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Reaching for the skies: how will aviation recover from Covid-19?
How will aviation recover from “the biggest shock” in its history, and what will it look like when the world starts flying again? James Chapple reports on the World Aviation Festival’s first Aviation and Covid-19 State of Play webinar with JLS Consulting aviation analyst John Strickland
What has been the impact so far?
Aviation supports about 60 million jobs globally, but this is likely to contract significantly after Covid-19, according to Strickland. Iata believes 5.6 million jobs and $378 billion GDP in Europe alone are at risk if governments do not support aviation.
The association also forecasts a $252 billion revenue hit for the sector, up from a prediction of just $28 billion six weeks ago. “This is the biggest shock the industry has ever seen,” Strickland says.
When might the recovery come?
Later, rather than sooner, predicts Strickland. He said there was no “easy exit” from the coronavirus crisis, and he does not believe there will be a repeat of the relatively swift recoveries post-Sars and 9/11. “I don’t buy the optimism this will be over with by the summer.”
What might the recovery look like?
Strickland believes the Covid-19 crisis will speed up some “necessary” consolidation in Europe, albeit at an “aggressive” pace. He said he foresees rail competing with short-haul flying, and reductions in discretionary long-haul leisure travel. “We are not going to come back to the same aviation sector,” he said.
Will there still be demand for commercial aviation?
Yes. But the landscape will change. Strickland said now companies have rapidly adapted to video conferencing there may be less demand for business travel. Meanwhile, the wider economic impact will mean people generally have less money to travel.
Should governments bail out airlines?
The UK treasury intimated it was prepared to offer cash-strapped Flybe a loan and respite from its APD bill. But this was before Covid-19. Strickland said some carriers and airline groups are better placed to survive a period of “zero revenue” than others.
Airlines, he said, should look first to “self-help measures”, and to their own shareholders, cash reserves and cost-saving measures before approaching governments for bailouts.
“I think nationalisation is the wrong way to go,” he added. More generally, Strickland believes the burden could instead be eased through tax breaks and other macro-economic measures.
Who stands to benefit from the situation?
JetBlue, potentially. “Now could be the time to strike,” said Strickland, who believes the US carrier could disrupt the premium transatlantic market with low fares, and potentially gain a foothold at an airport like Heathrow where there might soon be new capacity.
Other potential beneficiaries include low-cost carriers, who could take more of the point-to- point short-haul business travel market.
Will we still need a third runway at Heathrow?
Strickland said it was his belief expanding Heathrow would add the right capacity in the right place in the UK, particularly in a post-Brexit world. However, he said the question may yet become academic depending on the level of long-term traffic reduction following the coronavirus crisis.
Will the way air tickets are bought and sold change?
With price set to become an even bigger variable in a smaller industry, beset by weaker demand and more challenging operating conditions, Strickland believes airlines will want more control than ever over how they sell seats and maximise profits from each individual customer. There may also be less provision for GDSs, and a greater focus on new platforms such as NDC.
Airlines, said Strickland, may also seek to break out more business travel features in the same way low-cost carriers have been maximising ancillary revenue in the short-haul market.
Are there any positives to come out of this?
Strickland believes the coronavirus crisis is an opportunity for the aviation sector to pursue a global regulatory model with greater freedoms in respect of traffic rights, and a softer stance on ownership and control. “I think it’s what we should be aspiring to,” said Strickland, who added industry leaders must push now for a unified regulatory structure or risk losing the opportunity for ever.
“This virus is linking humanity in a crisis. I’d like to think that if a new aviation order can come in, it could yet again link humanity as a force for good.”
