What is the post-COVID future for aviation?

First – a thank you. The responses to the last few columns have been great. Perhaps people have more time to read and respond thoughtfully, now that the world has slowed down? Which brings us to the subject of this week’s piece: what will the future look like for the beleaguered airline industry?

The feature image shows a snapshot of the airspace over the Indian sub-continent. Usually alive with aircraft at this time of the morning, four freighters have the sky to themselves. The complete shutdown in traffic is unprecedented and this picture says a thousand words.

Known Unknowns

Let’s pose a few questions about the pandemic:

• How long is it going to last?
• Does an infection give immunity?
• Will there be a cure?
• When will there be a vaccine?

Answers to these, which must come from the scientific community, will map the future of the world, and air travel, in the months to come. This column can only speculate on answers to these questions, so it is best left to the more qualified. But let us peer into my crystal ball and see how this could play out.

A rapid recovery

The best hope for the airlines is that the containment and recovery period is relatively short. China has seemingly controlled the disease very well, after a false start. So have South Korea, Taiwan, Singapore and Japan, all of which were affected early. But there has been an increase in new cases recently in these countries. The new infections were mainly via residents returning from other infected countries, an ominous sign which probably rules out a rapid recovery.

Even countries such as Australia, which has seemingly ‘flattened the curve’ successfully, are talking about a six to eight month period of lock-down which is an eternity for the airline business.

A staged recovery

A gradual recovery with domestic traffic the first to revive is the most likely scenario. Chinese internal traffic is already showing ‘green shoots’. The government has banned residents from returning internationally, but there is no reason why domestic traffic won’t make a slow but steady recovery as the world’s #2 economy starts producing again.

This will mean that, once the pandemic is contained, there will be three principal domestic markets that show hope: China, the USA and India. Australia, due to its sprawling geography, and the two Asian archipelagos, Indonesia and the Philippines, will also be discussed briefly. European traffic has unique issues and Latin America is just too far away to be discussed in the space we have available.

Regional differences

China, the USA and India each have a unified government. The reason intra-European traffic will probably lag behind is that each country is handling the pandemic differently. This is evidenced by the astonishing mortality rates in Italy and Spain, as opposed to Germany. The cracks in the European Union are showing quite clearly and in the absence of a unified policy, it is likely that Europe’s airlines will take a long time to recover.

The USA is currently the epicenter of the pandemic. Whether or not it will be contained in a time frame similar to China’s will become known in coming weeks. Once it is defeated, the economy will regain momentum and business traffic will resume. The huge US domestic leisure sector though is likely to take much longer to recover.

What will happen in India is impossible to predict at this stage. The 1918 pandemic led to an estimated 50 million deaths on the Indian subcontinent (yes, you read that right – it is not a typo) almost half the death toll on the entire planet. Should a similar outcome occur this time, the repercussions are too awful to even contemplate.

Australia has taken strong containment steps and infection rates are seemingly under control. The situation in the Philippines and Indonesia is harder to analyze. Both countries’ Presidents have shown a reluctance to fully acknowledge the serious nature of this pandemic. Very little information is available as to the scale of infections and how the healthcare infrastructure is coping in these two locations.

Business traffic

Once the pandemic has run its course (whatever that may be) there is a good chance that domestic airline traffic in the USA and Australia will recover on a trajectory similar to what will be seen in China over the next three months. A ‘U’-shaped recovery – where business travel resumes after a hiatus of 6 to 8 months and some domestic leisure traffic returns in 9 to 12 months – is the best we can hope for in those markets.

Europe will take longer to recover due to the uneven effect of the pandemic, with borders remaining closed in an unpredictable fashion.

Should India escape a repeat of the 1918 death toll, then its two most energetic domestic airlines, Indigo and Spicejet, should recover strongly. Domestic traffic in the two island nations too should come back solidly should the pandemic not be too severe, as their geography demands it.

International traffic and tourism

This is the area that will probably be hit the hardest. The recovery, when there is one, will be very slow and follow a ‘prolonged U-shape’ with borders remaining closed for a drawn-out period. In addition to entry visas, there will most likely be stringent ‘COVID-free’ certification requirements. These will be strictly enforced for foreign nationals who wish to enter countries that have contained the pandemic and eliminated the virus within its borders. See the video of a Sky News reporter entering China on this link.

We may only see a sustained recovery of international travel, particularly in the leisure sector, once a cure is found or a vaccine has been approved and the majority of the world is vaccinated. That process could take a long time, anywhere from 18 months to three years or even longer.

So the short to medium term future for the airline industry is fairly bleak. The International Air Transport Association (IATA) has forecast that potential losses in the industry could approach USD 252 billion. Depending on how the next few weeks play out, we will know if this is a realistic number or whether the damage is even worse.

What this will mean for the thousands of jobs that are at stake is an open question. Many countries have pledged assistance to their airlines, but with medical costs rising and national economies being on life support, vanity airline projects will be hard to justify in the uncertain future that awaits us.

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