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Badly hit civil aviation industry

by Hoor Asrar Rauf 07/03/2021
written by Hoor Asrar Rauf 07/03/2021
Badly hit civil aviation industry

The civil aviation industry is limping back to normalcy after having been through intensely hard times. Entering 2021, the worst of the aviation industry’s COVID-19 downturn may be behind but the pandemic’s impact is not. Just how long its effects will linger is an open question but the road to recovery looks long and winding. Despite the chances of improvement, the COVID-19 pandemic put the aviation industry in a crisis much deeper than those that followed both 9/11 and the Great Recession. A long stretch of sustained growth was stopped in its tracks in 2020 and the next several years will be spent trying to simply get back to pre-COVID levels though it will not be easy. Many of the factors that will determine the industry’s recovery are out of its control and even the most connected insiders cannot accurately predict where the industry will go from here.

However, the industry outlook as described a year ago is far better now and gives a sense of relief to the industry managers. At the tail end of 2020, the aviation industry received its first dose of good news in quite some time when vaccinations began. However, even in the most optimistic scenario, it will be months before vaccinations have a significant impact. Further complicating the situation are the new and more infectious variations of the coronavirus that have sparked a new wave of travel restrictions and border closures that present yet another hurdle for the aviation industry. In the wake of these difficulties, it cannot be said with certainty when the pandemic will be under control and life can slowly start returning to normal.

In a precise reflection of how a bad year seemed to just keep getting worse IATA’s estimated that the industry would lose a combined $84.3 billion in 2020. By the time the agency released its year-end report in November, that loss estimate had been increased to $118 billion and an additional $38 billion in losses are expected in 2021. These losses were driven by the severe limitations on air travel during 2020. Lockdowns, border closures and safety concerns virtually grounded all air traffic in the early part of the pandemic and even when it was technically possible to travel, passenger demand was not there. Global aviation data found that passenger traffic fell 67 per cent in 2020 bringing the industry’s numbers down to a level not seen in decades.

Airlines operated just 16.8 million flights in 2020 only slightly more than half of the 33.2 million flights operated in 2019. Due to border closures and steep drops in business travel, the vast majority of 2020’s completed flights were domestic, with international travel accounting for only 23 per cent of the year’s air traffic. IATA’s year-end report from November was a bit more optimistic, estimating that passenger departures decreased by 61 per cent, falling from 4.5 billion passengers in 2019 to just 1.8 billion in 2020. Total passenger departures are predicted to climb back to 2.8 billion in 2021 but even if that prediction bears out, this year’s totals would still be the lowest the industry has seen since 2011. No matter how the situation is viewed COVID-19 effectively wiped out years’ worth of passenger growth.

Almost a year from now the industry suffered its worst times as Virgin fired more than 3,000 people including 600 pilots with Virgin Australia filing for bankruptcy and it was not alone as Air Mauritius went into administration and South African Airways going bankrupt as well. Finnair returned 12 planes and laid off 2,400 people with Ryan Air grounding 113 planes and got rid of 900 pilots. SAS returned 14 planes and fired 520 pilots. Etihad cancelled 18 orders for A350, grounded 10 A380 and 10 Boeing 787 laying off 720 staff.

Emirates grounded 38 A380s and cancelled all orders for the Boeing 777, an order of 150 aircraft, the largest order for this type. IAG (British Airways’ parent company) abandoned the takeover of Air Europa and paid €40 million compensation for that. IAG (Iberia) grounded 56 planes and IAG (British Airways) grounded 34 planes. Brussels Airline reduced its fleet by 50% and associated redundancies with Lufthansa planned to ground 72 aircraft. The adversity of the situation became glaring in wake of the fact that after several years of healthy and steady growth in airlines’ total revenues and overall traffic numbers, 2020 marked an abrupt end to what many expected to be a prolonged golden age for the civil aviation industry.

The global aviation fleet is not expected to return to its pre-COVID fleet numbers until the end of 2022 at the earliest but long-term forecasts are still bullish as Boeing expected the global fleet to reach 48,400 by 2039, only a four per cent downward adjustment from its 20-year forecast and Airbus predicts a similar long-term expansion, calling for a total global flee of 44,860 by 2038. But some aircraft parked in 2020 are likely to remain out of service permanently and it is expected that more than 2,600 planes will be retired by the end of May 2021, a roughly five-fold increase over the number of aircraft retirements in a typical year.

For an industry as advanced and high-tech as aviation, it can be somewhat surprising that it is often so conservative in its approach. Aviation is often viewed as slow to embrace change with many companies clinging to processes and technologies that are decades old.  This conservative attitude changed somewhat during 2020 as the volatility brought on by border closures and cancellations forced airlines to adopt shorter, more flexible scheduling windows. Airlines traditionally built their schedules six to twelve months in advance but flight scheduling windows were compressed to as little as six or eight weeks during the pandemic and this more dynamic approach to scheduling was acknowledged as one of the most important trends of the coming year.

There remains, however, a general perception that the civil aviation industry is always a step or two behind technologies and innovations being used elsewhere, in part because many industry leaders would prefer to let others go first when it comes to trying out new solutions rather than taking the risks themselves. One reason for such an attitude is the natural result of aviation’s focus on safety as entrusted with millions of lives every year, airlines are understandably hesitant to introduce new technologies or procedures that have not been thoroughly tested. However, the industry’s steady run of year-on-year growth has also likely played a part in this conservative mindset.

Predicting how the industry will bounce back from this crisis is difficult and it is doubly tricky to try to foresee unexpected crises on the horizon yet there was a moderate rebound during the summer travel period though recovery was short-lived. What was witnessed was there existed a persistent disparity between domestic and international air travel impacts resulting from the more stringent international measures in force. Domestic travel proved more resilient and was the main driver of any glimmer of recovery to the industry.  In the most optimistic scenario it is expected that by June of 2021 passenger numbers will be expected to recover globally to 71 per cent of their 2019 levels or 53 per cent for international and 84 per cent for domestic flights.  Optimism that the arrival and initial distribution of vaccines would lead to a prompt and orderly restoration in global air travel is still viewed credibly. TW

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Hoor Asrar Rauf

has remained a national swimming champion and is currently doing her graduation in hospitality from the US

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