By Jitender Bhargava
Every time green shoots of recovery for the airlines have surfaced, a new coronavirus variant has invariably cropped up. However, it can now be said with a fair amount of certainty that the worst for the aviation industry is over.
Look At The Pointers:
If in 2020, the first Covid year, the total revenues of global airlines were down by a mammoth $372 billion as compared to 2019 revenues of $838 billion; the revenues were down by a modestly less $324 billion last year because restrictions were in place for most part of the year. The revenue drop is forecast to be some $227 billion below pre-pandemic levels in 2022. A steady improvement!
Likewise, after the huge fall in the number of flights operated – from 38.9 million to 16.9 million – in 2020, flights operated in 2021 were 19.3 million. In the current year, 25.8 million flights are expected to be operated. Global air passenger traffic is expected to recover to 88% of pre-covid levels in 2022, and is expected to surpass the pre-pandemic level in 2023. Again, a steady improvement is enough to infuse confidence.
The recovery process has undoubtedly been excruciatingly painful and slow, particularly in Asia, where inter-regional air passenger traffic is still 61% below pre-pandemic levels, versus about 25% for Europe and only 0.5% in the USA, according to aviation analytics firm, Cirium. The global international recovery outlook would have been much better had Beijing’s strict Covid-zero strategy not severely limited international travel by Chinese tourists.
Vaccinated Get Assured Entry
The scaling up of flight operations, more people travelling and airlines consequently witnessing reduction in losses has been in an environment when the fear and impact of Coronavirus on air travel has not entirely disappeared. As virtually all countries have now removed restrictions on entry of passengers and health authorities in most countries are no longer insisting on a mandatory RT-PCR test before departure and on arrival and the dreadful need of quarantine – all adding to travel costs, the pace of improvement will accelerate in the coming months. Double vaccination certificates being treated as the second passport for gaining unhindered entry into most countries will also surely act as a catalyst for easing and spurring air travel.
Further adding to optimism is the resolve of governments worldwide to gradually dismantle all curbs imposed in 2020 for ensuring restoration of normalcy in all spheres of industrial activity, not just aviation. In India, the government has permitted the hosting of the Indian Premier League, a mega sporting event, which in the past had had to be held in the United Arab Emirates. When official functions like seminars, conferences, business meetings; social occasions like weddings are allowed to be held without restrictions on number of guests; and leisure travel, visiting friends and relatives become a matter of routine and act as triggers for travel, like it was in the pre-Covid era, normalcy in air travel will return, and return fast.
While the surviving airlines can undoubtedly breathe easy with renewed hope, one cannot but feel sorry for the other 68 or more airlines, which either entered or exited bankruptcy, or were liquidated in 2020. This was notwithstanding the fact that many airlines, particularly in North America, Europe and part of Asia, had collectively received governmental aid amounting to $173 billion for survival. In fact, only where government support was minimal, such as in Latin America, there have been failures or restructurings under bankruptcy.
What Does Normalcy Mean?
Airlines globally employ 2.7 million people directly and the livelihoods of more than 60 million people are dependent on it, including those working in the travel and tourism sector. Jobs of over a third – approx. 25 million were impacted in 2020. Employees, including pilots, maintenance engineers and cabin crew, are gradually regaining jobs while those who remained employed but faced salary cuts are looking for early restoration. Signs of aviation industry revival have rekindled hopes of normalcy in their working career.
One positive aspect in the aviation sector during the pandemic period has been cargo operations, which differed from that of air travel for passengers. Cargo volumes were down but nowhere near as much as passenger numbers as it remained essential to sustain global supply chains and for transporting medical equipment and pharmaceuticals besides other industrial goods. Airfreight helped Indian budget carrier SpiceJet too which featured on the list of possible bankruptcies in 2020 but has since improved its position – to a profit in the quarter ending 31 December 2021.
Indian Scenario
As the large Indian diaspora is spread all over the world, thousands of them were stranded when the flights were halted without adequate notice on 23rd March 2020. The government was thus quick in initiating limited flight operations under the Vande Bharat Mission to bring them home. This was followed by flights under specific Air Bubble agreements, which India now has with 37 countries. Even though the Indian govt had announced in end November 2021 that international flights under bilateral agreements will resume effective 15 December, 2021 the decision had to be deferred till end of February, 2022 as the Omicron variant had emerged and it was perceived as a threat – spread of virus through travelling passengers.
With Covid cases now at a record low and in manageable numbers, it is expected that the government will allow international flights as per bilateral agreements from mid-March 2022. This will not only allow optimal use of fleet airports but also non-aeronautical assets like shopping arcades, duty free shops at airports. Passengers, of course, will cheer the decision as they will have more options for travel and competition amongst airlines will ensure reasonable fares.
Interestingly, Indian domestic operations have been like a roller coaster ride. After gradually building up the market since flight recommenced on 25 May 2020, after being suspended for two months, it attained decent levels before the second wave in April 2021 saw passenger numbers falling by 50%. In December 2021, 3.96 lakh passengers had travelled on a particular day, a mere 5% from pre-Covid level, but passenger traffic once again saw a more than 50% fall due emergence of the Omicron variant. Passengers have shrugged off the fear and number of passengers flying daily by end-February is almost back to December 2021 level – 3.8 lakh passengers a day.
What the quick recovery demonstrates is that while new virus variants and restrictions could still crop up, underlying demand will remain strong to assure airlines that complete recovery is on the anvil.
About The Author
Jitender Bhargava, former executive director & author of The Descent of Air India.
