World post COVID-19: What is next for aviation sector?


World post COVID-19: What is next for aviation sector?
SHARES

The Good Times of Aviation


Until the COVID-19 pandemic, aviation was an indispensable part of how we traveled domestically and internationally, for both business and leisure.  As per the International Civil Aviation Organization (ICAO – a United Nations body), a total of 4.1 billion passengers traveled by air worldwide, in the year 2017. That accounts for about 60 per cent of the world population that year. The sector was growing steadily with significantly larger growth in the Asia Pacific region.




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India, in particular, had a double-digit growth rate to keep up with the proportionate demand. The aviation industry had made its place as an enabler, catalyst, and contributor in determining the strides in global economic activities and development.


Aviation in COVID days

The Coronavirus pandemic has brought aviation to a standstill. While travel bans and restrictions are much required under current circumstances, it has left many people helpless. We empathize with those who remain stranded away from their home and more so with those who require travelling for medical help. Four months into COVID-19, it now seems that the social and economic fall out of the travel restrictions was possibly underestimated

Air transport, which carried millions around the globe has been accused of spreading the virus worldwide. Countries across the globe had to shut down international flights in quick succession to arrest the spread by air transport. Subsequently, domestic flights were also discontinued. It is now clear that aviation is a victim too - the worst affected of all. The extent of the negative impact of COVID on air travel can be gauged from the emerging facts and figures at the global, regional, and national level.



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(Via CNBC: Flights during COVID-19)


Countries had to make a difficult choice between health safety and economy. While most countries have prioritized community health and grounded their airlines completely, few countries have allowed their air network to remain operational for economic consideration. Either way, in terms of revenue stream, the results are not encouraging.  The USA, which has allowed its airlines to fly, saw between 2 to 10 per cent of the passengers' traffic in the COVID period of March - Apr 20 as compared to the corresponding period last year. Passenger traffic in the USA had, in fact, had a free fall from 2 million travellers on the first of March to a mere 0.1 million on the 20th of April. Evidently, aviation operations with revenue from under 10 per cent of seat occupancy are not viable.  




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(Image: Bloomberg as a vast majority of the fleet of International airlines is grounded)


The crippling effect of restricted operations is immediately visible on the income-expenditure table of airlines. In the absence of demand, 95 per cent of commercial aeroplanes remain grounded since the pandemic. A grounded plane makes no money. Instead, in addition to the fixed costs, they demand more money in terms of extended maintenance and parking fees. With no revenue earnings, keeping them parked in the airworthy condition is an uphill task.

Considering the net economics of Aviation, keeping the airlines afloat seems impossible. Airlines have a regular loan or lease liability depending on how the planes were acquired. Even in the good days preceding the pandemic, the aircraft lease rentals or EMIs on loans were hardly serviced by the money that the airlines were making. With no income, it is impossible for most airlines to retain their planes. As a result, a few airlines are shutting down while others are downsizing or returning their planes to their lessors. 

As of now, It seems there are more planes in service than that would be required in the foreseeable future. Airlines have sent hundreds of their aeroplanes to bulk storage facilities, apart from those parked temporarily at airports. Many airlines are considering retiring their old model planes earlier than planned. With no replacement plan in sight, major manufacturers of aircraft like Boeing and Airbus don't see scope for fresh orders. Instead, they are already faced with requests for the cancellation of existing unfulfilled orders.





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(Image source: Samchui, as the bulk of the International fleet is grounded


With this mayhem in aviation, It is anticipated that the fleet size of airliners will reduce, triggering a corresponding reduction in the human resources required.  Particularly in India, airlines may not require the available pool of pilots, flight attendants and engineers that they had hired to service the expansion in fleet size amidst the forecasted growth in aviation. Pay cuts and furlough are understandable. Airlines professionals are staring at the possibilities of retrenchment, which is detrimental both for the employee and the airlines. As the fleet grows later, the airlines will incur extra costs to train a new set of pilots and get them back to the cockpit.

As it stands today, the survival of this critical sector is in jeopardy. It is not surprising that many countries are funding or standing guarantee for their airlines. Most concerned nations including USA, China, Singapore, Australia, France etc have recognized the potentially catastrophic effect it would have on the economy if airlines were to crumble. Such countries are helping their airlines, with supportive financial packages to keep them afloat. Understandably, this money is in the form of a loan or grant which helps airlines keep their planes airworthy and pay salaries to their staff until flying resumes.



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(Image credit: Skopje International Airport with regular sanitization)


Once survival is ensured, the airlines will have to fend for themselves during the revival phase. The revival phase would be akin to reengineering aviation. In preparation for the times ahead, the aviation industry is working hard with stakeholders to innovate air travel. The bottom line is that airlines can make money only if passengers resume travel. Therefore, all airlines have turned their immediate focus to getting passengers to fly– the focus point in aviation after COVID-19.

Aviation After COVID-19

Commercial air travel has to eventually revive for the sake of the economy and convenience. But we need to accept that air travel will remain sluggish for a long time from now, at least until a vaccine is found for COVID-19 and its results are visible. A large part of the flying population will not travel until they feel it is safe to travel in large numbers. A survey by IATA (International Air Transport Association) indicates that 50 per cent of regular fliers are unwilling to fly for the next 6 months, even if regulators open up the skies.  Health safety remains their primary concern. The inconvenience and time consumed by the introduction and implementation of COVID detection/prevention protocols at airports will soon deter a few more from travelling.

The COVID scenario has invariably redefined travel in terms of 'Essential' and 'Non-Essential'. Interestingly, only 30 per cent of travel was indeed essential, with the majority of travel, including vacation trips, social visits, and routine business meetings being termed Non-Essential. Given the renewed understanding of the term 'Essential travel',  the flying population will shrink to a bare minimum.  




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(Image source: Zee News. Delhi Airport with new marked spots during the checking)


From the time the skies are opened once again to a point when the vaccine is found, the passenger traffic pattern may at best see a gradual climb, depending on the Confidence Building Measures (CBM) taken by aviation administrators and airlines in particular. The revival of aviation will also depend on the efficacy and speed of implementation of strategies to gain passengers' trust, lest people settle with the new normal of managing with less travel – especially with the concept of Work from Home (WFH) gaining acceptance.

In a new development that dampens the growth curve of aviation, many companies have recognized the benefits of working from home or more appropriately 'Working from Anywhere' (WFA). Tata Consultancy Services, in India, with a global strength of about 4.5 lakh employees is looking at 75 per cent of their workforce 'working from anywhere' by 2025. Innovating further, some newer companies have tried and tested the Work from Anywhere as a policy since their inception. The simple fact is that it works! Government offices are also taking full advantage of contactless governance. The emerging trend and new adaptation will be a steep departure from the travel culture in the business that gave the aviation industry a welcome boost.



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(Image source: Paul Kedrosky showing the fall in the domestic demand after 9/11)

While the dangers of COVID-19 are present and clear, human psychology is known to modulate and misinterpret many aspects of the epidemic which could manifest as flight anxiety amongst previously happy fliers. Flight-related anxieties are known to limit many people from embracing air travel, to the extent of not flying at all. Specific concerns emanating from fear of wellbeing under COVID-19 conditions can lead to a substantial drop in air travellers and add to the count of flight anxious passengers. A prime example of such a shift in mentality was seen after 9/11. In the August preceding 9/11 65.4 Million passengers flew. Soon after the 9/11 attack, the numbers trailed off dramatically. A similar situation is likely to arise from the COVID-19 scenario where lack of social distancing will be seen as the limiting factor in ensuring wellbeing onboard aircraft. The fact that this limitation can be overcome with alternate means will remain poorly understood for some time.



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(Image Source: Khaleej Times shows sanitization efforts in the plane)


Anxiety concerns are often real and appear unsurmountable unless the mitigating efforts are highlighted. It is a known fact that Coronavirus can remain viable for hours on metal, upholstery, and other surfaces in an aircraft cabin. The protocols for sanitization & disinfection of aeroplanes before each flight will have to be developed and the airlines will have to follow them scrupulously. Since most of these fears are real, each airline will have to exceed the regulatory requirement to win the confidence of its existing clientele and other air travellers at large. Each positive case of Coronavirus, directly or indirectly connected to aviation, will not only tarnish the prospects of a particular airline but will definitely raise questions on the safety of aviation as a means of transportation.

Apart from this, unsubstantiated information may take root, concerning overall wellbeing while flying. Questions about contaminated air circulation in flight immediately come to mind. The fact remains that the entire aviation operation will come up for a critical review. Airlines have a daunting task of clarifying doubts swiftly and reassuringly, to retain their clientele.  Awareness campaigns and counselling by domain specialists in Flight Anxiety removal can reduce these instances. Cockpit Vista in India (www.cockpitvista.com ) is conducting online awareness sessions to preempt flight anxiety issues due to COVID-19 scare.

The Way Ahead 

Social Distancing and health security in air travel will be the guiding factors in air transportation in the foreseeable future.  In the face of these new buzz words, the way we travel will never be the same. The concept of air travel will have to undergo a sea of change before we can start commercial flights while restricting the spread of COVID.



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(Image source: Business Traveller- The new normal)


Social Distancing or physical distancing norms on airplanes will translate to fewer passengers– as low as 50 per cent of the airplane’s capacity. This would make aviation commercially unviable, especially considering that airlines were not making money even with fully loaded airplanes. In order to overcome this barrier, administrators will be forced to explore alternate avenues and look at the large number of possibilities and innovations that can allow airlines to fill aircraft to capacity while remaining COVID-19 free. To achieve this, only COVID-19 free souls must be permitted to board a flight. This instinctively shifts our entire focus from the aircraft to pre-boarding protocols.

Basic screening on the curbside will be made compulsory. Since health sanitization at airports will be an absolute necessity and a mammoth task, countries may require the creation of Aviation Health Authorities (AHAs) analogous to the Aviation Security organizations created post 9/11 in the US and elsewhere. These AHAs will be responsible for the creation and implementation of protocols in aviation. These protocols may be time-consuming, requiring passengers to reach airports many hours before the flight. Only bonafide travelers, who qualify the health checkup will be allowed to proceed for check-in. Unlike the present norm in few countries, entry to visitors accompanying travelers will not be allowed.

The latest data indicate that 80 per cent of coronavirus carriers are asymptomatic. Since COVID-19 can remain undetected by temperature screening, an asymptomatic COVID-19 carrying traveler can pass airport checks undetected. It may be essential that all passengers are required to produce a coronavirus negative medical certificate obtained from authorized centers a day or two before the flight. This certificate, akin to 'COVID VISA' may become the minimum eligibility to travel.

With the advent of quick testing kits, it has become possible to get results within 10 minutes. This could possibly be available to last-minute travellers who are willing to risk their tickets if they are suspected to be a case of COVID-19. Although these processes may appear regressive, they would work satisfactorily in such times, as only essential travel would be encouraged.



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(Image source: Khaleej Times Emirates begins Rapid COVID-19 testing)


Major emphasis will be placed on technological innovations in contactless processes. To begin with, the available technology will need to be customized for contactless check-in. Gradually, Airports and airlines should be able to robotize the check-in of travelers and their belongings via contactless means.  Customers will be encouraged to come with printed boarding passes.   At the airport, the generation of boarding passes at check-in kiosks using bar code scanning, biometrics and voice commands will be made available. The use of contactless card payments will be made a norm.

Some rules will apply globally like the use of masks in public. Air travel may take it a step further with the mandatory requirement to wear certified masks and gloves within the airport premises and throughout the flight. 

Social distancing at check-in, boarding gates, and airport shops will be mandatory. Marked places for sitting and standing in queues will be a common sight. Similar restrictions will apply onboard flights. Minimal movement inside planes will not only ensure social distancing but also allow the staff and crew to do their job more efficiently.  



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(Image source: Swarajya showing the crew in PPE during one of the repatriation flights of Air India)


It will be more reassuring if we can fly with minimum instances of contact. Cabin baggage may be disallowed or restricted to essentials in order to decongest the cabin. The casual movement of passengers or lavatory visits will be regulated. Just like Flight Marshals became necessary post 9/11, Flight Janitors may be deployed to keep utilities sanitized. To keep the flight attendants protected from unnecessary contact, the serving of lavish inflight meals on full-service airlines may be reduced to giveaway packets. Full-service airlines will have to repackage their service so that their business model, especially on long haul flights, still remains relevant. Low-cost carriers may stop the sale of meals altogether. Flight Attendants will revert to their lesser-known primary roles as 'Safety Attendants'. Interestingly, in addition to their primary role, they will also function as health inspectors on board – don’t be surprised if you get a piece of advice from them on hand hygiene or respiratory etiquette!

Turnaround times for aircraft (the time between the arrival of a flight and its next departure) will significantly increase. Presently, simple cleaning is done between the flights before welcoming passengers on board. However, the current arrangement would be grossly inadequate and detrimental in the COVID-19 environment. Aircraft will have to be disinfected between each and every flight. This would involve cleaning of seat handles, seat buckles, upholstery, tray tables, overhead bins, and all other surfaces that a passenger can reasonably reach and touch. An aircraft like Boeing 737 usually sees about 8 to 10 sets of passengers each day. This number may very well reduce to half. Turnaround times can be especially annoying for passengers on multi-hop journeys.

Since air travellers fly over airline networks spanning continents, mapping their travel history will be another mammoth task. Travellers will need to keep a record of their social contacts on a regular basis. This is true, especially for international travellers.  A protocol and tracking mechanism at the regulatory level is an immediate need.

In view of the restrictions, the demand for Business class is sure to go up. Airlines like Delta are planning to leverage the new normal by offering a premium class experience in large numbers. The personal space in Business class is reassuring although it is more psychological than practical. Business-class gives an enhanced sense of space and health security. Passengers are more likely to board a flight if they see health safety in place. Many airlines are likely to encash this by increasing business class seats and package business class travel with express health checkups, added privileges on flights, and other comforts, with the reasonable expectation of higher ticket costs.




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(image source: Quartz, showing a thermal screening of passengers at Mumbai Airport)


Notwithstanding all the efforts, international travel may remain limited, unless all countries have a uniform policy and protocols. Stricter immigration control at airports, including quarantine on arrival, will be needed to eliminate cross border spread. If a uniformly strict approach to COVID-19 control is not undertaken globally, opening up air immigration can lead to the second wave of COVID-19 and take the world back to where we started in January 2020. The harrowing experiences are not worth the adventure. Organizations like ICAO, IATA and other aviation associations along with health and sanitation organizations like WHO will need to come together to work out and recommend Standard Practices or operating procedures. This is essential as the passenger traffic will depend on the efficacy of preventive measures taken by respective countries. Until then, international travel is unlikely. Having said that, few international flights may operate in a controlled manner between major cities to keep the essential travel going. 

IATA estimates that the post-pandemic recovery of Aviation will begin with the domestic sector, followed by regional and global travel. The domestic market accounts for 58 per cent of air traffic and can be the torchbearer in the recovery process. Unlike the need for global consensus in international travel, activation of the domestic aviation sector is well within the reach and control of nations individually. Once the COVID-19 situation stabilises and containment measures and protocols are in place, people must be able to move within the national boundaries for essential medical, business, and social needs.  This is achievable practically by three-fold efforts - making the country a safe zone for movement, aggressive testing of air travelers, and strict entry control at immigration. This is possible if efficient and effective protocols are in place.

It is ironic that many interesting aspects of the IATA survey of passengers in 2019 stand reversed in the post-COVID-19 scenario. As per the survey, passengers wanted more control over their travel. With the economical utilization of time being the essence of air travel, they hated waiting in queues and wanted a shorter check-in times. 80 per cent of travelers wanted no more than 3 minutes of wait at baggage drop and a maximum of 10 minutes at immigration cum custom. With reporting times as much as 3 hours in advance for domestic travel and protocols at every point, the travel experience will be very different from the image we carry. 

The net effect of COVID-19 on airlines and passengers is discouraging. Air travel may not remain a great experience unless one can pay exorbitant fares in the luxury class and buy priority services. But the critical question is whether the airlines will be able to fly routes even if passengers were willing to pay more.

Economic Impact on Commercial Air Operations

Aviation directly generates 4 million jobs in USA and contributes approx. $ 850 billion in economic activity – about 2.3 per cent to the GDP of USA.  By quantum that may appear nominal, but considering both direct and catalytic sectors, Aviation contributes $1.8 trillion (5 per cent of GDP of USA) and generates 11 million jobs. As regards India, overall the air transport industry contributes $35 billion to its GDP annually while generating 1.34 million jobs. Evidently, if the aviation sector were to halt, the economy at large will suffer miserably.   Aviation is, therefore, a critical sector, deserving serious attention globally.



(Source: Election Tamasha, showing the importance of the aviation sector to the economy)


Airlines make business only if and only if the passengers fly. Going by the anxieties and health concerns connected with coronavirus, air travelers are unlikely to board planes in the immediate future. Lack of demand seems to be the stumbling block in reviving aviation in the ongoing scenario. Financial worries besiege the future of the industry.

If all the rules of Social distancing are to be followed, airlines will have to do with a maximum of 50 per cent passenger occupancy. A physical distance of over one meter around you is prescribed for Corona prevention. As of now, aircraft, especially the economy class are configured to carry maximum possible authorized passengers. This doesn’t allow the prescribed physical distancing between two adjacent seats.   Although 50 per cent occupancy will be in lines with the expected load factor for times to come, sustained operations with such limitations on load factor will make flight operations uneconomical.

The occupancy through the month of April in the USA & Europe (where flights are allowed) is just about 2 per cent of capacity. Given the subdued mood and the anxiety of flying, airlines should not expect any significant change in the near future. On the face of it, airline operations seem unviable.

The slump in demand has grounded a large portion of airlines' fleets.  The fixed cost associated with these grounded and unutilized planes includes parking charges, logistic cost, and additional maintenance charges. Most of the major airports that offer parking and maintenance/logistic services are not Government-owned and may not agree to give concessions. Many larger planes of major carriers have been sent to long term storage. Lufthansa, Singapore Airlines, and many more have indefinitely parked their fleet of superjumbos like Airbus 380, Boeing 747. The future of larger planes is unknown, but they continue to bleed airlines in terms of fixed costs. Retiring these machines at partial life will be a write off on the balance sheet as well, with lingering effect.



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(Image source: Aviation International News, showing the flight commanders)


Also, with each plane grounded, a set of 12 pilots and a matching number of Flight attendants & ground crew also become redundant. Aircrew being a precious resource, airlines have to think carefully before retrenching them. Keeping them on payroll seems wiser for many reasons.

Finally, aircraft are planned to remain in air to maximize yield. However, the need for extensive sanitization of the cabin between flights will limit the aircraft utilization - now on airlines will be able to achieve fewer flights per aircraft.

Given the downside of the Corona crisis on Aviation, a national financial survival plan has to be put in place urgently.

Financial Revival Plan

Going forward, financial planning has to be forthcoming from the airlines and governments alike. A well thought survival plan is the most immediate requirement to keep the critical sector alive. Revival plan can follow.

To overcome the cash flow & liquidity crisis, a financial rescue package in the form of a grant in aid as done in the USA, China, and European nations is imminent. This could be in the form of a term loan, equity infusion, or other financial instruments. The Government on its part can also offer a deferred payback of the grant in aid. 



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(Image source: Sirf news showing an aircraft being fuelled. ATF to come under GST has been a long going debate)


ATF is the major component of operational cost, Tax rebates, especially on ATF, will be required. In the Indian context, bringing ATF under the GST regime will enable airlines to take Input Tax Credit which is a major respite for airlines.

Relief can also be provided by the advance purchase of tickets by the government as in the case of Hong Kong which bought 5 lakh tickets from its carriers.  In the Indian context, it is suggested that for a limited period at least, the government can take the entire aviation sector under something akin to UDAN scheme wherein the govt pays airlines a part of the operating cost. This would also work as a revival package for airlines until they become self-sustainable.

The government can waive off landing, parking and navigation charges and subsidize the same for services at privately run airports. This initiative has already been in place in Euro control which provides aviation services across Europe.

Despite all these efforts, an increase in fares by airlines is inevitable to cover costs. Doubling the fares is the least of the expectations in light of the fact that many airlines do not break even with a full flight. Air travel is bound to get costlier for one more reason. Airlines have already suffered substantial losses in the last quarter of FY 2019 20 ever since precautionary measures were adopted on Feb 20. It is unlikely that this loss can be covered up anytime soon even with increased airfares.

On part of airlines, few changes are desirable. Until complete revival from COVID-19, the route map will have to change completely. Unfortunately, it is not a case of one size fits all. Each airline will have to formulate its strategy, taking into consideration its business model and fleet configuration. Notwithstanding the diversity, we may see some commonalities in the outcome. To begin with, the number of services between city pairs will drop. Many tier two and three cities may be dropped from the route map. In international sectors, smaller planes will be more suitable and sufficient to service the expected loads – It is unlikely that fleets of wide-body planes like A 380 will find utility in the near future. Twin-engine long hauls like B 787 appears to be the right balance between capacity and reach.

Conclusion 

Unlike conventional war, the COVID-19 war will cease only after the last of the virus is neutralized. Easier said than done. A Vaccine is the only solution. This may take time and a coordinated effort. Until then we have to live with the challenges of the new normal that we are faced with. 

Necessity is the mother of Invention. True to the saying, Aviation stakeholders are quickly evolving, adapting, and technologically innovating their area of operations to overcome the handicap and challenges due to COVID-19. However, the willingness of the air traveller to fly remains a million-dollar question. The pace of revival of the industry post-COVID-19 will, therefore, depend entirely on the confidence-building measures by stakeholders and adaptability of air travellers to the new normal. It seems like a lot of effort before we take to the skies again.

About the Author

The author of this article is Wing Commander K Dinesh, who is a former Indian Air Force officer. Presently, he practices as an Aviation Safety Consultant with a focus on Flight Anxiety removal for air travellers through his venture Cockpit Vista in Mumbai, India (www.cockpitvista.com). He can be reached at  cockpitvista@gmail.com

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