With lockdowns, border closures and so on causing passenger demand to ‘evaporate’, in the analysis firm’s words, commercial aviation has suffered a profound financial hit. As a result, many airlines have had to cancel outstanding orders and even reduce the size of their fleets; GlobalData believes that a conservative approach to fiscal policy is likely to be taken up across the board, with many airlines opting to extend the life of their existing fleets rather than invest in new models.
“Manufacturers such as Boeing and Airbus are unlikely to invest in the development of new platforms in the midst of one of the worst economic downturns the industry has faced,” said Harry Boneham, Aerospace and Defense Associate Analyst at GlobalData. “On the other hand, [however], there may be considerations generated by the Covid-19 pandemic that may drive airlines to look to new designs in the medium term.
“The campaign to reduce the environmental impact of commercial aviation predates the current crisis, with concepts such as flygskam [or ‘flight shaming’] growing in prominence. However, a campaign to incorporate and accelerate the adoption of green policies in the economic restart following the Covid-19 pandemic has been gathering pace. For instance, in the European Union,14 air transport associations have called for decarbonisation to be prioritised in post-Covid-19 recovery funding. Among the initiatives suggested is the replacement of older models, which are on average 20 to 25-per-cent less fuel efficient than newer generations.”
The International Air Transport Association (IATA) has warned that 2020 is likely to be ‘the worst year in the history of aviation’, financially speaking, with the global air transport industry likely to lose in the region of $84.3 billion over the course of the year, making for a net profit margin of -20.1 per cent. Revenues are likely to fall by 50 per cent compared with 2019.
However, said Alexandre de Juniac, the Director-General and CEO of IATA, there is some hope – providing that there is no major second wave: “The worst of the collapse in traffic is likely behind us. A key to the recovery is universal implementation of the re-start measures agreed through the International Civil Aviation Organization to keep passengers and crew safe. And, with the help of effective contact tracing, these measures should give governments the confidence to open borders without quarantine measures. That’s an important part of the economic recovery because about 10 per cent of the world’s GDP is from tourism, and much of that depends on air travel. Getting people safely flying again will be a powerful economic boost.”
There may be light at the end of the tunnel, but the road (or skies) ahead remain turbulent – Australian airline Qantas, which had already cancelled its international flight network through to October this year, has now announced that it will operate effectively zero international services for the next nine months, with no new bookings taken until 28 March next year. It is impossible to tell exactly how the next year or two will shake out, but hopefully all stakeholders can band together as much as possible to mitigate the damage.