Impact of COVID-19 on Airlines’ Financial Performance and Innovation Strategy

Natthanicha Siriphot, Ploypailin Kijkasiwat, Joosung Lee


The COVID-19 pandemic profoundly affected the airline industry, prompting an exploration of non-financial factors that influence global airline financial performance. This study employs regression analysis on a panel dataset sourced from airlines’ annual reports and financial statements from 2015 to 2020. The dataset is divided into pre-COVID-19 (2015-2018) and COVID-19 (2019-2020) periods, encompassing 72 samples from International Air Transport Association member airlines, categorized as full-service carriers (FSC) and low-cost carriers (LCC). Notably, pre-COVID-19 performance is statistically linked to non-financial factors such as passenger numbers (PAX) and passenger load factor (PLF). During COVID-19, financial performance was impacted by factors including PAX, available seat kilometers (ASK), revenue passenger kilometers (RPK), PLF, and aircraft count (ACT). This research advances our understanding of the interplay between airline-specific factors and financial performance during exogenous shocks such as COVID-19, potentially serving as a model for similar studies in extreme circumstances. Airline business innovation strategies are also discussed for the post-pandemic era. We analyze the impact of COVID-19 on airlines’ financial performance and propose service innovation measures with the aim of promoting sustainable industry growth. The methodology included an embedded case study, statistical modeling, and hypothesis testing. This study reveals a positive correlation between passenger demand and total asset turnover because passengers play a vital role in the commercial airline sector. However, measures imposed by the World Health Organization (2020) during the pandemic, such as mandatory mask-wearing and seat distancing on flights, severely impact airline revenue. This study indicates that the passenger load factor positively influences total asset turnover, suggesting that airlines may have effectively adapted to optimize asset deployment in the COVID-19 era. The analysis of the given case on the impact of COVID-19 could serve as a foundation for further innovation initiatives for sustainable market growth of air transportation. By adding the financial performance data to the discussion on airline service innovation, we identified a strong relationship between airline management and innovation strategy during the pandemic.


Keywords: COVID-19 pandemic, airline industry, financial performance, non-financial factors, service innovation.



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