Description

Before the global COVID-19 pandemic hit, the aviation industry had anticipated high passenger volume and aircraft fleet growth over the next decade. Now, however, the industry is suddenly facing a new environment where capacities are reduced and passenger demand is down for the foreseeable future. If the global situation results in prolongs lock-downs and delayed development of vaccination, airlines’ financial strength will be greatly impacted and change the industry landscape. Privately operated airports will face difficulties in keeping costs down when there is negligible revenue generation. Also, the uncertain nature of this pandemic has severely marred passenger confidence, which may take time to rebuild post crisis. Weak passenger confidence in travel and declining economic conditions among many countries will impact the total number of passengers traveling, in both the domestic and international segments. Passenger numbers are estimated to reach pre-pandemic levels only after a couple of years.

Airlines and airports must seize digital opportunities to navigate this uncertain period and ensure the smooth re-establishment of air travel. Digital solutions will enable both airlines and airports to plan and align their resources with the sudden decline in demand; these tools will play a key role as airlines and airports scale up their operations to match the rise in travel. The aviation industry will require higher levels of collaboration between software providers, hardware providers, and master integrators to meet business requirements and provide seamless services. New technologies such as Internet of Things (IoT) and big data analytics will play a major role at airports in optimizing operations and ensuring efficient health screening at key touch points.

Airlines have a high level of fixed costs that negatively impact liquidity and cash flow. In this situation, airlines and airports will need to negotiate and strike new deals that enable them to reduce fixed costs. Operational costs that are variable can be kept low by optimizing resources and achieving operational efficiency with the help of digital solutions, which will also help airlines and airports ramp up operations as demand for air travel grows.

The European region has been volatile for the last few years, with multiple airline bankruptcies. The pandemic will lead to a consolidated market in Europe, similar to the North American market. Countries with high levels of domestic demand such as the United States, India, China, and Latin American countries will begin to mitigate the impact of the pandemic as restrictions on domestic travel are lifted earlier than for international travel, and the robust air travel market will grow as the external situation improves (e.g., factors like vaccination development and recovering economic conditions).

The top measures that will ensure business continuity are fiscal discipline, renegotiation of contracts to stabilize fixes costs, and protection of employee welfare. Airlines and airports must be ready to resume operations in a scaled manner to ensure that rebound demand is captured effectively. Digital solutions in areas of operational efficiency, contactless boarding, revenue management, and network planning will play a key role in stimulating demand, right-sizing operations, and reviving revenue growth.