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What if aviation doesn’t recover from covid-19?

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What if aviation doesn’t recover from covid-19?

Old 12th Oct 2020, 11:24
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What if aviation doesn’t recover from covid-19?

How the pandemic transformed the travel industry. An imagined scenario from May 2022

This article is fiction (taken from The Economist), but grounded in historical fact and real science.



In September 2019 a group of climate activists formulated a plan to shut down London Heathrow, Europe’s largest airport.

Heathrow Pause, a splinter group of the Extinction Rebellion movement, had been inspired by an incident at Gatwick the previous year, when an unauthorised drone closed Britain’s second-largest hub for three days. They hoped to repeat the trick at Heathrow. But their drones failed to get off the ground, due to signal-jamming by the airport.

In December 2019, Extinction Rebellion tried again to close Heathrow, this time by blocking its entrance road with a pink bulldozer. But police confined the protest to a single lane of traffic, meaning that incoming passengers could simply drive around the problem.
The activists lying in front of the bulldozer that cold December morning could not have known that a virus just 0.1 microns wide, more than 8,000km away in China, was inadvertently about to help their cause. Few industries were harder hit by the subsequent covid-19 pandemic than air travel. Government lockdowns, travel restrictions and cancellations by fearful passengers soon grounded most of the industry.

By April 2020 Heathrow’s passenger numbers had fallen by 97% to the lowest monthly figure since the 1950s. Global passenger numbers did little better, falling that month by 94% year on year, to levels last seen in 1978. Half a year of lost revenue later—amounting to well over $250bn—the industry’s finances were in ruins.


Two years on, the forecast made in May 2020 by the International Air Transport Association (iata) that passenger numbers would return to pre-pandemic levels by 2023 now looks wildly optimistic. But the trade body’s prediction that only 30 of the world’s 700 or so airlines would survive the crisis without government help was spot on.

Carriers that failed to get bail-outs fell like dominoes, starting with Flybe, Europe’s largest regional airline, in March 2020, Virgin Australia in April and latam, Latin America’s largest carrier, in May. Sir Richard Branson, founder of the Virgin Group, became an illustration of his old quip: “The easiest way to become a millionaire is to start out as a billionaire and then go into the airline business.”


Even airlines that got government bail-outs did not find life easy. Austria and France led the way by imposing strict environmental conditions. Airlines were forced to cut their emissions to meet aggressive targets and to end competition against greener alternatives such as high-speed rail. That raised their costs and limited their potential revenue. And they were soon cash-strapped again. America’s airlines quickly chewed through $25bn in federal grants and loans; Air France-klm and Lufthansa of Germany did the same with bail-outs worth nearly €10bn ($11bn) each. The result was a drastic slimming down of the world’s flag-carriers.


Airline executives had initially thought the pandemic would cause manageable, but not catastrophic, disruption. Looking at previous epidemics in Asia, such as sars in 2002-03 and the South Korean outbreak of mers in 2015, iata expected a sharp dip in traffic, followed by a return to the original trend six or seven months later.

In retrospect, that was overly hopeful. A short, stuttering recovery during the autumn of 2020 was choked off by the pandemic’s second wave of infections. “This time is very different,” says Leigh Bochicchio of the Association of Corporate Travel Executives, an American industry association. “It’s a very different beast to sars or 9/11.” After those earlier shocks, there was no second wave of infections or terror attacks to remind people of the danger of flying.


And in retrospect, sars was much easier for airlines to manage than covid-19. sars showed symptoms immediately and could be detected with temperature checks at airports. It was not initially contagious; those infected could be isolated before they spread it to others.

Covid-19, in contrast, shows no symptoms for up to two weeks after infection, a period in which it is contagious. No wonder experts soon found that airline travel was the primary means by which the disease spread around the world.


In the past, the airline industry has always fully recovered from crises. But this time has been different. “Peak plane”, once Extinction Rebellion’s fantasy, no longer looks so inconceivable. With the prospects for a vaccine still uncertain, business travel began to pick up again in 2021, though only as a trickle. The biggest global downturn since the Depression left corporate travel budgets an easy cost-code to squeeze.

Even firms that are solvent enough to let their employees fly have not been keen to do so. “People are more comfortable with online meetings, and that will never go away,” notes Ms Bochicchio. After the global financial crisis of 2007-09, international business travel fell by a third in many countries, and never recovered. Companies found new ways of doing business using video calls. That story repeated itself in spades after covid-19. Many corporate events and conferences have gone online permanently.

Another chilling effect was that firms feared being sued by employees who caught covid-19 on business trips—a possibility their insurers increasingly refused to cover. As a result, the average age of business travellers is now falling: surveys show millennials are more likely to regard business travel as a status symbol than older workers, and consider themselves at less risk from covid-19.


Leisure travel has been much slower to recover. That was not due to any initial reluctance to get back in the sky. Surveys during the pandemic found that 69% of Americans said they missed travelling. Half of Chinese expected to travel more once the crisis was over. Perhaps most remarkably of all, 23% of Britons said they planned to be on the first flight deemed safe.


But many newly established “air bridges” and “travel bubbles”—pairs and groups of countries between which travellers could move without quarantine—collapsed in panic when the second wave of the pandemic hit in autumn 2020.

“Staycations”—holidaying within one’s own country—became the norm in 2021, as crowded aeroplane cabins were shunned in favour of cars, trains and even cruise ships (which, despite their association with the early weeks of the outbreak, turn out to be well suited to social distancing).


The aviation industry did its best to win back customers with a marketing blitz, but cabin crew dressed in personal protective equipment, who treated all passengers as biohazards, failed to reassure. The requirement to leave middle seats empty, to maintain social distancing, was dropped by governments when airlines complained that it cut their capacity. But that prompted concerns that airlines were more concerned with profits than with passenger safety.


The end of low-cost flights

Rising ticket prices have also deterred travellers from flying away on holiday. Although fares initially fell to put bums back on seats after the first and second waves—dropping by 35% in 2021, just as Dollar Flight Club, an American travel website, had predicted—the low prices didn’t last long. Ryanair, Wizz Air and Air Asia, the world’s biggest budget carriers after the pandemic, waged the “mother of all fare wars” in an effort to put all non-state-subsidised rivals out of business in Europe and Asia.

The resulting consolidation has left little competition in the industry. As soon as they could, airlines began to pass on the extra cost of their new counter-coronavirus measures to passengers. Analysts think fares could soon be double what they were before the pandemic.


Perhaps the clearest sign of the long-term change in direction for aviation has been the collapse in demand for new aircraft. The world’s two biggest planemakers, Airbus and Boeing, predicted just before the pandemic that global air travel would grow by 4.3% each year over the next 20 years, requiring around 40,000 new airliners to be built. Now they are not so sure. Airlines permanently grounded over 5,000 planes during the pandemic.

Boeing cut future production by 50% and cancelled plans to develop two new airliners in the coming decade. Even Airbus, which has enough orders to keep its assembly lines busy for a decade, decided to slow production by 30%.


The biggest casualties were the biggest birds. Boeing 747 jumbos, once the “Queens of the Skies”, were nearly all grounded in 2020, never to fly again. The even-larger superjumbo fared almost as badly. “The a380 is over,” lamented Sir Tim Clark of Emirates during the pandemic. Having once owned 115 of the 242 in existence, Emirates retired 40% of them in 2020.

Planemakers and airlines alike are pinning hopes of a travel revival on the wanderlust of the young, and of the rising middle classes in the developing world. Their faith may be misplaced.

The young are highly climate-conscious and have taken to “train-bragging”, encouraged by campaigners such as Greta Thunberg. Several European governments have stepped up investment in high-speed rail as part of their stimulus packages.

Polls suggest people under 25 see climate change and pollution as the two most important issues facing the world. In the developing world, meanwhile, the pandemic shattered the illusion in Africa and India that travelling by plane was any safer or more hygienic than overcrowded diesel trains or by car.

That covid-19 has exposed the fragility of globalisation is particularly apparent in the case of aviation. The industry can no longer rely on the steady growth of the past, or indeed any growth at all. Yet historians will write that it was not radical environmental movements such as Extinction Rebellion that killed the trend.

Instead it was the combination of a microscopic virus and free-market capitalism.
The five-year period before the pandemic was the only one since Orville and Wilbur Wright made their first flight in 1903 in which the industry covered its cost of capital. Burned again by covid-19, many investors have now decided to stay away from anything that flies. Warren Buffett, a billionaire investor, once quipped that “if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favour by shooting Orville down.” During the pandemic, Mr Buffett realised that this historical observation was no joke. Selling his shares in American airlines at a multi-billion dollar loss, he noted that they should be avoided by investors. His reason: “The world has changed after covid-19.”


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Old 12th Oct 2020, 11:33
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Of course it will recover..... It may take a while but it will.....
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Old 12th Oct 2020, 11:34
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Got a replacement handy?
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Old 12th Oct 2020, 12:05
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Originally Posted by White Knight View Post
Of course it will recover..... It may take a while but it will.....
Depending on what you mean by "recover".

Eventually, traffic levels will have slowly climbed back to their pre-Covid levels - my money would be on that taking at least 5, maybe nearer 10 years. So in effect that's 5-10 years of net zero growth.

What's not in doubt is that, while aviation may well recover, there will be a number of airlines that won't.
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Old 12th Oct 2020, 12:58
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Originally Posted by DaveReidUK
Quote:
Originally Posted by White Knight View Post
Of course it will recover..... It may take a while but it will.....


Depending on what you mean by "recover".
The industry. Aviation thereof... Obviously with many airlines from the current industry missing! But as ever, out of the ashes some Phoenixes (or is that Phoenii?) will rise!

And yes, I agree with your kind of timeline!
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Old 12th Oct 2020, 13:49
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Business aviation will suffer permanently from on-line conferencing. CFOs are not going to finance travel for other than the higher level executives. Holiday travel requires destinations and a huge number of the cheap hotels and resorts are going the same way as the airlines. It will cost a lot of money to get them going again, while the increase in demand will increase prices and choke off the cheap end of the business. I think those who are forecasting ten years before we see recovery are not far off the mark and I doubt if air travel will ever again reach the heights that it did in the last five years before Covid-19 struck.

...not forgetting that another pandemic is never going to be far away round the corner...

On the other hand, Air Cargo is doing well and has a bright future. With all those retired aircraft sitting in the desert there's a huge potential for cheap converted freighters.
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Old 12th Oct 2020, 14:19
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What's not in doubt is that, while aviation may well recover, there will be a number of airlines that won't.
Aviation is rarely stabe, with many airlines not surviving in a normal year.
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Old 12th Oct 2020, 14:38
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I’m under the impression that with regards U.K. and in terms of holidays to the med, demand is still very strong and the lack of consumer confidence has been as a result of the shifting of the goal posts regarding quarantine - not directly the threat of the virus. Seems what happens next year will be crucial to the survivability to even the strongest of airlines, both in terms of getting a handle on the Covid situation but also people having the disposable income to travel. The fallout of Brexit is likely to provide its own challenges on top of this so I hope it is factored in to policy making.

Also under the impression that biz jet operators are doing pretty well, with competing scheduled offerings vastly diminished.

All is not lost yet, hoping to see some positive developments in the coming months.. History tells us that one way or another pandemics do have a shelf life.. What I’m concerned about is the lack of confidence in the Government in being able to position the country to be able to rapidly rebuild the economy following its passing. The fact that airlines have seemingly had pretty much zero assurances from the Government are concerning, and I fear this could be as a result of more than just Covid.. Think Climate Change policy... Time will tell on that.
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Old 12th Oct 2020, 15:41
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Originally Posted by pug View Post
I’m under the impression that with regards U.K. and in terms of holidays to the med, demand is still very strong and the lack of consumer confidence has been as a result of the shifting of the goal posts regarding quarantine - not directly the threat of the virus.
Agreed...

if you look at chat elsewhere you'd see middle of the summer many people in the UK were keen to get away to the Sun post lockdown but it was the fear of jetting off to somewhere "safe", and then finding whilst they were away that it had been hit with a 14 day quarantine requirement on return to the UK that caused more than a few to stay at home. I know one or two who could absorb quarantine (e.g. they were working from home) who got cheap holidays as a result..


If we get some certainty/stability next year then maybe the short haul side of thing ex-UK will pick up..OTOH no idea how Long Haul is going to shape up...
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Old 12th Oct 2020, 16:51
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I am convinced that Tourism flying - both SH and LH will come back.
However, the money is in business flying in J and F. (and WT+).

The big spenders used to be Pharma, Banks, Techies. Will they get back on the planes? Will the CFO let them fly business class?

By 2022, Aviation will be growing again. Growing profitably is more difficult to predict.
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Old 12th Oct 2020, 17:13
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Airbus Boeing

How long could the big two survive without delivering new aircraft? If the airlines with new hulls on order go bust, those that survive could fly on current airframes. The big two couldn’t carry on if no one is accepting new aircraft. You just can’t stop a production line . The costs would quickly destroy the company. Some people don’t seem to realise how serious things are.
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Old 12th Oct 2020, 17:48
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What I am amazed to see is...

Where are all the failing airlines? Many have tripped and fell at so much less so I would expect hundreds of failures by now yet.... none?

Explain that?
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Old 12th Oct 2020, 18:22
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Originally Posted by proteus6 View Post
How long could the big two survive without delivering new aircraft? If the airlines with new hulls on order go bust, those that survive could fly on current airframes. The big two couldn’t carry on if no one is accepting new aircraft. You just can’t stop a production line . The costs would quickly destroy the company. Some people don’t seem to realise how serious things are.
Great point. It also provides a glimmer of hope in that a push to keep production lines open may mean cheap aircraft are available for a couple of years once current orders have been honoured. I must apologise as I’m a little ignorant on the manufacture side of things but I suspect there’ll be pressure to subsidise some of the manufacturing to protect the production lines. May play into the hands of the incumbents and potentially open the door to newcomers. Wizzair U.K. plans are an example of an operator seeing great opportunity while the main players are on the ‘backfoot’.

As far as long-haul, wouldn’t like to guess as I’ve no idea.
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Old 12th Oct 2020, 18:32
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Originally Posted by Kelly Hopper View Post
What I am amazed to see is...

Where are all the failing airlines? Many have tripped and fell at so much less so I would expect hundreds of failures by now yet.... none?

Explain that?
Either because the leasing companies have agreed to even further monthly lease reductions or, the airlines are just about to feel the wrath of the winter season coming. The leasing companies are in a no win basically - no point in repossession as there is nowhere for the machines to go other than the desert.
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Old 12th Oct 2020, 18:36
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For me, being dual nationality, I go to NZ (nationality) or Spain (holiday).
For Spain I can take the channel tunnel & drive in my own bubble, I would
not dare fly. For NZ, no idea for the time being. Maybe vaccine will change
things. I see Thailand is setting up to produce the Oxford candidate.
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Old 13th Oct 2020, 00:29
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If you take a look at Flightradar24 or a similar app you will see that the domestic aviation world in China is getting back to normal. I haven't seen the figures this week but 80% of last year was mentioned a while ago.

Once you get the politics sorted out, many passengers will return but almost certainly people will fly less, for both business and leisure. Just another customs, health and immigration hoop to jump through, as if travel wasn't grim enough last year...
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Old 13th Oct 2020, 01:32
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Once you get the politics sorted out
Don't forget the disease. Screw the politics....... don't forget to stop people dying from it.
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