INDUSTRY
ANALYSIS
AVIATION GLOBAL AIR TRAVEL
With major airlines facing losses, many employees were laid off, or were asked to either go home without pay or face salary cuts
Covid-19 & its impact on aviation industry IF CORRESPONDENT
The aviation sector is not a stranger to rising to the challenges of a crisis. There is no denying that 2020 was an exceptionally difficult year for all of us, and the aviation industry was no exception. In fact, this sector was one of the most hard-hit. With major airlines facing losses, a large number of With major employees were laid off, while airlines facing many were asked to go home losses, a large without pay and others faced number of salary cuts. Industry revenues employees were totaled $328 billion, around laid off, while 40 percent of the previous many were years. It was also predicted asked to go by experts that the aviation home without industry will achieve its 2019 pay and others numbers only by 2024. faced salary Keeping the financial woes cuts. aside, the long-term effects of Covid-19 on the aviation industry is slowly emerging. The obvious ones are concerns regarding hygiene and safety, which have definitely become more strict. The health, safety, and well-being of passengers and staff is the aviation industry’s number one priority. In order to follow through, airports around the world have introduced many new health and biosafety measures to ensure the safety of the passengers and that their efforts directly reflect and match with the current consumer trend. Airports and
74 | Jan - Feb 2022 | International Finance
airlines along with the world have come together to resume global connectivity. At present, the rate of global vaccinations offers a hope that a return to normalcy is possible in the near future.
Leisure trips will fuel recovery Experts estimate that while business travels will take longer to recover, and even then, it is only likely to recover to around 80 percent of prepandemic levels by 2024. Additionally, remote work and other flexible work arrangements are likely to remain in some form, even post Covid-19, which will lead people to take fewer business trips. In previous crises, leisure trips or visits to friends and relatives tended to rebound first, and this was first witnessed in the UK, after 9/11 and the 2008 global financial crisis. Not only did business trips take four years to return to the pre-crisis levels after the attacks on the World Trade Center but they also had not yet recovered to pre-financial-crisis levels when Covid-19 broke out in 2020. Hence, it is expected once Covid-19 subsides, the rise in leisure trips will lead to the recovery of business travel. There are some air carriers that are highly dependent on business travelers, both those who are traveling in business class and economy seats right before they travel. While leisure passengers fill up most of the seats on flights and help cover a portion of fixed costs, its overall contribution to net profit is negligible, and marginal at best. Most of the profits
