Recovery of the Aviation Sector

Recovery of the Aviation Sector

Recovery of the Aviation Sector

Dr Marina Efthymiou, DCU Business School, Dublin 9, Ireland 

The Aviation industry has shown little resistance to external shocks but considerable resilience. 

Asian states lost US$12–18 billion as the SARS crisis depressed travel, tourism, and retail sales. SARS slowed down the growth rate of China and reduced tourism income by US$16.9 billion, with passenger transportation declining by 23.9% and aviation passenger traffic by nearly 50%. Nevertheless, after the SARS crisis, tourism recovered rapidly and international passenger traffic recovered within nine months. None of the past epidemics and pandemics experienced such an extensive reaction with lockdowns and travel restrictions as those that have been imposed for COVID-19. 

According to ICAO, the COVID-19 impact on world scheduled passenger traffic for the year 2020 (estimated actual results), compared to 2019 levels, is as follows: 

• Overall reduction of 50% of seats offered

• Overall decrease of 2,699 m passengers (-60%) 

• USD 371 billion loss of gross passenger operating revenues

Whereas the COVID-19 impact on world scheduled passenger traffic for the year 2021 (preliminary estimates), compared to 2019 levels is: 

• Overall reduction of 38% to 40% of seats offered

• Overall reduction of 2,074 to 2,210 m passenger (-46% to -49%)

• USD 305 to 324 billion loss of gross passenger operating revenues

In a study about the impact of COVID on airlines and airports that I conducted with some colleagues, we found that routes served by well-financed/funded air carriers and/or exposed to the lowest rates of COVID-19 infection and/or are seeing the least restrictive lockdowns and travel measures have been impacted least by the pandemic and are those that are most likely to rebound first. However, it is evident that not all air carriers have been impacted equally by the COVID-19 pandemic. For example, less well-financed/funded carriers whose networks are focussed on international markets, premium traffic and discretionary leisure travel are affected most by the pandemic and are likely to take the longest to recover. Conversely, better-financed/funded airlines with a greater focus on domestic markets, non-discretionary traffic, and standard economy class fares have been found to be less severely impacted by the pandemic.

In terms of airports, we found that performance has varied according to airlines served, characteristics of the airport/city, and the severity of the outbreak. For example, airports handling domestic traffic may fair better in the short term in countries with a lot of domestic traffic. Equally, more diversified air carriers and route markets in terms of market segments served (i.e. those less reliant on international/intercontinental traffic) are also more likely to be less severely impacted by the pandemic and more likely to recover faster to pre-COVID-19 traffic and revenue levels. 

Ireland, an island nation geographically positioned on Europe’s periphery, dominated by international markets with little domestic traffic and for a long time facing very tight foreign travel restrictions, has been hit very hard by the pandemic but is on the road to recovery. In March, domestic flights were holding up better during the pandemic than international flights, which was the case for Ireland too. In the summer, thanks to vaccination rollouts and travel restrictions easing, traffic started recovering stronger. According to EUROCONTROL, in August, flights were back to 71% of 2019 levels across Europe. In August, flights in Ireland were back to 53% of 2019 levels, and Irish aviation entered the recovery period. 

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