airways, Singapore Airlines, China’s Nanshan Group and HNA, and Richard Branson’s Virgin Group. Facing their own difficulties, they have signalled they will not inject further capital.</p>
<p>This funding package gives the airline more time to find <a href="https://www.afr.com/politics/federal/private-equity-investors-circle-over-virgin-20200415-p54jwd">other investors</a>. But its longer-term future remains up in the air.</p>
<h2>Desperately seeking $1.4 billion</h2>
<p>While the US government has agreed to provide <a href="https://www.nytimes.com/2020/04/14/business/coronavirus-airlines-bailout-treasury-department.html">US$50 billion</a> in loans and grants to its ten biggest domestic airlines, with the option to take equity stakes, Treasurer Josh Frydenberg said this week the Australian government was “not in the business of owning an airline”.</p>
<p>Having two major airlines had served Australia well, <a href="https://www.abc.net.au/news/2020-04-16/virgin-australia-disspears-from-skies-which-airline-coronavirus/12151072">he said</a>, but “our approach has been sector-wide support”.</p>
<p>Complicating that type of support has been disagreement between Virgin Australia and Qantas. </p>
<p>Qantas chief Alan Joyce has argued for “<a href="https://www.abc.net.au/news/2020-03-24/qantas-boss-comments-unhelpful-says-accc-boss/12085672">survival of the fittest</a>” and against assistance to “badly managed” businesses. His airline did not need government support, Joyce said this week. But if the government loaned Virgin Australia A$1.4 billion, <a href="https://www.abc.net.au/news/2020-04-16/virgin-australia-disspears-from-skies-which-airline-coronavirus/12151072">he wanted A$4.2 billion</a>. </p>
<h2>To bail or not to bail</h2>
<p>The federal government’s dilemma is whether it is better to bail out Virgin Australia or allow commercial forces to rule, as it has done in the past.</p>
<p>Its interest in sector-wide support reflects the fact the entire domestic aviation industry is hurting.</p>
<p>Freight and logistics, aircraft maintenance and repair, flight training and simulation, component manufacturing and research and design operations are all bundled together into a tightly bound sector. </p>
<p>All up, the industry’s five subsectors – domestic commercial aviation, international commercial aviation, general aviation, freight transport and aviation support infrastructure – have provided employment for about <a href="http://www.australianindustrystandards.org.au/wp-content/uploads/2018/02/Aviation-Key-Findings-Paper2018V4Web.pdf">90,000 Australians across 1,900 businesses</a>. So it’s not just the 10,000 people employed by Virgin Australia the government needs to think about.</p>
<h2>Systems shocks are nothing new</h2>
<p>History is also a factor. The global aviation industry is no stranger to “system shocks”. These have included the Global Financial Crisis of 2008, the SARS outbreak in 2003, the World Trade Centre attacks in 2001, the Asian Financial Crisis in 1997 and the oil shocks of the 1970s.</p>
<p>Typically the sector has “bounced back” within a year. </p>
<p>The last big shakeup of the Australian airline industry was in 2001. Just days after the September 11 terrorist attacks, Ansett Airlines – flying since 1935 – went into administration. </p>
<p>After Ansett’s collapse, Virgin Blue (established in 2000) saw explosive growth
and former Ansett employees helped create regional operator Rex in 2002.</p>
<p>So from the rubble of failure new enterprises and forms of aviation business can grow, just as Virgin Australia has taken Ansett’s place as the nation’s second major domestic carrier.</p>
<p>Of course, the extent of the crisis is somewhat different this time. </p>
<p>With domestic travel restrictions likely in place for at least six months, and international flight restrictions set to continue even longer, the sector will be changed forever. </p>
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Read more:
<a href="https://theconversation.com/once-the-pandemic-is-over-we-will-return-to-a-very-different-airline-industry-134124">Once the pandemic is over, we will return to a very different airline industry</a>
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<p>But history shows Australia can support two major airlines. We have extensive domestic aviation routes that will enable an early recovery compared with airlines in other parts of the world that rely on international routes.</p><img src="https://counter.theconversation.com/content/136399/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The federal government’s dilemma is whether it is better to bail out Virgin Australia or allow commercial forces to rule, as it has done in the past.Stephen Fankhauser, Deputy Chair, Aviation Department, Faculty of Science, Engineering & Technology, Swinburne University of TechnologyMatt Ebbatson, Senior lecturer, Swinburne University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1278002020-02-16T18:57:03Z2020-02-16T18:57:03ZMajor airlines say they’re acting on climate change. Our research reveals how little they’ve achieved<p>If you’re a traveller who cares about reducing your carbon footprint, are some airlines better to fly with than others?</p>
<p>Several of the world’s major airlines have announced plans to become “carbon neutral”, while others are trialling new aviation fuels. But are any of their climate initiatives making much difference?</p>
<p>Those were the questions we set out to answer a year ago, by analysing what the world’s largest 58 airlines – which fly 70% of the total <a href="https://airlinegeeks.com/2015/12/28/airline-metrics-available-seat-kilometers/">available seat-kilometres</a> – are doing to live up to their promises to cut their climate impact.</p>
<p>The good news? Some airlines are taking positive steps. The bad news? When you compare what’s being done against the continued growth in emissions, even the best airlines are not doing anywhere near enough.</p>
<h2>More efficient flights still drive up emissions</h2>
<p><a href="https://amadeus.com/en/insights/white-paper/airline-initiatives-to-reduce-climate-impact">Our research</a> found three-quarters of the world’s biggest airlines showed improvements in carbon efficiency – measured as carbon dioxide per available seat. But that’s not the same as cutting emissions <em>overall</em>.</p>
<p>One good example was the Spanish flag carrier Iberia, which reduced emissions per seat by about 6% in 2017, but increased absolute emissions by 7%.</p>
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<p>For 2018, compared with 2017, the collective impact of all the climate measures being undertaken by the 58 biggest airlines amounted to an improvement of 1%. This falls short of the industry’s goal of achieving a <a href="https://www.iata.org/en/policy/environment/climate-change/">1.5% increase</a> in efficiency. And the improvements were more than wiped out by the industry’s overall 5.2% annual increase in emissions. </p>
<p>This challenge is even clearer when you look slightly further back. <a href="https://www.iata.org/en/iata-repository/pressroom/fact-sheets/fact-sheet---industry-statistics/">Industry figures</a> show global airlines produced 733 million tonnes of CO₂ emissions in 2014. Falling fares and more people around wanting to fly saw airline emissions rise 23% in just five years. </p>
<h2>What are the airlines doing?</h2>
<p>Airlines reported climate initiatives across 22 areas, with the most common involving fleet renewal, engine efficiency, weight reductions and flight path optimisation. Examples in <a href="https://amadeus.com/en/insights/white-paper/airline-initiatives-to-reduce-climate-impact">our paper</a> include:</p>
<ul>
<li>Singapore Airlines modified the Trent 900 engines on their A380 aircraft, saving 26,326 tonnes of CO₂ (equivalent to 0.24% of the airline’s annual emissions);</li>
<li>KLM’s efforts to reduce weight on board led to a CO₂ reduction of 13,500 tonnes (0.05% of KLM’s emissions).</li>
<li>Etihad reports savings of 17,000 tonnes of CO₂ due to flight plan improvements (0.16% of its emissions). </li>
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<p>Nineteen of the 58 large airlines I examined invest in alternative fuels. But the scale of their research and development programs, and use of alternative fuels, remains tiny.</p>
<p>As an example, for Earth Day 2018 <a href="https://aircanada.mediaroom.com/2018-04-19-Air-Canada-to-Save-160-Tonnes-of-Carbon-on-Earth-Day-through-Innovative-Biojet-Fuel-Project-at-Toronto-Pearson-Airport">Air Canada announced</a> a 160-tonne emissions saving from blending 230,000 litres of “biojet” fuel into 22 domestic flights. How much fuel was that? Not even enough to fill the more than 300,000-litre capacity of just one A380 plane.</p>
<h2>Carbon neutral promises</h2>
<p>Some airlines, including Qantas, are aiming to be <a href="https://www.qantasnewsroom.com.au/media-releases/qantas-group-to-slash-carbon-emissions/">carbon neutral by 2050</a>. While that won’t be easy, Qantas is at least starting with better climate reporting; it’s one of only <a href="https://www.fsb-tcfd.org/tcfd-supporters/">eight airlines</a> addressing its carbon risk through the systematic <a href="https://www.fsb-tcfd.org/">Task Force on Climate-related Financial Disclosures</a> process. </p>
<p>About half of the major airlines engage in carbon offsetting, but only 13 provide information on measurable impacts. Theses include Air New Zealand, with its FlyNeutral program to help restore native forest in New Zealand. </p>
<p>That lack of detail means the integrity of many offset schemes is questionable. And even if properly managed, offsets <a href="https://theconversation.com/flying-home-for-christmas-carbon-offsets-are-important-but-they-wont-fix-plane-pollution-89148">still avoid</a> the fact that we can’t make <a href="https://www.sciencedirect.com/science/article/abs/pii/S0969699716302538">deep carbon cuts</a> if we keep flying at current rates.</p>
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Read more:
<a href="https://theconversation.com/flight-shame-wont-fix-airline-emissions-we-need-a-smarter-solution-127257">Flight shame won't fix airline emissions. We need a smarter solution</a>
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<h2>What airlines and governments need to do</h2>
<p>Our research shows major airlines’ climate efforts are achieving nowhere near enough. To decrease aviation emissions, three major changes are urgently needed. </p>
<ol>
<li><p>All airlines need to implement all measures across the 22 categories covered in <a href="https://amadeus.com/en/insights/white-paper/airline-initiatives-to-reduce-climate-impact">our report</a> to reap any possible gain in efficiency.</p></li>
<li><p>Far more research is needed to develop alternative aviation fuels that genuinely cut emissions. Given what we’ve seen so far, these are unlikely to be biofuels. E-fuels – liquid fuels derived from carbon dioxide and hydrogen – may provide such a solution, but there are challenges ahead, including high costs.</p></li>
<li><p>Governments can – and some European countries do – impose carbon taxes and then invest into lower carbon alternatives. They can also provide incentives to develop new fuels and alternative infrastructure, such as rail or electric planes for shorter trips. </p></li>
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<h2>How you can make a difference</h2>
<p>Our research paper was released late last year, at a World Travel and Tourism Council event linked to the <a href="https://theconversation.com/au/topics/cop25-79570">Madrid climate summit</a>. Activist Greta Thunberg famously sailed around the world to be there, rather than flying.</p>
<p>Higher-income travellers from around the world have had a disproportionately large impact in driving up aviation emissions. </p>
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<p>This means that all of us who are privileged enough to fly, for work or pleasure, have a role to play too, by:</p>
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<li>reducing our flying (<a href="https://theconversation.com/people-hate-flight-shame-but-not-enough-to-quit-flying-130614">completely</a>, or <a href="https://theconversation.com/flight-shame-flying-less-plays-a-small-but-positive-part-in-tackling-climate-change-125440">flying less</a>)</li>
<li><a href="http://www.offsetguide.org/avoiding-low-quality-offsets/">carbon offsetting</a></li>
<li>for essential trips, only flying with airlines doing more to cut emissions.</li>
</ol>
<p>To really make an impact, far more of us need to do all three.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/climate-explained-how-much-does-flying-contribute-to-climate-change-127707">Climate explained: how much does flying contribute to climate change?</a>
</strong>
</em>
</p>
<hr>
<img src="https://counter.theconversation.com/content/127800/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Susanne Becken is on the Sustainability Advisory Panel of Air New Zealand. Her report, Airline initiatives to reduce climate impact, was co-written with Paresh Pant. This research paper was done in partnership with travel technology company Amadeus.</span></em></p>We analysed what the world’s top 58 airlines – such as American Airlines, British Airways and Qantas – are doing about climate change. Even the best airlines are not doing anywhere near enough.Susanne Becken, Professor of Sustainable Tourism and Director, Griffith Institute for Tourism, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1308722020-02-02T13:39:27Z2020-02-02T13:39:27ZThe coronavirus will hit the tourism and travel sector hard<figure><img src="https://images.theconversation.com/files/313114/original/file-20200131-41516-1y2r4cb.jpg?ixlib=rb-1.1.0&rect=161%2C143%2C5712%2C3062&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">China's tourism sector has been devastated by the latest coronavirus outbreak, but the impact is being felt around the world and in many industries.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>The spread of infectious diseases is invariably linked to travel. Today, tourism is a huge global business that accounts for <a href="https://www.wttc.org/-/media/files/reports/economic-impact-research/regions-2019/world2019.pdf">10.4 per cent of global Gross Domestic Product (GDP) and 10 per cent of global employment.</a></p>
<p>Nothing seems to slow its growth as year-over-year <a href="https://unwto.org/world-tourism-barometer-n18-january-2020">increases outpace the economy</a>. The United Nations World Tourism Organization is predicting further <a href="https://unwto.org/world-tourism-barometer-n18-january-2020">growth of three per cent to four per cent in international tourist arrivals for 2020</a>, with <a href="https://unwto.org/world-tourism-barometer-n18-january-2020">international departures worldwide particularly strong</a> in the first quarter of this year. </p>
<p>But that was before a new coronavirus (formally known as 2019-nCoV) hit China and then very rapidly started spreading to the rest of the world with <a href="https://gisanddata.maps.arcgis.com/apps/opsdashboard/index.html#/bda7594740fd40299423467b48e9ecf6">20 countries and counting</a> isolating cases.</p>
<p>Officials in China and those in the rest of world have been much quicker to take more drastic action after learning bitter lessons from the SARS outbreak in 2003, which also started in China.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/313109/original/file-20200131-41481-5z54nv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/313109/original/file-20200131-41481-5z54nv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/313109/original/file-20200131-41481-5z54nv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/313109/original/file-20200131-41481-5z54nv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/313109/original/file-20200131-41481-5z54nv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/313109/original/file-20200131-41481-5z54nv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/313109/original/file-20200131-41481-5z54nv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Thailand Prime Minister Prayuth Chan-ocha, centre, removes his face mask to speak to journalists during a visit to the Suvarnabhumi International airport to inspect measures in place to monitor passengers for the coronavirus.</span>
<span class="attribution"><span class="source">Thai Government Spokesman's office via AP</span></span>
</figcaption>
</figure>
<p>The impact on travel to and from China of this new coronavirus, however, has been devastating. Airlines, including <a href="https://www.cbc.ca/news/business/coronavirus-air-travel-1.5444326">Air Canada</a>, <a href="https://www.cnn.com/2020/01/29/business/british-airways-coronavirus/index.html">have cancelled all flights</a> or <a href="https://www.cnn.com/2020/01/29/business/american-airlines-suspends-china-flights-coronavirus/index.html">significantly reduced the number of flights</a> in and out of China. <a href="https://www.bloomberg.com/news/articles/2020-01-30/russia-closing-border-with-china-to-affect-people-not-goods">Russia closed its land border to passenger travel</a> with China and <a href="https://www.vice.com/en_ca/article/n7jebz/hong-kong-is-closing-its-borders-to-keep-coronavirus-out">Hong Kong shut down its borders, cross-border ferries and railways</a>. </p>
<p>How does the impact of 2019-nCoV differ from that of SARS, which also affected tourism dramatically? </p>
<h2>SARS has higher death toll so far</h2>
<p>The <a href="https://www.who.int/csr/sars/country/en/">World Health Organization</a> confirmed 8,096 cases and 774 deaths in 26 countries as a result of the SARS coronavirus. First detected in late February 2003, it had run its course five months later. </p>
<p>The coronavirus first appeared in December 2019 but has already <a href="http://doi.org/10.1056/NEJMoa2001316">surpassed the total number of SARS cases in just two months</a>, albeit with a much lower death rate. Infectious disease experts expect it <a href="https://www.straitstimes.com/asia/east-asia/wuhan-virus-experts-say-outbreak-will-last-months-at-least">to last for several months</a> yet with tens of thousands afflicted before it runs its course.</p>
<p>SARS accounted for a <a href="https://data.worldbank.org/indicator/ST.INT.ARVL">drop in international tourist arrivals of almost 9.4 million</a> and a loss of between US$30 billion and $50 billion. But in 2002, China’s role as both a travel destination and a source country was relatively minor, receiving fewer than 38 million tourists and sending about 17 million tourists abroad. </p>
<p>Compare that to 2019 when it is estimated China received <a href="https://www.china-mike.com/china-travel-tips/china-tourism-statistics/">142 million inbound tourists and the Chinese made 134 million trips abroad and 5.5 billion trips domestically</a>.</p>
<p>The severe travel restrictions imposed by the Chinese government on its citizens and the stern warnings from Foreign Affairs offices, <a href="https://travel.gc.ca/destinations/china">including Canada’s</a>, to avoid all non-essential travel to China and all travel to Hubei province (Wuhan is its capital and largest city) means that the economic impact of this coronvirus will be felt in every corner of the world and almost every sector of the economy. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/313108/original/file-20200131-41481-y35fjw.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C3600%2C2608&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/313108/original/file-20200131-41481-y35fjw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=437&fit=crop&dpr=1 600w, https://images.theconversation.com/files/313108/original/file-20200131-41481-y35fjw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=437&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/313108/original/file-20200131-41481-y35fjw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=437&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/313108/original/file-20200131-41481-y35fjw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=549&fit=crop&dpr=1 754w, https://images.theconversation.com/files/313108/original/file-20200131-41481-y35fjw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=549&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/313108/original/file-20200131-41481-y35fjw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=549&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A woman wears a mask in the arrivals section of the international terminal at Toronto Pearson International Airport.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Nathan Denette</span></span>
</figcaption>
</figure>
<p>The market response has been swift, with <a href="https://www.cbc.ca/news/business/coronavirus-economic-impact-1.5437393">share prices of major airlines, cruise lines and tourism companies dropping several percentage points</a>. </p>
<p>With the World Health Organization declaring the coronavirus <a href="https://www.who.int/">a public health emergency of global concern</a>, Gloria Guevara, president and CEO of the World Travel and Tourism Council (<a href="https://www.wttc.org/search-results/?query=coronavirus">WTTC</a>) fears that this escalation could have a damaging and lasting economic impact on the sector. She’s <a href="http://www.travelweekly.co.uk/articles/356089/wttc-issues-coronavirus-economic-impact-warning">expressed serious concerns</a> that airport closures, flight cancellations and shuttered borders often have a greater economic impact than the outbreak itself. </p>
<h2>Hundreds of thousands die from seasonal flus</h2>
<p>These concerns are well justified when one considers that <a href="https://www.cdc.gov/media/releases/2017/p1213-flu-death-estimate.html">between 291,000 and 646,000 people worldwide die from seasonal influenza-related respiratory illnesses each year</a>, which does not lead to any of these warnings or drastic measures.</p>
<p>Canada saw <a href="https://www.who.int/csr/sars/country/en/">251 SARS cases and 43 deaths</a>, but it cost the Canadian economy an estimated <a href="https://www.cbc.ca/news/business/coronavirus-economic-impact-1.5437393">$5.25 billion and 28,000 jobs</a>. At the time, China was a Canadian tourism market of less than <a href="https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=2410000301">100,000 visitors annually; that dropped by 25 per cent due to SARS</a>. </p>
<p>Today, China is Canada’s second-largest overseas market, accounting for close to <a href="https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=2410000301">800,000 arrivals</a>, and its highest spending market with more than<a href="https://www.destinationcanada.com/sites/default/files/archive/869-Market%20Highlights%20-%20China%20-%202019/MarketHighlights-CN_EN%5B1%5D.pdf">$2,800 per trip</a>. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/313110/original/file-20200131-41476-oebvq9.jpg?ixlib=rb-1.1.0&rect=34%2C0%2C3888%2C2590&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/313110/original/file-20200131-41476-oebvq9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/313110/original/file-20200131-41476-oebvq9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/313110/original/file-20200131-41476-oebvq9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/313110/original/file-20200131-41476-oebvq9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/313110/original/file-20200131-41476-oebvq9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/313110/original/file-20200131-41476-oebvq9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Tourists are seen on the Great Wall of China.</span>
<span class="attribution"><span class="source">(Avery Steadman/Unsplash)</span></span>
</figcaption>
</figure>
<p>Depending on how long the restrictions and warnings are in place, losses could easily double of those in 2003. The pain will be felt in every industry as tourism’s supply chain involves everything from agriculture and fishing to banking and insurance. The hardest hit will be its core industries of accommodation, food and beverage services, recreation and entertainment, transportation and travel services.</p>
<p>While Air Canada will <a href="https://www.aircanada.com/ca/en/aco/home/book/travel-news-and-updates/2020/china-travel.html">refund fares for cancelled flights</a> to and from China, other airlines may only <a href="https://www.cnn.com/2020/01/28/business/delta-american-united-coronavirus-wuhan-china/index.html">extend change fee waivers</a> or provide credit towards future flights. </p>
<p>But this may not be the case for connecting flights from Beijing or Shanghai, the cities most commonly served by North American airlines.</p>
<p>A growing number of hotels are also waiving changes and cancellation fees for bookings in China scheduled for the next few weeks. But many travellers to or passing through China may not be able to recover all their money, even if they bought insurance. That’s because most basic travel insurance plans do not cover <a href="https://www.aarp.org/travel/travel-tips/safety/info-2020/insurance-coronavirus-coverage.html">epidemics as a reason for cancellation</a>.</p><img src="https://counter.theconversation.com/content/130872/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Marion Joppe does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The economic impacts of the new coronavirus on the travel and tourism industry will be felt in every corner of the world and almost every sector of the economy.Marion Joppe, Professor, Law and Economics of Tourism, University of GuelphLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1286712019-12-19T13:51:06Z2019-12-19T13:51:06ZWhy bad customer service won’t improve anytime soon<figure><img src="https://images.theconversation.com/files/306893/original/file-20191213-85428-1qol2vg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Bad customer service is increasingly good for companies who use it.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/hand-client-show-feedback-bad-smile-1145358584">Sichon/Shutterstock.com</a></span></figcaption></figure><p>Some of the most hated companies in the U.S. are also <a href="https://www.bloomberg.com/news/articles/2013-12-17/proof-that-it-pays-to-be-americas-most-hated-companies">the most profitable</a>.</p>
<p>Much of this consumer resentment <a href="https://research.wpcarey.asu.edu/services-leadership/2016/05/13/seven-effective-practices-for-preventing-customer-rage/">may stem from poor customer service</a>. In fact, most Americans have fought with phone menus, desperately seeking a live service agent to seek a refund.</p>
<p>In 2013, Americans <a href="http://business.time.com/2013/01/24/you-probably-spent-13-hours-on-hold-last-year/">spent an average of 13 hours</a> disputing a purchase or resolving a problem with customer service.</p>
<p><a href="https://www.marshall.usc.edu/personnel/anthony-dukes">As professors</a> <a href="https://carlsonschool.umn.edu/faculty/yi-zhu">of marketing</a>, we have examined why customer service continues to be so unsatisfactory even at many profitable companies.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/306894/original/file-20191213-85376-r2l8hb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/306894/original/file-20191213-85376-r2l8hb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/306894/original/file-20191213-85376-r2l8hb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/306894/original/file-20191213-85376-r2l8hb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/306894/original/file-20191213-85376-r2l8hb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/306894/original/file-20191213-85376-r2l8hb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/306894/original/file-20191213-85376-r2l8hb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Comcast customer Carmel Booth claimed to have received such bad service that she forced city officials to hold a public meeting about it.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Broadband/401eddd2a05b4ae99eead2c46ebd0445/10/0">AP Images/John Amis</a></span>
</figcaption>
</figure>
<h2>Is good customer service unattainable?</h2>
<p><a href="https://doi.org/10.1287/mksc.2019.1149">Our research</a> focuses on the structure and incentives of various customer service centers to explain why consumers perpetually experience hassles when seeking refunds.</p>
<p>What we found is not encouraging.</p>
<p>Many complaint processes are actually designed to help companies retain profits by <a href="https://hbr.org/2019/02/why-is-customer-service-so-bad-because-its-profitable">limiting the number of customers</a> who can successfully resolve their complaints.</p>
<p>The process involves a tiered structure in which all incoming inquiries start at “Level 1.” Level 1 may be a call center operator who listens to a complaint but acknowledges that there is nothing he can do.</p>
<p>Only by insisting to talk to a manager or threatening to leave the company do consumers come closer to obtaining a refund.</p>
<p>Forcing customers to talk to a computer, circulate through phone menus or sit on hold “while serving other customers” serves the same deterring role as that Level 1 call-center agent.</p>
<h2>Saving money with smart tech</h2>
<p>By design, Level 1 agents are <a href="https://abcnews.go.com/Business/customer-service-representatives-deliberately-making-experience-worse/story?id=29926935">limited in their authority</a> to compensate customers.</p>
<p>For example, one Indian call center that we visited forbade Level 1 agents from offering any monetary refunds.</p>
<p>Consumers may have noticed that companies’ call centers increasingly use automated chatbots to serve as Level 1 “agents.” The caller can talk with a human agent – at Level 2 or even higher – only after the chatbot’s AI technology recognizes that a customer is sufficiently unhappy with the process.</p>
<p>These smart technologies determine the caller’s level of anger by <a href="https://www.wsj.com/articles/everyone-hates-customer-service-this-is-why-11564804882">remotely monitoring the tone and pace of voice</a>. If the level of anger reflects a chance the customer may leave the company, then the call is transferred to a more experience operator to handle the complaint.</p>
<p>This allows companies to exploit customers’ individual differences in age, race and gender so that only the “<a href="https://www.forbes.com/sites/blakemorgan/2016/12/05/a-squeaky-wheel-gets-the-grease-and-why-it-pays-to-be-an-angry-customer-2/#182eb03e610e">squeakiest wheels</a>” are compensated.</p>
<p><iframe id="UzQbw" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/UzQbw/1/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<h2>Who struggles with bad customer service?</h2>
<p>Not surprisingly, <a href="https://www.forbes.com/sites/christopherelliott/2018/08/27/chatbots-are-killing-customer-service-heres-why/#e2f232113c5a">surveys show that chatbots are not improving customer service</a>. This is especially true for certain segments of consumers above others.</p>
<p>Consumers experience hassles in different ways. For instance, navigating an online complaint process is generally harder for <a href="https://www.softwareadvice.com/resources/demographics-impact-live-chat-customer-service/">older people</a>.</p>
<p>Additionally, <a href="https://www.ftc.gov/reports/combating-fraud-african-american-latino-communities-ftcs-comprehensive-strategic-plan">African American and Latino</a> customers are less inclined to complain than college-educated whites.</p>
<p>In addition, <a href="https://www.consumerreports.org/cro/news/2011/06/women-get-more-annoyed-than-men-with-aspects-of-bad-customer-service/index.htm">women get more annoyed</a> than men when dealing with bad customer service.</p>
<p>This all suggests that the tiered process may hit vulnerable groups in our society harder. Therefore, elderly customers and some minority groups will be less inclined to obtain a refund.</p>
<h2>Bad customer service doesn’t harm profits</h2>
<p>It seems puzzling, therefore, to see companies repeatedly pledge that they are committed to great customer service.</p>
<p>For example, Comcast states that “<a href="https://corporate.comcast.com/comcast-voices/our-new-head-of-customer-experience">Our customers deserve the best experience every time they interact with us</a>,” but consumers are <a href="https://fortune.com/2018/05/23/hate-cable-tv-comcast-frontier/">increasingly unsatisfied</a> with their service.</p>
<p>Even United Airlines, whose poor customer service inspired a <a href="https://www.youtube.com/watch?v=5YGc4zOqozo">song and video</a> with nearly 20 million views, claims to offer a “level of service to our customers that makes [United] a leader in the airline industry.”</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/5YGc4zOqozo?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">United Airlines customer service inspired this video on YouTube.</span></figcaption>
</figure>
<p>But our research suggests that in markets without much competition, companies are more likely to implement a tiered complaint process and profit from the reduced payouts to customers.</p>
<p>This explains why <a href="https://www.theverge.com/2015/4/1/8321437/maps-show-why-internet-is-more-expensive-us-europe-competition">internet service providers</a>, <a href="https://www.travelagentcentral.com/running-your-business/stats-flight-prices-set-to-rise-2-9-2019">airlines</a> and <a href="https://www.usatoday.com/story/money/media/2018/01/05/tv-rate-hikes-why-cable-bills-rising-again-and-what-can-you-do/1006639001/">cable companies</a> consistently receive <a href="https://www.customercaremc.com/insights/2017-us-customer-rage-study/">the ire of survey respondents</a>.</p><img src="https://counter.theconversation.com/content/128671/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Anthony Dukes receives funding from the Marketing Science Institute. </span></em></p><p class="fine-print"><em><span>Yi Zhu receives funding from the Marketing Science Institute and 3M Non-Tenured Faculty Grant.</span></em></p>Bad customer service is actually good for companies’ bottom lines.Anthony Dukes, Professor of Marketing, University of Southern CaliforniaYi Zhu, Associate Professor of Marketing, University of MinnesotaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1132112019-03-08T13:46:29Z2019-03-08T13:46:29ZWhy Virgin Atlantic’s new makeup policy is mostly concealer and gloss<figure><img src="https://images.theconversation.com/files/262893/original/file-20190308-150700-19uaa8b.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/close-nose-view-passenger-airplane-boeing-1079382797">Shutterstock</a></span></figcaption></figure><p>The airline <a href="https://www.cnbc.com/2019/03/05/virgin-atlantic-drops-mandatory-makeup-rule-for-female-flight-crew.html">Virgin Atlantic has decided</a> that female cabin crew will no longer be required to wear makeup during flights. They will also be offered the option of wearing trousers as part of their standard uniform allocation rather than only on request. According to one Virgin executive, the move will “provide our team with more choice on how they want to express themselves”. </p>
<p>That companies like Virgin continue to operate different policies for men and women might have come as a shock to those who assumed that discriminatory dress codes were a thing of the past. Yet <a href="http://eprints.gla.ac.uk/124290/">research attests</a> to the continuing aesthetic expectations governing the recruitment, selection, supervision and management of airline cabin crew. </p>
<p>In fact, makeup policies are just the tip of the iceberg. Height-weight regulations, grooming manuals and gender differentiated uniform requirements are the industry standard – especially among airlines flying lucrative business travel routes. </p>
<p>British Airways for instance, continues to require female cabin crew to wear makeup, and <a href="https://www.theguardian.com/business/2016/feb/05/female-british-airways-cabin-crew-win-the-right-to-wear-trousers">only allowed them to wear trousers</a> in 2016. And while “no frills” airlines tend to be more relaxed about rules on appearance, Ryanair only <a href="https://www.ibtimes.co.uk/ryanairs-offensive-sexist-bikini-girl-cabin-crew-calendar-scrapped-1468209">stopped producing</a> its calendar featuring bikini clad female crew in 2015.</p>
<p>Virgin Atlantic demonstrated the importance of women’s bodies to its brand image a decade ago, in its 25th anniversary advertising campaign: Still Red Hot. Despite reducing the high levels of skill and training required of cabin crew to a retro-styled ode to the “trolley dolly”, the advert <a href="http://www.thecreativeindustries.co.uk/industries/advertising/advertising-case-studies/advertising-case-virgin-atlantic">won industry accolades</a> and much praise on social media. </p>
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<p>The actual demands of the job – ensuring the safety and security of passengers, taking control of safe evacuation in the event of an emergency – are often forgotten. Meanwhile, the Virgin Atlantic Sindy doll and the Ann Summers flight attendant costume, demonstrate how the sexualisation of female cabin crew remains firmly encoded in popular consciousness.</p>
<p>One of the many problems with this is that making an employee’s appearance your business transforms him or her (and it is disproportionately “her”) into a spectacle. This effectively means they are working two jobs: the job itself, and the sexualised theatre of the job. An aesthetic economy depends upon (again, predominantly young women) aspiring to this. This means that the desire to be seen, to dress up, to “stage oneself” forms a practically limitless basis for exploitation and profit accumulation. </p>
<p>Hence, like so many people (again disproportionately women) working double shifts, female cabin crew are relatively underpaid, enticed by the glamorous veneer of an industry characterised by low pay and high levels of sexual harassment. </p>
<p>And while Virgin may have updated its makeup rules, its <a href="https://www.theguardian.com/commentisfree/2019/mar/05/virgin-atlantic-sex-discrimination-women-makeup-paying-less">gender pay gap</a> from figures published in 2018 suggest a median average hourly rate for women of 28% below that of their male colleagues. Women also count for 81% of the employees in the <a href="https://gender-pay-gap.service.gov.uk/Employer/AsdkKQSO/2017">company’s lowest pay quartile</a>. </p>
<h2>Flying the flag for equality?</h2>
<p>A Virgin spokesperson applauded the change of makeup policy as “significant” in an industry in which female crew are expected to invest considerable time and resources in maintaining the prescribed appearance, “adding to the costs and unpaid labour” associated with their jobs. Arguably this move is significant in so far as it formally recognises the centrality of this aesthetic aspect of the work involved. </p>
<p>Certainly, incremental developments such as changes to uniform and grooming regulations are important formal steps towards addressing this. But they need to be understood in relation to two other important industry-wide factors. </p>
<p>First, such changes have to be set against the wider historical context – a change in policy will never be enough on its own to offset the impact of years of discriminatory employment practices, and their wider ramifications for women across the industry and labour market. </p>
<p>Second, while changes to formal policies are all well and good, they are arguably undermined by the very powerful visual images on corporate websites and advertising campaigns. These send out a clear and persistent message about who and what the company (and industry) values. </p>
<p>Indeed, whatever commitment to equality Virgin may or may not have wanted to make was quickly unravelled by a tweet circulated immediately afterwards depicting the company’s new cabin crew apprentices. The female contingent, identically dressed in red skirts, ruby shoes and bold crimson lipstick, embodied the extent to which old habits are hard to break.</p>
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<p>Reading between the lines, what Virgin wants is not for women to wear makeup, but to recruit women who want to wear makeup, and who aspire to embodying the corporate brand and its reified versions of feminine sexuality. For those women who “choose” to wear makeup, Virgin offers a template of corporate colours and websites replete with “painting by numbers” photographs of cabin crew who are, presumably, highlighted as ideal examples of how to be the face of the company. </p>
<p>The message is loud and clear: you don’t have to look like this, but we’d really like you to. And more to the point, we’d like it to be not because it is what we want, but what you want.</p>
<p>As a mode of self-discipline this makes the policy much more effective – Virgin is able to recruit only those people who want to embody the corporate brand, as it is narrowly defined yet ubiquitously, idealistically depicted. And as industry leaders, other airlines emulate this as an ideal to aspire to.</p>
<p>The decision to allow female employees to go makeup free is a welcome development, but it is a baby step. What is really needed is a great big leap of faith towards the seemingly radical idea that people’s worth might relate to more than how they look.</p><img src="https://counter.theconversation.com/content/113211/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The job of looking after safety in the skies remains a highly sexualised occupation.Philip Hancock, Professor of Work and Organisation, University of EssexMelissa Tyler, Professor in Work and Organisation Studies, University of EssexLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1085832019-01-17T11:39:06Z2019-01-17T11:39:06ZIn ‘airports of the future’, everything new is old again<figure><img src="https://images.theconversation.com/files/253743/original/file-20190114-43510-1xlmqst.jpg?ixlib=rb-1.1.0&rect=44%2C0%2C4940%2C3290&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Just because an airport looks impressive doesn't mean it functions well.</span> <span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Turkey-New-Airport/bfe0a294298143d29ce49dc1387dcd2b/27/0">AP Photo/Emrah Gurel</a></span></figcaption></figure><p>As <a href="https://www.nytimes.com/2018/12/02/travel/new-airport-istanbul-beijing.html">massive new airports</a> open across Asia and the Middle East, U.S. airports are <a href="https://www.ajc.com/blog/airport/delta-now-using-facial-recognition-hartsfield-jackson-international-terminal-plans-expand-technology-detroit/avJxkBSmoD4MBNQ6zaSuWL/">enhancing security checkpoints with technological gadgets</a> to screen passengers and luggage more quickly. All these projects are often touted as “<a href="https://www.cntraveler.com/story/inside-the-airport-of-the-future">airports of the future</a>,” in which air travel will be faster, more efficient and more enjoyable than ever before.</p>
<p>However, as a scholar of the <a href="https://www.palgrave.com/us/book/9783319311944">history of U.S. airports</a>, I’m most interested to see that all these shiny improvements are still struggling to solve the <a href="https://theconversation.com/longing-for-the-golden-age-of-air-travel-be-careful-what-you-wish-for-34177">problems that have vexed airport managers and passengers</a> since at least the late 1950s. Even at the dawn of the <a href="https://airandspace.si.edu/exhibitions/america-by-air/online/jetage/index.cfm">jet age</a>, airlines had trouble moving people and bags through airports – and they still do. It’s unclear that bigger airports serving ever more passengers will have an easier time than their smaller, less crowded predecessors. </p>
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<a href="https://images.theconversation.com/files/253735/original/file-20190114-43538-pagvk4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/253735/original/file-20190114-43538-pagvk4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/253735/original/file-20190114-43538-pagvk4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=282&fit=crop&dpr=1 600w, https://images.theconversation.com/files/253735/original/file-20190114-43538-pagvk4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=282&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/253735/original/file-20190114-43538-pagvk4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=282&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/253735/original/file-20190114-43538-pagvk4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=355&fit=crop&dpr=1 754w, https://images.theconversation.com/files/253735/original/file-20190114-43538-pagvk4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=355&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/253735/original/file-20190114-43538-pagvk4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=355&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Chicago’s O'Hare, one of the nation’s busiest airports, stretches across an area one-third the size of Manhattan.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:OHare_terminal_map.jpg">Jay8g/Wikimedia Commons</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
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<h2>A long way to walk</h2>
<p>When commercial jet airliners came to the U.S. in the late 1950s, they were <a href="https://theconversation.com/50-years-of-the-boeing-747-how-the-queen-of-the-skies-reigned-over-air-travel-99814">larger and faster than previous planes</a>, needing longer runways and more space to park and maneuver on the tarmac. They carried more passengers, which meant boarding gates had to be bigger. This led to the now-familiar design called “<a href="https://science.howstuffworks.com/transport/flight/modern/airport4.htm">pier-finger terminals</a>,” with a main terminal screening passengers and collecting checked luggage, beyond which lay long stretches of boarding gates, spaced far enough apart for planes to fit side by side. <a href="http://archive.aviationweek.com/issue/19630715">Atlanta, Chicago and Miami</a> airports all were criticized for <a href="http://archive.aviationweek.com/issue/19630805">making passengers walk nearly half a mile</a> from ticketing to their gates.</p>
<p>Eero Saarinan, designer of classic jet-age terminals at Dulles and Kennedy airports, proposed two different answers. At Dulles, outside Washington, D.C., he called for <a href="https://www.washingtonian.com/2016/11/21/mobile-lounge-dulles-airport-people-movers/">large, bus-like vehicles</a> to move passengers from the terminal directly to their airplanes. Called “<a href="https://www.atlasobscura.com/articles/the-lonely-ballad-of-the-mobile-lounge">mobile lounges</a>,” they’re now being phased out in favor of another system billed as more future-oriented: an <a href="http://www.washingtonpost.com/wp-dyn/content/article/2010/01/25/AR2010012502837.html">underground train</a>.</p>
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<figcaption><span class="caption">People-moving ‘mobile lounges’ at Dulles International Airport.</span></figcaption>
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<p>In his TWA terminal at JFK Airport outside New York City, Saarinan planned for <a href="https://www.usatoday.com/story/travel/flights/2016/09/28/airport-moving-walkways-history/91187032/">moving sidewalks</a> to help people cover the distance. The final construction didn’t end up including them, but many large airports adopted the idea.</p>
<p>Those approaches did reduce the number of steps passengers had to take. But as terminals grew in size and airline routes became more complex, passengers had to change planes more often. That has required trains or trams to help people travel longer distances within terminals, or even to other concourses.</p>
<p>Checked luggage has to travel farther, too. In the late 1980s and early 1990s, Denver officials thought they had the ultimate futuristic solution with an <a href="https://www.nytimes.com/2005/08/27/us/denver-airport-saw-the-future-it-didnt-work.html">automatic bag handling system</a>. After repeated failures, though, the machines were shut down and baggage handling was put back in human hands. </p>
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<a href="https://images.theconversation.com/files/253742/original/file-20190114-43541-1cfq6hu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/253742/original/file-20190114-43541-1cfq6hu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/253742/original/file-20190114-43541-1cfq6hu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/253742/original/file-20190114-43541-1cfq6hu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/253742/original/file-20190114-43541-1cfq6hu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/253742/original/file-20190114-43541-1cfq6hu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/253742/original/file-20190114-43541-1cfq6hu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/253742/original/file-20190114-43541-1cfq6hu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Loading baggage by hand is more reliable than automated systems.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/USAIRWAYS/a0c08412416a499198d3ffdea061d82c/39/0">AP Photo/Gene J. Puskar</a></span>
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<p>After decades of attempts, the best way to ensure you and your bags arrive at the same place at the same time is carrying them on the plane yourself. Of course, that means you have to drag heavier bags even farther through sprawling airports.</p>
<h2>Planning for the unexpected</h2>
<p>After the 2001 terrorist attacks, new security screenings created long lines and increased the amount of time people spent at the airport before flights. The need for additional security and waiting space challenged designs that had seemed forward-thinking even in the late 1990s. </p>
<p>For instance, a terminal <a href="http://www.flyreagan.com/dca/history-reagan-national-airport">completed in 1997 at Reagan National Airport</a> outside Washington, D.C., included shops and restaurants, as well as a seamless link to the region’s public transit system. That whole layout is <a href="https://www.nbcwashington.com/news/local/Reagan-National-Airport-Readies-for-1-Billion-Renovation-Project-416881363.html">being revamped now</a>, at a cost of US$1 billion, to enhance the travel experience and to accommodate growing passenger numbers.</p>
<p>As more people fly more often, the pace of growth and unexpected events have often overwhelmed the best intended designs and plans. After more than 60 years of trying, it’s an open question whether the ultimate airport of the future – one where passengers and their bags move quickly through a space that’s enjoyable to be in – could ever exist at all.</p><img src="https://counter.theconversation.com/content/108583/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Janet Bednarek does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Big lines and long distances to walk have plagued airports since the dawn of the jet age. New designs and technologies haven’t helped much, even if they’re visually impressive.Janet Bednarek, Professor of History, University of DaytonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1027842018-10-04T05:05:39Z2018-10-04T05:05:39ZAverting a plane crash: what to do about the global pilot shortage<figure><img src="https://images.theconversation.com/files/238261/original/file-20180927-48641-1shgi3n.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C4187%2C1817&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Students in Australia who want to undertake a flight training degree need to find close to $35,000 upfront.</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>The world is running out of experienced pilots. Supply is not keeping up with the growing demand for air travel. In Australia the effects are already starting to bite. </p>
<p>Even flagship carrier Qantas is having problems. In recent months it has had to perform a very nimble tap dance to crew its vast fleet and maintain its extensive flight schedule. </p>
<p>In response Qantas has plans for one of the biggest pilot training programs in its history. It has just announced its first ever pilot training academy, training 250 pilots a year, will be based in Toowoomba. A second site, to train a similar number of pilots, is still to be announced.</p>
<p>Training this many pilots, though, will be a struggle. The academy will first have to find enough instructional pilots to deliver the required training flights.</p>
<h2>Ruptured training pipelines</h2>
<p>The reason airlines and other operators are in this predicament stems from the rupturing of the training pipelines that historically supplied pilots across all levels of the aviation industry. </p>
<p>Experience is everything in aviation. Qantas and Australia’s other major carriers – Virgin Australia, Tiger and Jetstar – have mostly employed pilots with high levels of flying experience. Pilots gained that experience flying for regional airlines, charter operators and, critically, as instructors at flight training schools.</p>
<p>As pilots gained experience and progressed to more lucrative flying positions, newly qualified pilots were employed to replace them. Together with a trickle of ex-military pilots topping up the airlines, the whole system had sat more or less in equilibrium. </p>
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Read more:
<a href="https://theconversation.com/one-flies-planes-the-other-makes-money-the-two-sides-of-aviation-12753">One flies planes, the other makes money: the two sides of aviation</a>
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<h2>Reaching a tipping point</h2>
<p>This equilibrium has been at tipping point for some time. Almost a decade ago (in 2009) <a href="https://infrastructure.gov.au/aviation/publications/files/Aviation_White_Paper_final.pdf">a government white paper</a> predicted the training system would fail without remedial action. </p>
<p>Some measures were put in place, but not enough. Most of the weaknesses went uncorrected. It was only because of the Global Financial Crisis, which suppressed global demand for air travel, that crisis was delayed. </p>
<p>A leading indicator of system failure is a dearth of available experienced trainers, as flying school instructors move into airline employment. Without these instructors, flight schools struggle to train new pilots to feed the industry from the bottom up. </p>
<p>In Australia there is no mechanism to maintain this vital pool of flight instructors. There are no formalised career pathways and minimal financial support to those looking to teach others to fly. A bespoke airline training scheme won’t remedy the problem if its pilots all go straight into the airline’s employ.</p>
<h2>Taking care of training pathways</h2>
<p>In the US the system is somewhat different. Despite substantial evidence to show that <a href="https://www.atsb.gov.au/media/4171790/ar-2012-023_final.pdf">airline cadetship programs posed no negative impact to flight safety</a>, in 2013 the US Federal Aviation Administration chose to stipulate a substantial minimum level of experience a pilot must have to be employed by a major airline. </p>
<p>While this has exacerbated the pilot shortage issue for American airlines, it has also forced the industry to create formal pathways to train new pilots and help freshly qualified pilots progress to an airline career. Such pathways often include a period of <a href="https://news.delta.com/delta-propels-next-generation-pilots-through-innovative-career-paths">employment as a flying instructor</a>. </p>
<p>A similar “instructing pathway” needs to be a central part of Australia’s airline training programs if they are going to be sustainable.</p>
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Read more:
<a href="https://theconversation.com/were-flying-into-an-aviation-skills-crisis-with-safety-under-the-radar-27064">We're flying into an aviation skills crisis, with safety under the radar</a>
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<p>Government also has a role to play, as noted by <a href="https://taaaf.org/raaa_site/wp-content/uploads/secure/V-7-FINAL-Expert-Panel-20180629-1.pdf">the expert panel</a> charged with recommending strategies for a sustainable and successful aviation training sector in Australia. A key issue is education funding.</p>
<h2>Sky-high student costs</h2>
<p>The cost to become a commercial pilot is comparable to that of becoming a doctor or a veterinarian. A university-trained commercial pilot with a flight-instructor rating will pay more than $140,000 in fees. </p>
<p>But unlike those doing medicine or veterinary science courses, trainee pilots have never been adequately assisted by federal student subsidy and loan schemes such as HECS, FEE-HELP of VET Student Loans. </p>
<p>Recent <a href="https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r6051">amendments to the Higher Education Support Act</a> cap the maximum debt a student can have under the Higher Education Loan Program (HELP) at $104,440. The only exceptions are medicine, dentistry and veterinary science, where the cap is $150,000. </p>
<p>This effectively means students wanting to undertake a flight training degree need to find close to $35,000 upfront. The effect will be profound. Many talented potential pilots will not be able to pursue the career.</p>
<h2>Over the horizon</h2>
<p>Looking further into the future, we must find more ways to maintain the pilot training pipeline. Encouraging more female and Indigenous students to pursue the career would be a start. The numbers now are woefully low. </p>
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Read more:
<a href="https://theconversation.com/life-in-a-post-flying-australia-and-why-it-might-actually-be-ok-70388">Life in a post-flying Australia, and why it might actually be ok</a>
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<p>Finally, the entire process of pilot training needs to be made more effective and efficient. Practices have remained essentially unchanged since flight training began. </p>
<p>Our future training systems must make pragmatic use of learning technologies and theory to enhance student progression, reduce failure and maximise the use of expensive aircraft resources. This requires investment. </p>
<p>In Canada, the training and simulation giant CAE, in partnership with the national and Quebec governments, is <a href="https://www.nasdaq.com/press-release/cae-poised-to-revolutionize-pilot-aircrew-and-healthcare-professional-training-by-investing-c1-20180808-01000">investing C$1 billion</a> over the next five years to develop the next generation of aviation training systems. </p>
<p>In Australia we need to recognise this opportunity for innovation and act now, before our pilot training system completely crumbles.</p><img src="https://counter.theconversation.com/content/102784/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>We have known for more than a decade that the pilot training pipeline is close to rupturing. Now the crunch has come there are some obvious things to do.Stephen Fankhauser, Deputy Chair, Aviation Department, Faculty of Science, Engineering & Technology, Swinburne University of TechnologyMatt Ebbatson, Senior lecturer, Swinburne University of TechnologyLicensed as Creative Commons – attribution, no derivatives.