With business currently grounded, what’s next for air travel and the airline industry?
It’s fly or die time for the airline industry. With over 60 percent of airplanes now grounded because of Covid-19, the industry has experienced an economic crash unseen in our time. The world has been addicted to air travel for decades, with many business leaders and employees forced by necessity and habit to climb aboard the closest jet. In the times of Covid-19, those options aren’t available, which affects everyone from the airlines themselves, airports and their staff, and passengers wanting to get somewhere for business or leisure.
So, what’s next for the airline industry and air travel with international travel down 87% since January, 2020?
Sprouting a new set of wings and finding new ways of flying that brings the industry back is the only answer, but it’s not an easy climb through turbulent times.
As the Financial Times says, “As international air travel grinds to a halt in the face of the coronavirus pandemic, the global aerospace industry is being forced to confront some hard truths about a future it once believed was secure for at least the next decade. Record order books, built on a decade of booming demand and worth more than $1tn at list prices, are looking less certain by the day as airlines push back deliveries and even cancel orders to survive the worst crisis in aviation history.
“More than 60 per cent of the world’s commercial aircraft have been grounded as governments quarantine their populations and close borders. And with little or no revenue coming in, airlines are cutting costs, drawing down huge credit lines to bolster liquidity, and calling for billions in state aid. Ed Bastian, chief executive of the world’s biggest carrier, Delta Air Lines, says his company is burning through $60m a day while 600 aircraft are parked on the tarmac and 80 per cent of April’s scheduled flights are cancelled. Iata, the aviation industry’s trade body, has warned that some 25m jobs in both the aerospace and aviation sectors are at risk if governments do not step in with lifelines. ‘I wish I could predict this would end soon,’ Mr Bastian told employees in April. ‘But the reality is we simply don’t know how long it will take before the virus is contained and customers are ready to fly again.’”
Pranay Jhunjhunwala, a managing director and senior partner with Boston Consulting Group, says the crashing of the airline industry in 2020 is more devastating than anything we have seen in the industry in our lifetimes, and will result in huge security and personal safety changes in order to bring passenger trust back once restrictions are lifted. “Unlike 9/11 and the 2008 financial crash, there will not be a sharp, quick recovery – there will be a prolonged depression before it comes back. We are seeing that it will take two to three years before demand comes back to the level it was this time last year. For 9/11, within a year we saw demand come back to the previous level.”
The air industry is likely to shrink 20-30% by this time next year. Yet despite global challenges, Mr Jhunjhunwala emphasises how the air industry is known for its ability to innovate.
What does airline innovation look like? It might look a lot like consumer inconvenience.
For one, there will be frequent health testing on arrival, at boarding, and through transit to various ports of call. Some airlines now flying aren’t allowing personal belongings on board to be stored in overhead compartments or under seats. We will likely see face masks given away at airports and onboard, though the price of those masks will probably be absorbed into the price of a ticket. And what about the price of those tickets? Most experts believe that if social distancing needs to be maintained on flights, that the price of individual fares will go up. The question is, with all the precautions, and with higher priced fares, will people come flocking back to air service?
That question, for now, remains very much up in the air.
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