While some global airlines have started buying new aircraft and hiring staff, there are still major hurdles for the aviation industry to overcome as the realisation dawns that the coronavirus pandemic will not be done and dusted in 2021.
Global airlines are pushing recovery talks to 2022 as summer prospects turn cloudy in many areas. Even countries with upbeat domestic services are worried as airlines worldwide are giving up hope that the passenger demand will return to levels of pre-pandemic normalcy by this summer.
In its most recent briefing, the International Air Transport Association (IATA) said 2021 global air traffic – measured in terms of revenue passenger kilometres – may not even reach 40 per cent of 2019 levels. If governments remain more cautious towards relaxing travel restrictions, that could drop further to around 33 per cent.
“There’s an additional risk today with respect to the way governments may or may not lower restrictions on international travel,” said Brian Pearce, the IATA’s chief economist. “The science is that governments will start lowering those barriers once the vulnerable parts of the population are vaccinated. The consequence of all that is that the recovery in passenger revenues could well be slower than we were expecting.”
Even world-famous airlines like Emirates have been buckling under the strain of lengthy border closures. (Photo: supplied)
Airlines the world over had thought they could use reworked debt provisions and government relief to get through until the first quarter of 2021. But the much-anticipated recovery is going to take longer now, said Tim Clark, president of Emirates. “Therefore you see the cries from a number of entities within the industry saying we’re going to run short of cash very quickly,” he added.
The industry could burn cash in the range of $75-95 billion this year, much higher than the previously estimate of $48 billion, according to the IATA.
Airlines were seeing a modest recovery in air travel just after summer last year as governments eased restrictions on the back of falling COVID-19 cases. However, the appearance of virus variants in the United Kingdom and South Africa prompted countries to once again place tight restrictions on air travel.
The UK placed the United Arab Emirates on its travel ban list, virtually shutting down the world’s busiest air route – London-Dubai – overnight. The United States, which is the largest aviation market, re-introduced a 7-day quarantine. Even in China and Russia, where domestic markets had seen a better-than-expected improvement in traffic last year, things are looking bleak.
Trying to move forward
However, some airlines are displaying confidence in a recovery sooner rather than later. United Airlines is buying 25 additional Boeing 737 Max planes and taking delivery of other orders earlier than previously planned as it prepares for a recovery in travel demand, the carrier said a week ago.
“As we plan for the future and the return of demand, we’ve been looking at ways to best position our fleet for the recovery and be in a position to best take advantage of people’s desire to travel,” Andrew Nocella, United Airlines’ chief commercial officer, said in a note to staff.
In addition to the 25 Boeing 737 Max planes that are slated for delivery in 2023, the Chicago-based airline said it moved up the delivery of 40 other Max jets to 2022 and five others to 2023.
United Airlines lost more than $7 billion last year as it struggled, like other airlines, with the pandemic, and it expects first-quarter capacity to be down at least 51 per cent compared with the same quarter of 2019. But the airline is already preparing for a recovery with vaccine distribution picking up.
“As the end of the pandemic nears and vaccines continue to roll out, today’s fleet announcement helps position us to meet the demand we expect to see in 2022 and 2023 and puts us on a path toward more opportunities for our employees in the future,” wrote Nocella.
US airlines are still struggling, losing $150 million a day according to Nick Calio, CEO of industry group Airlines for America. US airlines lost more than $35 billion combined last year and passenger counts dropped by more than 60 per cent from 2019 to about 370 million, the fewest since 1984. “We’re hopeful that by the end of the year we will break even,” Calio said last week.
The States is in the process of passing a $1.9-trillion coronavirus relief package that included a third round of federal payroll aid for airlines, and $14 billion that will help soften the blow of a choppy first half of the year if it is approved.
Meanwhile, EU leaders agreed last week to work on vaccine certificates, with southern European countries including Spain and Greece pushing to unlock tourism this summer. But some countries, such as France and Belgium, have expressed concern that easing travel only for inoculated people would be unfair.
The UK government has said when more is known about the impact of vaccines it could introduce a system to allow people who have had a jab to travel more freely abroad. Prime Minister Boris Johnson said international trips could potentially resume from May 17, subject to review and if there was no resurgence in coronavirus. This has led to a jump in bookings for the likes of EasyJet and Ryanair.
Pilot panic?
Indeed, airlines are laying the groundwork for a travel rebound that still looks months, if not years, away, and some are even training pilots and adding staff. Delta for example last month said it wants all of the roughly 1,700 pilots who have not been flying back on active status by October.
But a global pilot shortage is threatening to emerge as aviation attempts to climb out of the abyss. According to Geoff Murray and Taylor Cornwall, airline experts writing for CNN Business, an important question facing the airline industry is not whether it will face a pilot shortage, but when it will begin.
“It’s hard to imagine there could be a pilot shortage on the horizon. But by 2025, after the global demand in domestic and international travel expands beyond 2019 levels, we expect a worldwide shortfall of at least 34,000 commercial pilots – almost 10 per cent of the total workforce,” the experts wrote. “That gap, which will begin to be felt as early as next year, is based on a modest recovery scenario. If we were to see a more rapid recovery, that shortage could reach 50,000.”
According to their analysis, a pilot shortage could ultimately limit industry growth later in the decade by as much as 10-12 per cent, and thanks to the pivotal role air transport plays in the global economy – with aviation accounting for about 4 per cent of global GDP – slower industry recovery could temper economic growth worldwide.
But the story may be slightly different in Asia, they said. In some parts of the world, shortages are a result of the rising demand for air travel, driven by a burgeoning middle class. “That’s the case in the Asia-Pacific region. Because of the region’s success in containing the coronavirus, airlines in the likes of China especially were able to return to 2019 levels of operation at the end of 2020 and avoid furloughs and forced retirements,” they continued.
Despite that, the high rate of air travel demand growth in the region could result in a gap of around 22,000 pilots by 2029. “One possibility is that Asia may get bailed out by emigrations of unemployed or furloughed pilots from other slower-growth regions, such as Europe and Latin America, which could create supply challenges in those regions instead,” the experts concluded.
In terms of the world as a whole recovering from the entire ordeal, Subhas Menon, director-general of the Association of Asia-Pacific Airlines, said at an Aviation Week webinar in mid-February that three factors would need to come into play before airlines can recover from COVID-19 – an equitable vaccine rollout; coordination of border measures and vaccination recognition; and planning for a smarter and more sustainable life after the pandemic.
“Unfortunately, economic recovery cannot just hinge on the recovery of the developed world. Nor can travel recovery just proceed with travel among the developed world,” he said. “Travel protocol harmonisation is a huge challenge. It will take effort on the part of foreign governments, and of course the industry, to try and iron out all these confusing and disparate measures that different places have adopted. And not just by different countries, but also within countries.”
Cre: VIR
Nguyen Xuan Nghia – COMM
Source: aopa.org
