New virtual forum series from UND Aerospace confronts reality of aviation industry downturn
UND archival image.
This isn’t the airlines’ first rodeo.
While the early impacts of a global pandemic have been grim for the airline industry, and the current students of UND Aerospace already have been affected in many ways, there’s a case for long-term optimism, faculty and visiting experts at the John D. Odegard School of Aerospace Sciences agree.
That’s because airlines have seen ridership, jobs and profits plummet in economic downturns before, then recover dramatically once the crisis has passed.
Furthermore, help is already on the way from the federal government. The CARES Act, the recently passed economic stimulus package, contains $50 billion for domestic airlines and another $8 billion for cargo carriers.
Even so, the short-term outlook remains, “Turbulence ahead.” With that in mind, Aerospace students are being told to brace for a slowdown in hiring for the immediate future.
The insights above come from the Aviation Industry Speaker Series, a forum created by Aerospace faculty as a means of communicating directly with students and answering their questions. It’s also a response to the lack of in-person gatherings on campus during the busiest time of year for hosting industry representatives.
The first two installments of the weekly series – via Zoom – confronted the reality of an industry-wide downturn and the history of the airline industry, as it relates to the global economy. Hundreds of students, along with alumni, parents, and prospective students, have tuned in to the sessions both live and on the School’s YouTube channel.
The series also brought in commercial aviation alumni, all of whom currently fly for Delta Air Lines, to speak about their career experiences and give advice to students who are unsure of what’s ahead.
On March 26, Professor Jim Higgins, Chester Fritz Distinguished Professor Kent Lovelace and Associate Professor Brandon Wild called upon their decades of combined industry experience and research to present “Navigating Airline Careers During Downturns and Uncertainty.”
“With the current situation, if you want to come up with one word right now, it’s ‘bad,’” said Higgins as he pulled up a plummeting chart representing global airline capacity. “Starting at the end of January, we’ve seen a massive drop-off in capacity. Mainline carriers in the U.S. are seeing anywhere from 15 to 30 percent passenger load factors.”
Passenger load factors – the measure of filled seats on a flight – typically average more than 80 percent, according to Higgins.
Then a more appealing chart appeared, showing industry revenues from 1950 to 2012. The slightly zigzagged but always upward-trending track showed a resilience to global disturbance and an ability to rebound in exponential fashion.
“Those of us who’ve lived through difficult events, such as 9/11 and the Great Recession, knew people who would say the industry would never be the same, or profits would never return,” Higgins said. “When you see the data, it demonstrates that time and again we always respond and recover. Not only do we recover, we grow stronger.”
This decade’s long perspective of global airline revenue has been cause for optimism in the wake of the COVID-19 pandemic. Though the chart above ends at 2012, the trajectory for revenue had increased until March 2020. Image courtesy of UND Aerospace.
Better-equipped for downturns
In short, the long-term industry outlook remains the same to UND’s experts: the world of aviation needs pilots.
Of course, there is still vast uncertainty about how quickly the current pandemic can get under control, which in turn affects the economic outlook for the months and years afterward.
But airlines hit this downturn better prepared in key ways than they were in earlier recessions. The faculty panel brought forth more industry data to explain that airlines have been able to more precisely manage operations in ways that can fend off the worst of economic downturns. Advanced analytics can help airlines better strategize flight prices, and more consideration has gone into fuel supply in recent years. One of the most important developments for carriers since the 2007-2009 recession has been ancillary revenue – charges for items such as baggage, upgrades and in-flight conveniences.
“That income really helped stabilize the industry,” Higgins said. “The good news is that it provides a buffer, and helps airline management through times of recession.”
“What we can see when we look back at the time of the Great Recession are deep losses, but the interesting thing is how quickly the industry rebounded,” Wild followed. “The biggest piece of that, in combination with what [Higgins] mentioned, is the consolidation factor – mergers.”
The associate professor quoted a former CEO of Delta Air Lines in saying a key to surviving downturn is consolidation, which spreads costs to more passengers and keep ticket prices stable. Costs go down, profit margins go up, Wild said.
Karen Ruth, pictured here during a 2018 visit to UND with Delta Air Lines’ Propel career pathway program, spoke to students alongside two other Delta pilots during the April 2 forum to talk about her career and how it has been affected by matters beyond her control. UND archival image.
Sage advice from alumni
Delta Captain and UND Hall of Fame Alum Karen Ruth was one of the three pilots who talked on April 2 about the “turbulence” of their careers in the airline industry. Throughout her 35-plus years as a pilot, instructor and interviewer for the country’s biggest airlines, she’s seen most of what the industry can throw at someone.
Ruth graduated from UND in 1982 and took advantage of the boom of job opportunities in the mid-1980s, resulting in an offer from Republic Airlines.
“In two weeks, I had five job offers” said Ruth, adding that such a “feeding frenzy” was happening across the industry. “It was very much like how it was a month ago, before the coronavirus hit.”
From there, she went through a variety of events that impacted her time as a pilot. Republic was acquired by Northwest a year after she was hired, and the forceful merging of Northwest policies and procedures (which resulted in a pay cut) “wasn’t pretty,” she said. In the 90s, Ruth was one of more than 6,000 pilots on strike amid union disputes. Along with instances directly affecting her career, Ruth characterized the global events and disasters that affected Northwest and sped up the airline’s trajectory to bankruptcy.
“When Northwest went bankrupt in 2007, I had already taken a 15 percent pay cut,” Ruth said. “Now I had another 24 percent cut, and they froze my pension. That was a dark day, and it was a stressful time.”
Things got better for her and many pilots upon Delta’s acquisition of Northwest in 2008, but there are still plenty of things affecting pilots that are out of their control, with COVID-19 being the latest. Of more than 900 planes Delta operates, 600 of them are sitting on lots, waiting to be needed.
The other two alums featured at the forum were David Barnes and Jared Herndon, who graduated from UND in 2001 and 2008, respectively. Though they haven’t been in the industry as long as Ruth, their perspectives were equally valuable in providing students with advice.
Ruth was the first one to give recommendations to students, which were later echoed by Barnes and Herndon.
“Please be continuous learners and stay competent,” she said. “Have some financial discipline. Start saving, even if it’s $10 a paycheck. Get a hand on your downtime – be proactive with your distance learning. This isn’t the time to just catch up on Netflix.”
The trio also implored students to find ways to build their resumes if their career paths are altered by the circumstances of a pandemic and resulting downturn. Ruth said in her 25 years of being an interviewer, the first thing she looked at was how applicants were using their time outside of work and class.
Another common refrain was to manage expectations. Airlines will most likely bounce back, but hiring could slow for the foreseeable future; and students, for instance, might find themselves instructing for longer than they originally planned.
“In aviation, airplanes can experience unexpected turbulence, despite careful observance of the weather,” said Ruth in closing. “So it is in life. No matter how well you plan and organize, you’ll need to adjust to situations beyond your control, just like this one. We’re all in this together.”
About the series:
The Aviation Industry Speaker Series is hosted by UND Aerospace at 5:30 p.m. every Thursday, on Zoom. More information can be found on the series’ website. The following is a list of confirmed speakers for the series:
April 9: United Airlines
April 16: National Business Aviation Association (NBAA) and panel on corporate aviation
April 23: Airport Panel
April 30: FedEx Express