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Pandemic turbulence: Will aviation industry be able to recover?

Any recovery to the aviation industry post pandemic, experts say, will be slow and in phases

By Hammad Sarfraz |
Design: Ibrahim Yahya
PUBLISHED February 20, 2022

If the terrorist attacks of September 11, 2001, triggered the most significant contraction in the airline industry’s history, the onset of the Covid-19 pandemic can easily qualify as apocalypse for global aviation.

Shortly after the attacks that jolted the US and the world, more than two decades ago, travelers were skeptical and the forecast for airlines was dismal. Unsure about the new and constantly changing security requirements, most passengers abandoned their travel plans or only traveled when unavoidable. And within no time after the series of coordinated attacks that claimed 3,000 lives, global travel, both inside the US and around the world, was brought to its knees.

While the aviation system was restored within days in the US, many local airlines had no option but to file for bankruptcy. It was not until 2004 that the number of enplaned passengers returned to the pre-9/11 levels. And that was the beginning of an irreversible change for global travel. It changed significantly and forever.

Once again, the global travel industry has been hit by a crisis that still appears to be beyond the imagination of some of the wisest minds in the industry – the Covid-19 pandemic.

At the start of the new decade, countries around the world started shutting their borders in response to the onset of the novel coronavirus – commonly known as the super spreader. Border restrictions were followed by the introduction of innumerable regulations that further limited the free movement of individuals. The initial understanding was that shutting the border or limiting human movement could reduce, if not entirely control, the spread of the deadly respiratory virus, which so far, has claimed more than half a million lives globally. And just when the airline industry had started picking up in 2021, Omicron, another variant of the virus, came to us like a bolt from the blue.

The surge in Omicron cases, the most contagious of all variants of the respiratory virus, prompted new travel restrictions – jeopardizing the fragile recovery in international flights, creating endless delays in some parts of the world. Some carriers were even forced to cancel thousands of flights a day due to shortage of staff – mostly as a result of contracting the virus.

While the minuscule gains last year were encouraging, the number of travelers is still down and nowhere close to half of pre-pandemic levels. This recovery, aviation experts say will be slow and in phases.

“Despite the spread of the recent Omicron variant, the aviation industry has left the intensive care unit and is set to recover. In saying this, the aviation industry is recovering gradually from the Covid-19 crisis – even if we are still only at 40% of pre-crisis levels,” explained Linus Benjamin Bauer, founder and managing director of Bauer Aviation Advisory (BAA), a consulting firm for the aviation industry.

“The circulation of vaccines will allow some governments to reopen borders and relax restrictions to support the global aviation industry to reach 63% of 2019 levels in 2022,” predicted Bauer, who heads the Dubai-based consulting firm.

According to a report published by the International Civil Aviation Organization’s (ICAO), world passenger traffic collapsed with unprecedented decline in the history of air travel shortly after the onset of the pandemic in 2020.

Responsible for international air navigation, planning and development of air transport, the UN agency recorded a 49% decline in world passenger numbers in 2021 – a year after the pandemic began. While that is less than the 60% decline noted in 2020, experts predict a bumpy ride ahead. “Before a full recovery, we will see many ups and downs. The path to recovery will not be straight and simple,” cautioned Sam Chui, one of the world's most established aviation and travel bloggers. The coronavirus pandemic, Chui said, is nothing less than a near-mortal blow for the aviation industry.

In his most optimistic comments about the trajectory of air travel, Chui outlined a scenario in which nations around the world would have to rely more on vaccinations than shutting borders.

“While shutting borders delays the arrival of the virus or its variants, it clearly does not guarantee absolute protection. So, countries around the world will have to focus on vaccination campaigns,” Chui told the Express Tribune during the exclusive phone interview.

Travelers from highly vaccinated countries or regions, he said, should face less restrictions at destinations that have vaccinated a significant portion of their population against the coronavirus.

The rapidly changing travel rules and the wide range of regulations prompted an overall reduction of 2,699 million passengers during the first 12 months of the deadly pandemic. According to the ICAO, the rapid decline in air travel came at a total price tag of $371 billion for airlines around the world. For those who were excited about the recovery in 2021, the pandemic had more shocks. The Delta and Omicron variants caused further financial damage to the already battered aviation industry, with a total loss of $323 billion in revenues.

According to FlightRadar24, a Swedish internet-based service that shows real-time commercial aircraft flight tracking information on a map, 4.5 billion travelers took to the skies in 2019. The site that gathers flight numbers and a wide range of aviation data, reported 42 million flights worldwide during the year.

In March the following year – just around the time when Covid-19 peaked, passenger air traffic took a nosedive – dropping by more than 75 per cent. Over the next 12 months and straight into 2021, passenger numbers continued to fluctuate mostly in the lower range.

Prepared for the crisis

When asked if the airline industry was prepared for the Covid-19 crisis, Bauer Aviation Advisory’s chief said the pandemic caught the world and the aviation industry off guard.

“The airline industry wasn’t prepared for the pandemic. Even if the industry has dealt with various crises to date, the Covid-19 crisis, with its unique dynamics, has had an unprecedented impact on the entire industry. The situation was worse than any other recent sector recession or shock,” said Linus Bauer via email from Dubai.

Bauer, who heads an extensive global network of aviation experts and consultants, said the airline industry has witnessed a sudden halt imposed on it by the global health crisis. “In April 2020, two-thirds of the global commercial aviation fleet sat idle on the tarmac, while international passenger traffic was down 90% year-on-year,” he explained.

The pandemic, he said, has brought about the most significant disruption to the global airline industry in its entire history. “The declines seen in 2020 were about 20 times worse than any time in history. International air traffic witnessed a so-called ’10 standard deviation’ event,” he explained. “However, the global travel industry has been a relatively stable and resilient industry over the past four decades. Hence, the industry will survive this crisis, as well,” he predicted.

Asked when to expect a recovery, he said he hoped to see the aviation industry emerge stronger than the pre-crisis levels from 2024 onwards.

“We at Bauer Aviation Advisory believe the commercial aviation industry has been in the rebuilding process since 2021. This year will be better than the previous, and 2024 onwards you will see a stronger aviation industry,” said the expert.

Revealing travel data gathered during the pandemic, the UN agency for aviation predicts that the overall loss in airline revenues during 2022 could be 50% less than 2021. According to its estimate, the global travel industry will incur a loss of $180 to 210 billion during this year. Passenger numbers, the agency’s report said, will remain in the negative – up to 25-30% less than the pre-pandemic levels.

The new normal

Prominent aviation vlogger, Sam Chui, who has more air miles than most experts in the industry said, air travel has changed significantly. “We are witnessing the new normal in air travel – just as we are in life. Airlines and countries will have to adapt to the changing times and requirements.”

While the tunnel to full recovery is long, Chui sees some form of normalcy in air travel. “It is gradually returning to normal. At the onset of the pandemic, we witnessed passengers wearing personal protective equipment, commonly referred to as PPE and face shields. Much of that is gone and we are finally seeing that rules are being relaxed to the point where only face masks are required.” Passengers, he said, are boarding planes once again, but short-haul routes and domestic travel appear to be performing better than long-haul routes.

The only constant in this crisis, the prominent aviation vlogger, who has over 2.8 million subscribers on his YouTube channel said, is the uncertainty. “It is the uncertainty and the changing rules that is keeping passengers from traveling. That can change once countries decide how to mitigate the ongoing global health challenge,” said Chui.

He cautioned that the aviation industry’s fragile recovery is vulnerable. “The emerging variants of the virus will continue to stall the recovery and may even derail it a few times before we reach the end of this long tunnel,” he said.

Data gathered by aviation consultancy firms shows commercial air transport on domestic level will continue to perform better. Demand for long-haul traffic will remain subdued – which means a significant number of the wide-body planes that shuttle passengers on the intercontinental routes will need more time before they get back to flying frequently.

Business model

Looking beyond the pandemic, experts believe, airlines will have to confront the emerging realities and devise strategies to adapt to the new normal. While the cost of keeping the planes in the air is increasing, airlines around the world will also have to focus on making air travel less complicated and more affordable for travelers.

With the emergence of new variants, hygiene and safety standards will be more stringent and they are here to stay. The multilayer airport experience will have to be digitized. Mobile applications will be more commonly used to store travelers’ vaccine certificates and Covid-19 test results. Above all, travelers around the world would expect more universal checks than the current and ever-changing regional regulations.

“Uncertainty will remain a major factor that will impact travel decisions. That needs to be addressed,” said Chui. Universal checks, if and when, governments around the world agree, Chui said, will make traveling easier during the pandemic. At the moment, he pointed out that there are too many websites and just too many protocols to follow for each country.

“Something like a travel pass – which has been in the pipeline for some time could make traveling easier. Unfortunately, it has not been universally adapted – largely because of different covid testing and vaccination requirements for each country.” In the US alone, he said each state has a different policy for visitors.

Covid-19, the popular aviation vlogger said, has changed consumer behavior—and the airline sector — irrevocably to a large extent. Countries, carriers, and passengers, he said, will have to adapt to the changes in the future.

When asked if the aviation industry needs a new model to survive the ongoing health crisis that has very much grounded it, Bauer Aviation Advisory’s chief said: “Neither a new nor an existing business model will emerge victorious from the pandemic, and airlines across the globe – including in Pakistan – should focus on various key recovery drivers.” “Focusing too much on business models could become a dangerous trap for carriers,” Linus cautioned.

“Maximizing their cost savings through rigorous transformation programs, shifting towards becoming a more customer-centric brand, and significantly having supportive government policies for the post-Covid-19 recovery and growth will help airlines survive the current pandemic,” said the aviation expert.

Low-cost airlines with the lowest operating cost, he noted, have been in an advantageous position during the pandemic. “However, there is no guarantee for them to retain that position. It also largely depends on the other key drivers, including government policies and branding.”

“We already see a more significant performance disparity among airlines during these challenging times. Some airlines have responded to the pandemic by restructuring for greater efficiency; others are merely muddling through all the business models to simply survive,” he added.

Linus listed financial support from the government as an important factor in the recovery process. “Various carriers across the globe have availed government support, which falls into seven broad archetypes: nationalization, government-backed commercial loans, flight subsidies, grants, recapitalization through state equity, private equity, and deferral and/or waiver of taxes and charges.”

Last year, Emirates, Middle East’s largest and most prominent carrier, ended up seeking a government bailout. According to Bloomberg, the Dubai government rescued the airline with a $3.1 billion cash infusion after long-haul travel, the airline’s main business, almost collapsed. Thailand’s national carrier was also on the list of airlines that received support from the government. Already in a precarious financial situation, Thai Airways was saved from the brink by the government in Bangkok through a bail-out of $1.8 billion.

While the situation remains unpredictable, Linus listed several factors that will impact the aviation industry. During the pandemic, the Bauer Aviation Advisory chief said, the entire aviation industry confronted more than 50 uncontrollable variables – the most recent being the emergence of the Omicron variant.

Border restrictions

During the peak, nearly every country imposed some form of border restrictions to prevent the spread of SARS-CoV-2, the virus that causes coronavirus. The practice was against the advice of leading international health experts and organizations. In what appeared to be a knee-jerk reaction after the discovery of the latest coronavirus strain, the US and many European countries-imposed travel restrictions on eight southern African nations – only to be reconsidered and lifted shortly before New Year's Eve. The move irked many around the world, including United Nations Secretary General Antonio Guterres, who called it the ‘travel apartheid’.

More than two years into the pandemic, more and more countries around the world are reconsidering the strategy. Most recently, Canada announced it would review its border restriction policies. The UK and some other European countries are also in the process of revising the rules.

Commenting on the border restrictions, Sam Chui said: “Whether border closures are effective in containing the virus has been a source of debate throughout the pandemic. What is more important is that countries will have to rely on vaccination and encourage and help others get vaccinated.”

Linus had a slightly different view. He believes countries are neither taking the right nor the wrong decision in this case. “Protecting their citizens is the top priority of governments across the globe. However, various governments are fighting a global pandemic in isolation with a view that closing borders is the only solution.”

“When it comes to the recovery of air traffic volumes and restoring of passengers’ confidence to travel, the unilateral actions done by governments across the globe to date put them back to square one in that game again and again,” he added.

The expert urged governments around the world to join forces with the airline industry and scientists to find ways to re-establish global connectivity and implement measures that will enable economic and social life to resume. “Multilateralism will play a vital role in restoring air connectivity across the globe.”

“We must accept to live with the virus because it will stay with us for some time,” cautioned Bauer Aviation Advisory’s chief.

Cost of flying

While travelers are haunted by the burgeoning cost of air transport, it appears to be fueled by the constant disruption in demand and supply.

“The cost of traveling is usually governed by the demand and the supply of airplane seats. With a reduced number of flights during the pandemic and travel decisions left to the eleventh hour, passengers are paying more for the seats that were cheaper before the global health crisis,” explained Chui.

With airlines flying smaller planes, Chui said, the cost is expected to remain high, especially during the peak travel period such as Christmas, New Year, and other holidays. “Secondly, Omicron didn't help. So many airlines reported that their staff had contracted the new variant – which meant that the already limited supply was squeezed further and that caused the hike in airfare.

He added that an increasing number of passengers are also opting for direct flights and shorter stopovers. “That also contributes to the hike in airfares. Consumer behavior has changed significantly and will continue to change,” he reiterated.

Are hubs here to stay?

Air travel industry faces disruption of epic proportions – unmatched and unseen before in the history of aviation. The number of checks is not just limited to security – it is about health, hygiene and more. Passengers can no longer board without presenting verifiable vaccination records and Covid test results. Each point of entry has its own rules and violating them is not an option.

Barring anything else, long-haul travel is expected to reverse to pre-pandemic status by 2025. This leaves us with one question: What is the future of super hubs like Dubai?

Experts believe airlines and the hubs they serve will continue to struggle with an uncertain outlook, but the super hubs are not going anywhere in the near future.

The concept of an efficient hub, Chui said, will remain relevant. However, hubs will have to reconfigure themselves and see how they can be more efficient in the changing environment.

The discussion on the future of hubs, he said, has two sides. “Even before Covid, airlines were flying more efficient twin-engine planes like the Boeing 787 or the Airbus A 350. The beauty of this aircraft is that it carries around 200 to 300 passengers. They can bypass these super hubs to fly directly – opening new connecting city pairs such as from Istanbul to Montreal and other combinations. And more and more passengers will opt for these direct services instead of traditionally funneling through the hubs in Dubai or London.”

During the Covid pandemic and as the requirements for documentation and other complications increased, he explained, passengers tend to prefer flying long-haul more directly and with fewer stopovers.

“It remains difficult to conclude how relevant hubs will be. We will have to monitor air travel trends over the next year.” Chui concluded that traveling through hubs usually reduces the cost of air travel and most savvy passengers will continue to use them.