It is no surprise that the world of aviation is dominated by the impacts of the current COVID-19 pandemic. The sector has been decimated by the closing of borders and the implementation of quarantine periods for travellers. So, as we enter June, it is clear that the new normal we are living in is dominating the news for everyone in the industry. Here are some of the highlights.
The global picture today
As of June 1st, the global airlines and their suppliers are suffering a heavy toll, with financial performance and future stability under pressure. Since January 2020, the number of commercial passenger flights has dropped by a massive 77%. In the US, the amount of air travel has fallen by 96%. The total lost revenue is forecast to be $252 billion. There is no industry that could survive such a loss in market in such a short time – and that is the reality facing airlines.
With an impact in day-to-day cashflow comes a hit on the stock market. Airline shares have shed about 60% of their value since the beginning of 2020. Many airlines, including EasyJet, Air Baltic and Turkish Airlines, have had their credit ratings downgraded, having been placed on a watchlist.
With layoffs in the airline sector, comes a ripple down effect down the supply chain. Engineering and manufacturing companies that service aviation is being forced to cut thousands of jobs too.
The route to survival
The aviation sector directly employs an estimated 10.2 million people. However, connected industries account for a further 65.5 million jobs across the world. There are whole communities that will be devastated if the aviation sector isn’t helped in its survival.
At this time, Gabriel Mocho Rodriguez of the International Transports Workers Federation (ITF) has emphasised the only solution that is likely to work. Governments, employers and trade unions need to work together to pull the sector out of these challenging times. He notes that the relationship between these stakeholders has been marked by inevitable disagreements. However, he is clear that without a single focus on the future, large chunks of the industry will not survive.
The ITF has come together with the International Air Transport Association (IATA) to work closely with the World Health Organisation, the International Civil Aviation Organisation and the International Labour Organisation to shape a solution. Together, these sector leaders are working to shape the best guidance the right support measure to ride out this period. They are making what Rodriguez calls “extraordinary efforts” to maintain the vital role that the sector plays. Showing themselves to be indispensable, the airlines have been central to an effort to repatriate people, deliver medicines and vital medical equipment – and supporting the medical professionals on the frontline.
The government also has a role in aviation survival. They must work with the industry leaders to restore air connectivity in the safest way possible. Operations will need to be adapted, with the introduction of air bridges and social distancing protocols, but the airlines will need a route to flying once more.
One person’s crisis is another person’s opportunity
While the large global airlines may have taken a significant hit during the Corona Virus, the private aviation operators have seized on an opportunity. Companies such as WheelsUp, VistaJet and Jet Edge view this new normal as a period where they can consolidate their position.
The CEO of WheelsUp recognises that for private jet companies to make an impact there will need to be an effort made to democratise the experience. Kenny Dichter bites that there needs to be an increase in scale for newer customer experiences, something akin to that offered by Uber. While the prices are so high, private jets will always be limited in its market share. However, Dichter has led to an unprecedented level of acquisition and so hoping to increase the opportunity for more people to fly charter. The move to consolidate companies is hoped to improve the chances that private flight will become more mainstream.
The main problem they will face is that 95% of all commercial passenger travel is serviced by 150 of 19000 US airports – with a similar ratio experienced globally. Therefore, the power of regional hubs to service such an uptick in private air travel is likely to be a challenge. Without this access to regional airports, the passenger would be reluctant to commit to a long car trip to then board the plane.
A real-life case study
Bloomberg recently focused on real-life examples of the business community switching from first-class travel to a private jet. They cite the example of Brenda Marino, a real estate investor who often takes the most lavish and elaborate European vacations from her base in New Jersey. This year she is staying domestic – and opting for a private jet instead. She cites that the discounts on offer have made the possibility of private air travel irresistible. She is opting for a journey down to Florida on her chartered flight, where her family can be sure they maintain social distancing. There is little or no need to queue for security or boarding – making it a safer way to fly.
Private jet fares are said to be running currently at 20% lower than normal – thanks mostly to the drop in business travel. However, there are many opportunities for consumers to win greater discounts if they try their luck with an agent.
Michael Holtz of Smartflyer notes that there has been almost a 500% increase in interest in private jet charter since the start of the crisis. Although a two-hour trip can cost $20k for six people, making each ticket a weighty $3000+, many still feel this is a reasonable investment in the assurances of health and safety.
Some private jet companies are being inventive, by matchmaking clients who want to fly to the same destination. With such strategies, companies can continue to make the cost manageable and therefore a more viable option for those craving air travel.