The aviation industry will be forever changed because of the current situation, but the trends that drove the industry's growth will remain and still look bright
FREMONT, CA: With the sudden outbreak and spread of Covid-19, commercial airlines and other aviation businesses have faced substantial financial stress and even bankruptcy for some. This situation has left the industry to face tremendous pressure on cash flow due to the travel restriction and the sudden and massive drop in passenger demand. Although governments have released rescue packages for the aviation industry to prevent any dire disorder, it still needs a tremendous amount of capital to recover, and the weaker airlines will not be able to make it as independents.
However, the global integration, increasing consumer incomes, leisure time and economic growth had boosted the demand for these services, so here are five factors that the aviation industry will depend on transforming as it grows out of the pandemic:
Impact Structural Changes
The value of frequent flyer programs, which is a significant profit funnel for traditional airlines, will decline. With business traffic becoming more invalid, mid and long haul traffic becomes more point-to-point, and regional traffic changes to tertiary airports, the importance of the connectivity through hubs will also decline.
These changes will make low-cost carrier (LCC) models more attractive and well adapted to make money in narrow-body operations with high volume and low yields. So expect profit and growth acceleration from this group first, and rapid share gains are taken from the hub and spoke carriers as the recovery takes hold.
Business Travel Permanently Impaired, Leisure Travel will take Time
Expect a rapid return-to-zero for business travel because of the pent-up demand created by the shelter in place orders and expect the level of business travel to settle at a structurally lower level. With the evolution of improved tools like Zoom and more distributed teams, travel substitution trends were well underway before the crisis.
Leisure may return-to-zero more slowly as consumers take time to get used to flying again. However, the trends that have made travel one of the world's favorite leisure activities remain and will likely enable leisure travel levels to continue to grow. The airlines can help accelerate the recovery by addressing consumer concerns about sanitizing contagion on aircraft.
Volume Comes Back First
The pandemic's impact has led to many nations closing their borders to avoid the spread of the disease and will continue to do so in terms of foreign travel. Western governments will also find it more challenging to prevent domestic travel volumes than international volumes; thus, customer confidence in international flying will return more slowly.
Regional Aviation Market Overturn
The business travel market will decline both temporarily and structurally, and the regional network could undergo another significant round of downsizing. But electric and hybrid-electric aircraft and even the A220 could turn many regional routes into point-to-point leisure routes in the medium-term and stimulate the demand as consumers replace shorter-distance car trips with air trips. These new businesses would serve as the leading leisure for customers on a point-to-point basis.
See Also: Top Aerospace Tech Solution Companies