A Major Airline Will ‘Most Likely’ Go Out of Business by the End of This Year Says Boeing CEO

As the coronavirus crisis continues to ravage markets, industries, companies, and the economy at large, there is no telling whether or not some companies will survive the hit. The airline industry and transportation industry at large have been greatly impacted by the crisis, with many airline companies cutting their operations as high as 90% in the last quarter. There has also been a 95% slump of the demand for passenger flights in the US due to the coronavirus pandemic.

The US government has made efforts to support the falling industry by providing a $25 billion support to the most hit passenger airlines. The aim is to sustain the airlines and provide them with staff salaries until at least September.

While many people worry about the fate of many airline companies, Boeing CEO Dave Calhoun has declared his expectations of a major airline to go out of business this year as the coronavirus pandemic continues to impact the demand for passenger flights. He also said in an exclusive interview with NBC on Tuesday that he had no expectations of air travel to return to normal this year.

The damaging impact of the coronavirus pandemic on passenger flights is so intense that Boeing (BA) is also cutting its workforce by 10%, which is 16,000 employees, from mostly its commercial airline branch. Calhoun said in April that “the demand for commercial airline travel has fallen off a cliff.”

Calhoun also said that the $25 billion government payroll support will not be enough to prevent airlines from having made adjustments.

“Something will happen when September comes around. Traffic levels will not be back to 100%. They won’t even be back to 25%. Maybe by the end of the year, we approach 50%. So there will definitely be adjustments that have to be made on the part of the airlines,” Calhoun said.

According to a revision carried out by the International Air Travel Association on the performance of the industry, there have been several forecasts since the pandemic hit, estimating that airlines could report a $314 billion loss in passenger revenues this year, that is, a 55% drop in its revenues. In addition, the IATA has also reported that carriers around the world have drastically dropped in their normal capacity, as the demand for passenger flights has dropped to 82%, globally.

A few airlines are making plans towards July to reopen. Ryanair, Europe’s biggest airline by passengers, announced on Tuesday that it plans to resume operations by July 1, with 1,000 flights a day. However, the IATA says that even if demand picks up, coronavirus precautionary measures such as social distancing would have a financial implication. The association says that most airlines will be “financially unviable” as many seats would be left occupied.

Boeing has immensely cut back on its production of commercial planes for the time being as a result of the further impact of the coronavirus on the industry. It shut down its commercial aircraft production in Washington and South Carolina, in April. While its production units in the US, Canada, and Australia are still operational.