The Covid-19 crisis has a far-reaching impact on economies and societies around the globe. The existence of many companies is under acute threat, and executives have to weigh the interests of different stakeholders when deciding how to best mitigate losses and secure going concern. The approaches taken vary from company to company and tend to show how serious they are about social responsibility. Our analysis of the airline industry indicates that certain capital distribution and executive compensation practices are not aligned with corporate social responsibility values. It also shows that we, as shareholders and investment advisors, must continue to proactively encourage sustainable business models.
Undoubtedly one of the hardest and most directly hit sectors is the airline industry. The spread of Covid-19 has provoked a near-standstill in air travel with airlines facing zero revenues for the foreseeable future. Executives and directors have to take steps that will allow their companies to survive the coming weeks, perhaps even months. In the following sections, we take a closer look at 15 airline companies, examining how the measures they are implementing align with social values. All 15 companies analysed have grounded most, if not all, of their aircrafts. As a result, their revenue streams have dried up while, at the same time, their cost basis has only decreased marginally. All companies have thus had to take measures to a) increase liquidity and b) bring their cost base down.
Our Senior Equity Analyst Dr Thomas Kaufmann contributed to the 4th edition of “Nachhaltiges Investment Schweiz 2020”, a leading yearbook for professionals with an affinity to environmental, social and ethical investment themes.