Global aviation industry in the context of COVID-19: Severe turbulence, but let’s avoid the crash

Jean-Marc Bourreau | March 31, 2020

Pandemic calls for reflective moment so that airlines can get back in the air in style post-outbreak 

• Aviation sector faced with choices between health vs economy
• Need to overcome unilateral vision to propose multilateral solutions
• Path to recovery will call for large investments and a global response
• Must develop and coordinate the global response today

Aviation in the wake of COVID-19

In less than four months, COVID-19 has infected every nook and cranny of our world.

The damage has been especially severe in the aviation sector. Since January 2020, the airline industry has lost US 17 billion in passenger revenues just in the first quarter of the year. By year end, the International Air Transport Association expects airlines to lose somewhere between US 63 billion and US 113 billion.

In the same time frame, the Airport Council International projects losses for airports to total US 46 billion. This is not to mention how carriers have laid off thousands of staff since the announcement of travel restrictions. 

While the hit to the sector has been significant, COVID-19, too, will pass. The aviation industry will rebound. The question is how the industry can prepare for a post-pandemic world. With estimates claiming that COVID-19 will last up to 18 months, few can tell how the skies will shape up in the future. 

One thing is certain; airports and carriers must ensure their passengers and their employees’ health but also respect health requirements of each country once things get back to normal.

This article explores two topics:

1. First, it identifies key paradoxes likely to arise as the aviation industry weathers the pandemic. How these paradoxes may resolve will be discussed in subsequent papers.
2. Second, the note introduces multiple post-pandemic scenarios and briefly discusses how the industry can recover to its pre-pandemic state.

COVID-19 and the paradoxes in the aviation industry

The aviation industry is structured by a complex web of public and private entities.

Today, much of the airline traffic and the aviation supply chain relies on the private sector. Yet, many of the services that take place at airports are public: police, immigration, customs, health services, etc.

It’s not far-fetched to say that the two sectors harbour diametric interests. Under normal circumstances, some of their fundamental contradictions remain hidden. In difficult periods, however, they are laid bare.

This note presents two such paradoxes. Though COVID-19 is certainly wreaking havoc on the aviation industry, it can be instructive as well. Indeed, the pandemic presents a unique opportunity for stakeholders, operators and government officials to see how airports really work in times of duress. 

Health vs economy

The first paradox consists of health and the economy. A key role of the public sector is to ensure the health and welfare of citizens. The role of the private sector, on the other hand, is to generate profits by responding to market needs.

In doing so, it creates value and wealth that translate into better living conditions for workers. Ultimately, the public sector will provide services with the society’s well-being in mind whereas the private sector will work with the singular goal of generating profits.

In the current crisis, the private sector will take advantage of every opportunity to make a profit and provide air transportation services. Public officials will have the responsibility to curb these opportunities to the extent they are harmful to citizens.

While the public sector is the final shot caller, one cannot forget that it’s the private sector that ultimately brings in the money. What’s more, only a handful of airline companies have the means to continue functioning without revenue for more than a few weeks.

This paradox raises two key questions:

1. How long can states keep their airlines and other related business of the aviation supply chain alive without going into bankruptcy?
2. What measures can be implemented to allow business to function while ensuring the safety of citizens (and users)?

As all aviation authorities must grapple with these questions, the upcoming months promise to be highly illuminating as the industry will become a veritable laboratory of novel policies and measures.

Unilateral vision vs. multilateral vision

It’s worth noting that states have mostly responded to the pandemic in isolation (i.e. almost all countries have decided to cut flight unilaterally). At a glance, this makes sense. Institutions, preparedness and health systems, as well as cultural traits, all vary among countries. It’s no surprise, then, that states have made sense of the crisis in different ways.

Yet, this unilateral approach has allowed the virus to spread at a geometrical pace.

As more and more countries are afflicted by COVID-19, it may be worthwhile to shift to a multilateral paradigm. Multilateralism would allow for coordinated decision-making in respect to guaranteeing the health of the traveling public.

Origin and destination countries can cooperate to make sure that flight passengers are healthy, and that precautionary measures, such as quarantine and tracing, will apply when necessary.

From what’s unfolding, we can observe two phenomena:

1. While the crisis is global, most responses are almost exclusively at the national level.
2. Despite the fundamentally public aspect of the crisis, many “front-line” responses come from the private sector without clear guidance from the public sector.

The outcome is that airlines around the world will continue flying while due to demand. As people jump on the first flight available back to their country, they may carry the virus with them – all the while infecting front-line workers on the way, at all levels of the aviation supply chain.

Economic recovery scenarios

It’s a matter of time before the skies are filled with planes again. The goal, of course, is to get to this point with confidence rather than with a limp.

Several economic recovery scenarios have been published over the past few days. Most believe that the current “high crisis” will endure for another four to 10 weeks. What happens after is up in the air:

• Some believe that after the high crisis, the industry will gradually return to a pre-pandemic state. People will start traveling again. They expect a strong rebound in 2021.
• Others believe that the high crisis will leave lasting economic asymmetries among states. The ensuing economic crisis will preclude an immediate return to a pre-pandemic state. The reestablishment of air services will be uneven.
• Finally, it’s also possible that the “high crisis” may last much longer than anticipated. Due to the risk of global re-contamination (absent a vaccine), travel will not resume to its previous level anytime soon. In such a scenario, the economic crisis will be even greater; the path to aviation recovery may last up to two or three years.

Paths to recovery

Regardless of the amount of time and hardship the industry takes to recover, full resumption must meet the following criteria:

• Safe travel for passengers, with satisfactory health protection measures in place
• Airlines, airports and the whole aviation supply chain will need to be financially protected, and proper health protection procedures will need to be put in place for their employees.

Given the transnational nature of aviation, it’s evident that meeting these recovery objectives will require a global effort. As such, international aviation organizations must take the initiative and devise a global response:

• Provide guidelines and procedures for airlines and airports to ensure passenger and crew safety and health. For example, proper social distancing measures can be imported in airports and on airplanes. Technology can also be leveraged to minimize contact between border control officers and passengers.
• Provide new international facilitation procedures to cope with the pandemics that would be acceptable to all International Civil Aviation Organization contracting states (facilitation is the efficient management of border control processes to expedite clearance of aircraft, passengers/crew, baggage, cargo and prevent unnecessary delays).

Other entities can play a role in hastening the recovery as well:

• Governments must create appropriate financial support plans for their national aviation industry companies and personnel. As flights become scarcer due to global restrictions, governments must help the industry stay afloat.
• Private sector can provide service to markets where appropriate health measures are in place, without leaving way for a re-contamination of virus-free areas.
• International financial institutions can provide financial and technical assistance in implementing necessary measures when states lack such resources. Many states will be ravaged by economic consequences of the COVID-19 and won’t be able to support their aviation industry without aid from these institutions. 

The bottom line is that states may not allow traffic to resume until there is a guarantee that no new cases will be imported or that sufficient health protection measures are applied.

To get there, both international aviation organizations and states must cooperate to implement health and financial measures. This further cements the importance of a multilateral approach in managing the aviation industry in the context of COVID-19.

What’s next?

When the dust will have settled, planes will be flying a very different world.

It’s too early to tell what the aviation sector will look like next year. We can, however, envision three realities:

• Some form of global travel restrictions remain for non-essential services
• Travel between a mix of COVID-19 free countries and countries still experiencing the crisis
• Return to a virus-free system

Depending on medical breakthroughs, all three scenarios are possible, and all will probably happen at some point. Each scenario requires different adaptations and operating procedures, with varying levels of agreements between states.

This won’t be easy, as COVID-19 will be receding unevenly. For instance, it’s possible that an airport in a virus-free country will have to handle services flights from a country that is still combating the virus.

A first step would be to identify – and agree upon – possible scenarios that countries will face and then start working on making commercial aviation possible under each of them. To achieve this first step, a virtual conference consisting of the major industry players would be a strong start.

A second step would be to mobilize industry experts to develop and implement the guidelines that will hopefully pave the way to recovery.

COVID-19 may have caught us flat-flooted. Let’s begin the recovery process on the right foot.