To say the COVID-19 pandemic has devastated the airline industry is an understatement. In 2020, the total industry revenue amounted to just $328 billion—equivalent to 40 percent of the total revenue the year prior. Some experts predict industry traffic won’t return to the 2019 levels until 2024.
Financial woes aside, the longer-term effects of the pandemic have become more apparent. Some are obvious: while private jet safety remains a priority, hygiene and safety standards are now more stringent. In addition, digitalisation is expected to dramatically alter the whole travel experience.
Photo by Ifik Ismoedjati on Unsplash
For starters, mobile apps will be used to store COVID-19 test results and travelers’ vaccine certificates. However, other effects are more profound. Unlike 2008’s global financial crisis, the pandemic has also changed the airline sector and consumer behaviour in unprecedented ways.
Fundamental Aviation Industry Shifts Brought About by the Pandemic
Below are some of the expected shifts in the aviation industry and some of the ways you can adapt to the pandemic’s long-term realities:
Leisure trips will fuel recovery.
While business travel will take longer to recover, it is expected to return to pre-pandemic levels by 2024. Flexible working arrangements and remote work is expected to remain in some way post-pandemic, and it is also expected that fewer corporate trips will happen.
Following the global financial crisis and 9/11, visits to friends and relatives or leisure trips rebounded first, as was the case in the United Kingdom. It took four years for business trips to return to pre-9/11 levels. That said, the rise in leisure trips is expected to outpace business travel recovery once the pandemic subsides.
Airlines are expected to re-evaluate their operation economics, especially for long-haul flights. Since business travelers typically book point-to-point nonstop flights sold at a premium, the massive gap between connect and nonstop pricing must be narrowed.
Staggering debts will lead to ticket price increases.
As a result of the pandemic, many airlines resorted to borrowing massive sums of money to stay afloat. The airline industry also tapped into state-provided bond issuances, credit lines, and aid. In 2020 alone, the aviation industry collectively amassed a staggering $180 million debt.
Since costs need to be recouped, ticket prices are expected to rise, and some expect the ticket prices will increase by as much as 3 percent. When air travel demand returns, there will be a latent demand for people to travel. Since restoring capacity will take time, the supply-demand gap might result in higher short-term prices.
Airlines need to work with regulators to set standards while dealing with multiple issues. This can include increasing cash-on-hand requirements to ensure airlines become more resilient against future shocks. Changes in ownership caps to bring in a bigger inflow of foreign capital may also be considered to reduce the reliance on the state capital.
Air freight will experience an undersupply for some time.
Over the years, low cargo rates have resulted in many airlines scaling back or relinquishing their dedicated cargo freighter fleets. Surprisingly, cargo became a lifeline for the aviation industry during the pandemic. Before the pandemic, cargo made up only 12% of the aviation sector’s total revenue, and the percentage tripled in 2020.
To address the current low supply and high demand of air freight, carriers should examine short- to medium-term opportunities if they want to boost their cargo services. They can also enhance flexibility by increasing the deployment of passenger airplanes used to transport cargo.
Final Thoughts
Undeniably, the impact brought about by the pandemic is far from over. The aviation industry’s road to recovery can take several years. However, some experts predict that travel will become greener and more efficient in the future. As long as they take the necessary steps now, the aviation industry will thrive despite the massive transformation.
About the Author:
Melissa Hull is the Content Marketing Strategist for Aviation Charters, a West Trenton, New Jersey-based private aviation company that provides on-demand aircraft charter, aircraft management, and aircraft acquisition services. Aside from her passion for writing, she loves to travel and read espionage books.
