It's no secret that air travel has fallen off a cliff over the past few months. If you’re one of the many who’s been forced to cancel a family vacation or annual conference trip, then you know this story all too well. So, when will air travel return to any sense of normalcy?
It’s difficult to predict exactly how long it will take for us to be comfortable flying again, but Covid’s impact on airlines has been deep.
How bad is it, exactly? Greg Lee of Goldman Sachs’ Investment Banking Division said airlines are experiencing their worst stress environment in history, and that includes the aftermath of 9/11.
What this looks like in terms of numbers: major airlines accepted $25 million in government aid back in March. And, as seen by this CNBC story from June that says unions were asking for additional funds to keep people employed, more money is needed.
In the meantime, airlines have creative ways to finance their operations. And your rewards miles – the ones you earn when you make purchases with certain credit cards – may be helping carriers do just that. As a customer, you experience rewards as perks, but airlines benefit too because those miles are worth money. Bloomberg notes that airlines sell miles to other businesses, and Conde Nast Traveler reports that these sales can “be the difference between earning a handy profit or just breaking even.”
Carriers are also using miles for leverage; Goldman Sachs helped a major airline use miles to restructure debt and secure multi-billion dollar finance packages by using the stable cash flows generated from mileage programs as collateral.
Even if travelers are beginning to ease back into flying, Goldman Sachs’ Lee sees 2021 as being a challenge for the industry, but is confident airlines will eventually bounce back: “We are bullish about the industry overall as airline travel is akin to a public utility and is critically important for the economy, leisure and business over the longer term.”
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