Published 16 Jun 2021
The Impact Of COVID-19 On The Aviation Industry
The impact of COVID-19 is felt everywhere. Entire countries were and are isolated, social life was shut down.
There is hardly any other industry that has been so massively affected by the crisis triggered by the coronavirus as the international aviation industry: airlines, airports and other market participants are experiencing a significant drop in sales. Airlines in particular are facing their biggest challenge in decades, as demand for air travel has declined at an unprecedented rate and governments are further exacerbating this development by issuing travel warnings or even closing national borders.
Due to the rapid spread of the virus and national containment measures, air travel came to a virtual standstill within days and weeks. Air traffic decreased by 90% in 2020. Even today, passenger numbers are well below pre-crisis levels, as most tend to avoid travelling at present. Furthermore, there is a well-founded danger of an economic recession, which will most likely delay the economic recovery. If unemployment rises massively and retirement savings instruments no longer yield as much return, the revival of personal and business travel will take longer than in the past.
The Air Cargo Industry Profited At The Beginning Of The Current Crisis
While many industries had to adjust to declining sales figures and losses, the restrictions on goods and road traffic initially even had a positive effect on the airfreight industry.
The security measures against the coronavirus in the Asian region and especially in China led to a collapse of road and port logistics. This massively affected shipping traffic worldwide. Companies tried to relieve these blocked supply routes with air freight. The demand for air freight rose rapidly at that time. The airlines profited from this, of course.
The effects are now opposite. The demand for air freight is increasing, but about 50 percent of all air freight is not transported by pure cargo airlines, but by passenger aircraft. This means that every passenger flight cancelled because of the coronavirus also reduces these capacities.
Consequences Of The Crisis For The Aviation Industry
The current Corona crisis is affecting the supplier industry. The consequences are a decline in demand, supply disruptions, financial pressure and the disruption of the labour force, resulting in one of the largest global shocks in the history of the industry.
Where Do The Direct Consequences Of The Crisis Occur?
Pandemics like COVID-19 are fortunately rare, but the impact on the aviation industry is enormous, especially for small to medium-sized suppliers. The crisis is still ongoing and countries are shut down. This makes the scenarios for economic recovery uncertain. A quick recovery is unlikely.
The Corona crisis has a firm grip on the aviation sector and no one knows how long this will last. A large part of the aviation workforce is currently on short-time work - yet many of the companies' fixed costs remain and are putting more and more strain on liquidity. Government aid can maintain the industry's existence and employment at a certain level, but the consequences of the crisis will affect aviation in the long term. If the demand for aviation services decreases, chains of effects are set in motion that have an impact on the entire economy. Employment, value added and production may change as a result.
What Is Eurocontrol's Opinion?
According to Eurocontrol (European Organisation for the Safety of Air Navigation), the aviation industry will reach 2019 levels as early as 2023 due to the uncertain disease situation in some parts of the world. However, the organisation is more optimistic for European air traffic. Eurocontrol predicts that the sector will recover from the second quarter of 2021.
Eurocontrol estimates that the risk of coronavirus transmission will also disappear completely by 2022.
Eamonn Brennan, General Manager of Eurocontrol, stressed that with the global roll-out of the Covid 19 vaccine, the recovery in aviation will start from 2021: "However, the whole aviation industry will continue to need financial support in the coming years."
Scenarios For The Aviation Market Up To 2030
Covid-19 has changed everything. The impact on the aviation industry is unprecedented. Airlines, aircraft manufacturers and suppliers need to adapt to the changing environment and overcome the challenges it presents.
It is undisputed that air traffic will recover and passenger numbers will increase. However, growth will shift and slow down considerably due to the Corona pandemic.
Experts draft three different scenarios for the development of the aviation industry: best case, realistic case, worst case. According to the realistic assessment, the narrow-body segment will not return to pre-crisis levels until 2024, as air traffic volumes will not normalise until 2022 due to the pandemic. The recovery in the wide-body segment will be slower in comparison. Here it can be assumed that the pre-crisis level will not even be reached again until 2030 (realistic case). This will have a corresponding effect on the adjustment of production figures and thus on the supply chain. The number of engine deliveries, for example, is closely linked to the development of the aircraft fleets, so that a normalisation to pre-crisis levels is not realistic until 2025 in this area either.
It can be assumed that some - even high-profile - airlines and industry players will not survive this difficult period.
Market consolidation is inevitable.
To be well prepared for the global crisis and recession, OEMs, suppliers and
all other parties in the industry need to work together, make their value
chains more flexible, secure financing and become more agile. Companies that
act quickly and flexibly and develop as an organisation have the best chance of
surviving the crisis.