The COVID-19 virus does not respect borders. A true global pandemic, it has impacted all industries and lives of everyone across the globe resulting in economic and financial losses across sectors. In particular, air transportation has been significantly impacted, with airline closures, layoffs and restructuring as travel is restricted.
The hypothesis that since the aviation industry has been affected more than some other sectors, the revival will be slow and that a future in this sector is bleak is however misplaced. Air transport by its very nature is fast, scalable and a ‘force multiplier’. An aircraft can reach its destination by the time a locomotive warms its engine and attaches itself to a rake of wagons. Airpower is the the truest connector in this globalised world.
In the short term, demand for passenger air transport, is expected to gradually rise due to governments easing regulations limiting travel. As people gradually come out of lockdowns, spending and therefore consumption of goods is also expected to increase resulting in a increase of air cargo services as well.
ICAO estimates that for the full year 2020 – there will be an overall reduction of 40% to 53% in seats offered by airlines and a USD 297 to 384 billion loss to airlines. The air transport industry supports a total of 65.5 million jobs globally. It provides 10.2 million direct jobs. Airlines, air navigation service providers and airports directly employs around three and a half million people. The civil aerospace sector (the manufacture of aircraft, systems and engines) employs 1.2 million people. A further 5.6 million people work in other on-airport positions. Another 55.3 million indirect, induced and tourism-related jobs are supported by aviation. One of the industries that relies most heavily on aviation is tourism. By facilitating tourism, air transport helps generate economic growth and alleviate poverty. Last year, approximately 1.4 billion tourists travelled in the world; over half of whom travelled to their destinations by air. Aviation till last year supported almost 37 million jobs within the tourism sector, contributing roughly USD 897 billion a year to global GDP.
Both air passenger traffic and air freight traffic are expected to more than double in the next two decades. Forecasts indicate that in 2036, aviation will provide 98 million jobs and generate USD 5.7 trillion in GDP – i.e. a 110% year on year increase from 2016.
The data above suggest there is a need for recovery and a certainty that it will be sooner than later – aviation is an important cog in the globalised world of today. How and when it would happen will depend on the shape of the recession. The fact remains that though aviation has been hit hard, it will spring back the fastest.
Economists often label recessions as alphabetical shapes, based on the shape of economic activity and projection charts. These are typically based on activity such as employment, gross domestic product (GDP, or economic growth, industrial outputted in the case of aviation – passenger traffic, air miles, airline and airport revenues and cargo tonnage/revenues. There are 4 main shapes:
V-shaped – This is considered to be the best-case scenario as this sort of downturn begins with a sharp fall, but then bottoms out and economic recovery quickly follows.
U-shaped – Similar to a V-shaped recession but lasts longer. In this scenario GDP typically shrinks for several quarters in a row, and only slowly returns to the level of growth seen before the downturn.
W-shaped – This is when a recession starts by looking like it will be a V-shaped downturn, but then falls again after what turns out to be a false sign of recovery. It is also known as a double-dip recession, because the economy drops twice before it recovers to its previous growth rate.
L-shaped – The worst-case scenario, also called depression. It is when an economy experiences a deep recession and does not recover to its previous rate of growth for several years, if ever.
There is also the “Nike swoosh” recovery, named after the iconic check-mark logo, which brings a dramatic surge and a boost that’s blunted quickly. In this scenario it takes a long while for the economy to get back to pre-pandemic trajectory.
Many analysts and policymakers believe that only a vaccine or rapid development in COVID-19 treatment will see us return to pre-pandemic projections. As long as the virus remains dangerous, growth will be suppressed. Whats is certain though is the fact that when the recovery starts, it would be on the wings of aircraft. Be it transporting vaccines, medicines ventilators or PPE equipment, aviation has an important role to play in the COVID19 recovery.
It is interesting to note that domestic traffic in China bottomed out in February 2020 itself and is showing signs of recovery. As more countries reach the peak of the virus, domestic traffic is bound to rise. It is also a fact that India has huge share of domestic traffic and as and when India peaks, a V or U shape recovery is highly likely as soon as early 2021.
In the authors’ opinion, especially from a training and employment perspective, the future is not bleak. This would actually be the right time to commence training to enter this industry, as there will be a definite requirement for trained and motivated personnel very soon.