Will COVID-19 Threaten the Survival of the Airline Industry?

Abstract

The pandemic causes social distancing and lockdown, which impedes consumer confidence and contracts the economy. Hence, this study analyzes the corona (COVID-19) impact on the airline industry revenues (ALR) and forecast by the vector autoregression (VAR) method. The results indicate that gross domestic product (GDP) and air cargo are the best predictors of ALR. The forecasting outcomes explore if ALR will decline and expect to back to pre-COVID-19 in 2023. Our results resemble both the V-shaped and U-shaped, which suggests slow gradual recovery with longer lockdown and border disclosure. The government can restore confidence building by providing economic stimulus packages and can encourage the airline to return to travel. Furthermore, softening the passenger rules concerning the refund of unflown ticket, reducing taxes, and reducing overflight taxes, all reduce the costs. Similarly, the mutually recognized global standards are crucial for effective execution, and any temporary measures taken by the government should have a clear exit strategy. The study major limitation includes the lack of relevant research and data availability.