In 2020 total airline debt increased about 40% to around $600 billion.
Some of this is owed to banks and some to lessors, but most of the increase came from short-term government loans.
For example, by the end of 2020 Air France had fully drawn down its €7 billion state aid package, €4 billion of which will need to be repaid in 2023, when the airline is likely to still be in recovery mode.
Many doubt the ability of Air France and other airlines like it to repay their loans on time, and thus foresee states taking equity stakes instead.
Furthermore, this trend may even extend beyond traditional flag carriers--which have a history of state influence--to some privately held airlines.
So, what are the consequences for the aftermarket of increasing state involvement in airlines? Traditionally, state ownership of airlines meant protectionist aviation policies, high cost bases and, as a result, higher air fares.
A jarring return to that era would constrain aviation growth and be bad news for the aftermarket. However, governments are unlikely to unpick years of liberalization; instead, it seems more likely that in places like Europe they will use their new influence to align airlines better with environmental goals.
For example, a condition of Air France’s bailout is that it does not compete with high-speed rail on short-haul routes.
In other cases, governments may insist on airlines phasing out older aircraft and deploying only the most fuel efficient models, which would force some MRO providers to update their capabilities quicker than they might have expected.
At the same time, though, state interventions at big network airlines should boost the main low-cost carriers (LCCs), allowing them to pick up even more market share in short-to-medium-haul markets.
The original rise of the LCCs in the 1990s and early 2000s forced structural change in the aftermarket as new players pushed for outsourcing, fast turnaround times and stiff discounts. The post-crisis-era could see the next evolution of that trend.
Related Content
