The ongoing COVID-19 pandemic has brought an unprecedented impact to the globe while the preventive measures were largely driven by avoiding human connection. The fact disrupted the flow of economic activities, putting financial strain on individuals and businesses.
When the world stands still, recession spread across the globe. Breaking into the fundamentals, both the economic supply and demand sides were badly harmed under the various mechanism (Brinca et al 2020). According to Nguyen’s research (2021), social distancing and restriction policies drove a significant labour supply reduction and a global supply chain disruption. As the economy is an interdependent network, almost all businesses were attacked with the consequences of consuming hesitation and the financial market turbulence. All this transformed the health crisis into the worst economic downturn in the contemporary history.
On the far side, governments around the world cannot stand doing nothing while looking their economies collapse. They have intensified tremendous attempts to maintain economic activities by infusing cash into the system. The majority of programs are aimed at directly sustaining public well-beings, strengthening hard-hit sectors and maintaining liquidity of the capital market (Nguyen 2021).
Aviation industry survival
Due to the impacts of demand shock and virus transmission preventive measures, the worldwide aviation sector was pushed into turmoil by 2020. “The history books will record 2020 as the industry’s worst financial year, bar none.” – de Juniac (IATA 2020).
Airlines were unable to retain their key revenue-generating operations with empty airports, a spate of flight cancellations, and a struggling financial condition. They suffered significant losses because of their high operating costs. With the financial help of the government aviation companies went through cost restructure in the fiscal year 2020 with dramatic changes in capital structure and leverage usage. Taking notice to their survivals, other variables were their solid historical performance and the reserved capital surplus. (Nguyen 2021.)
As a wise response, airlines have developed new ways of working. The prolong and high-volatile period created them an opportunity to modernize their operation toward the cores of sustainability and resilience. Soon after the crisis, the industry is expected to surge associating with the commercial needs from globalization and international trading tendencies. Despite the overall bright prediction, the recovery path of enterprises will vary, depending on the obligations required by the public bailouts, applied business models and strategic management. In addition, the recovery will still be hampered by consumers’ hesitation induced by the demand and supply market shock. (Nguyen 2021.)
![[Alt text: A wholly deserted great airport terminal with large screens and device but with no people.]](https://blogit.lab.fi/labfocus/wp-content/uploads/sites/8/2021/12/677_2021_Covid-19-Economic-Recession-How-Could-Airlines-Survive-1024x684.jpg)
In a nutshell, it was shocking to realize the unpreparedness of the global economy in response to an unusual market occurrence. Ever before, the modern economy confirmed the importance of government in economic development. The event also brought up questions on the practicality of globalization and how vulnerable corporates had been with the showcases of aviation businesses. However, COVID-19 is still evolving unpredictably with many variants regardless of the vaccination popularity. Hence, it is hard to provide any accurate assessments of its actual effects on the economy at the current stage.
Authors
An Nguyen is a degree student in International Business at LAB University of Applied Sciences.
Ms Leea Kouhia works as a Senior Lecturer of Business Faculty at LAB University of Applied Sciences.
References
Brinca, P., Castro, F. M. & Duarte, B., J. 2020. Is the COVID-19 Pandemic a Supply or a Demand Shock?. Research Paper. Federal Reserve Bank of St. Louis. [Cited 2 Dec 2021]. Available at: https://research.stlouisfed.org/publications/economic-synopses/2020/05/20/is-the-covid-19-pandemic-a-supply-or-a-demand-shock
IATA. 2020. Industry losses continue to mount. [Cited 2 Dec 2021]. Available at: https://airlines.iata.org/news/industry-losses-continue-to-mount
Nguyen, A. 2021. Financial Recovery of Aviation Businesses during the COVID-19. Bachelor Thesis. LAB University of Applied Sciences. [Cited 2 Dec 2021]. Available at: https://urn.fi/URN:NBN:fi:amk-2021120223441
Images
Image 1. geraldfriedrich. 2020. Friedrich, G. Covid-19. Pixabay. [Cited 02 Dec 2021]. Available at: https://pixabay.com/images/id-5148746/
