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What next for aviation? - Institute for Emerging Technologies & Social Impact

What next for aviation?

Just before Christmas, under a cold, dark winter sunset, the last ever Airbus A380 to be manufactured took off from Hamburg; Germany, headed for Dubai after it was handed over to Emirates Airlines. Save for an honorary lap around the skies of the port city, the event was marked with little to no fanfare, bringing to a close an aeronautical dream that never quite took off.

When it was launched 14 years ago, the A380 was heralded as the future of the air industry; the world’s largest airliner; a superjumbo, with a capacity for more than 500 passengers over two decks and luxuries including private suites, showers and virtual windows. However, the delivery of only 250 planes since it first rolled out of production in 2007, fell far short of the original 1,000 estimate.

While passengers loved it, the appetite from the airlines disappeared just as quickly as it came, with more than 57 orders cancelled since the launch, even the superjumbo’s biggest clients, including Emirates, have turned their backs on the plane deemed too expensive, too large, too inefficient and costly to operate, opting instead for the smaller, narrower models like the Airbus A350 or the Boeing 777.

The Covid pandemic has essentially brought the industry to its knees, before the pandemic, the industry was reported to support more than USD $3.5 trillion to the global economy, however, the International Air Transport Association (IATA) predict a net industry loss of more than $108 billion for 2021, on top of the $126.4 billion losses from 2020.

The impact of these losses runs deep. Many global airlines have had to borrow vast amounts of money to stem the flow of daily expenses, and several carriers did not survive, with several notable mergers and acquisitions of big-name airlines in the past 18 months. The cost of repaying these debts continues to mount, as credit lines and ratings are cut, and refinancing becomes even more expensive. If left unchecked, this debt could eclipse industry revenues within the next three to four years.

To address this, it is likely that we the customer will bear the brunt of rising prices. As fleets have been grounded, staff put on administrative leave, if not let go, and pilots falling behind on their ‘recency’ (mandatory number of take-offs and landings) and licensing, that even when demand returns to pre-pandemic levels, it will take airlines time to catch-up and run at capacity. Until then, the passengers pocket takes the biggest hit.

But to airlines, all passengers aren’t created equal. The global business traveler market was no doubt the most profitable for airlines. Building customer loyalty through frequent flyer schemes ensured that the more expensive seats were always making money, often helping to run a profit, which meant they could afford not to sell all the seats in economy, and still run a cost-effective operation. And so, for the typical traveler, the average work trip helped to keep prices down and holiday tickets remained affordable.

However, with the pandemic all but putting a stop to global business travel, airlines quickly found that their profit margins were fast depleting, as it became increasingly uneconomical to fly half empty planes, especially when the more expensive seats were left unsold. It is no surprise then that several European operators decided to retire their fleet of A380’s entirely.

It is clear then, that the post-pandemic focus for airlines, at least in the short term, will be the leisure traveler. A McKinsey report suggests that the business traveler market will take much longer to fully recover, if it does at all. When the pandemic hit in 2020, the market had still not fully rebounded since the 2008 financial crash, coupled with the way business has adapted to remote working and corporate HQ’s now looking at reviewing the commercial need for returning to pre-pandemic travel habits: the frequent business traveler of the past is no more.

It is the families who have been separated for two years; the grandparents who are yet to see new grandchildren, those who have missed milestone occasions and families desperate for an escape from the cycle of lockdown, quarantine and homeschooling who will be the first to take to the skies en masse.

While the clouds over the horizon seem to be parting, as the global vaccine roll-out gathers pace, we’re still a world away from a return to business as usual for the industry. The pandemic has not only impacted traveler numbers, which in time will rebound, but it has also changed our traveling habits and behaviour, the impact of which, for better or worse, goes much deeper than a temporary fall in numbers. However, it isn’t all doom and gloom, particularly for those who relied on large government bailouts to survive, working alongside policy makers will help ensure the return of a greener, cleaner industry, with state-of-the-art digital infrastructures at its heart. Aviation is at a crossroads, where the next steps, taken now will help shape a reformed industry ready to meet the challenges of the next generation head on.

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