Over the next few months, many airlines face some unenviable choices. None of the outcomes is pretty in this fragile economy. As Covid-19 continues to ravage the aviation industry, and government support dries up, the options are dire. Either go under or cut back.

To illustrate the point, consider the situation of Qantas Airlines. They don't expect to operate an international long-haul service until July 2021, with a proposal to lay off 2,500 staff. They've taken a refurbished A380, direct from a make-over in Dresden, to long-term storage in the 'graveyard' at Victorville, California.

At the same time, they are running a reduced domestic operation. At least that was the source of some hope. Then the Covid-19 outbreak in Melbourne prompted internal flight restrictions.

Things are no better in the USA. American Airlines is predicting it will lay off 40,000 staff by October unless government aid is forthcoming. That's almost a third of their headcount. Both United and Delta are signalling significant job cuts are coming, with United talking of redundancy for 20% of pilots.

Some see these statements as confected threats to force the hand of the politicians. Others feel more financial aid is stalling the inevitable by misguided interventions. In any case, many airlines have already fallen, and more will go. And yet, don't forget that a collapse in civil aviation has ripple effects across the whole economy. It's a tough call to make

American Airlines is predicting it will lay off 40,000 staff by October unless government aid is forthcoming.

Cathay Pacific has made it clear it faces tricky decisions with rumours circulating of severe fleet reductions. CX currently has 68 Boeing 777s in the fleet, with suggestions this number may fall significantly, leaving the Airbus 350 as the backbone of the passenger fleet.

Such a move may mean laying off significant numbers of pilots, cabin crew and ground staff. CX can draw some solace from its booming cargo operation. It recently sought pilot volunteers to transfer to the cargo fleet as Hong Kong airport saw rapid growth in demand. Last month, Chek Lap Kok moved world record-breaking amounts of freight.

Also, on a positive note, Emirates resumed services to Cebu in the Philippines from August 20, and Houston in the USA from August 23. They restarted passenger services to Birmingham in the UK on September 1. Thus the Emirate network now has 74 operating destinations. But, we have no details on loadings.

Likewise, Chinese carriers are seeing a rebound. This month domestic arrivals at Chinese airports reached 86% of the 2019 levels. Meanwhile, bookings are back to 98% for domestic flights in the first week of September. Thus, China is returning to pre-pandemic levels of passenger load.

China Southern Airlines, the nations largest carrier, suffered losses of US$422 million from April to June. Yet, the recent rebound in passenger numbers may see the airline soon return to profitability.

Airlines use algorithms to set the pricing of tickets based on known factors and past traffic patterns. Those algorithms work well in regular times, but less so when the number of unknown factors escalates. Currently, the big unknown is when passengers will be confident enough to fly. It's explained here.

Aggressive pricing to draw travellers back can prove useful, although with an impact on profit margins. The coming Chinese 'Golden Week' holiday period in October will be a test of this strategy. With overseas destination denied to the massive Chinese market, airlines are hoping people will seek to explore within the country. Indeed travel to Sanya, China's Hawaii in the South China Sea has seen a broad recovery in arrivals helped by a new duty-free policy.

Looking to the future, despite some grounds for optimism, a significant realignment in the aviation industry is coming. Airlines will seek to rationalise operations, cut fleets and focus on survival. With China bouncing back first from Covid-19, others can draw lessons from there to craft a response to their needs.

In the meantime, Sam Chui captures the emotions of this episode in this excellent video. We need his optimism now.

Parking is at a premium at Hong Kong Airport.

Tough Decisions