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Aviation returns to the 1930s

Analysis

There’s been much talk about the post-COVID industry reverting to the profile of the 1970s, with its reduced traffic levels, the prospect of more active government intervention, smaller networks and higher prices.

But in two very important ways the real timeframe to compare is the 1930s. There are important lessons to be learned from industry and government behaviour 90 years ago.

First of all, WWI had spawned the multilateral Paris Convention of 1919, which established that every state had absolute sovereignty in the airspace over its territory, a response to the new aircraft that easily crossed boundaries. That meant essentially that all borders were closed to foreign aircraft and permission became necessary even to overfly.

Secondly, in the earlier, barnstorming days of aviation the biggest inhibitor of commercial air travel expansion was safety. There was an uncomfortable tendency for airlines to crash, a feature that would-be passengers found undesirable.

Summary: Disruption on a massive scale

  • The aviation industry is headed for a previously unimagined level of disruption as the next few months unfold
  • So long as borders are closed, wholly or partially, international recovery is impossible
  • Encouraging passengers back into flying, and relaxing border controls will be key to recovery – but slowed by the deep recession that is now inevitable
  • Business and corporate travel will be subdued by a combination of weak economic conditions, employer concerns over duty of care, and in the near term by the resurgence of teleconferencing
  • The industry profile will change drastically, affected by the reduction in high yield business travel, as airlines disappear or reinvent themselves and as opportunistic new entrants appear
  • Airports will need to adapt, expensively and innovatively: they may not be prepared
  • Environmental issues will still need to be addressed and can impact regrowth
  • The industry will resort to a greater reliance on loyalty programmes, IT solutions and E-commerce – and partnerships

This is an extract from the report "Aviation returns to the 1930s", contained in
Airline Leader, Issue #53

The 1930s parallel translates to 2020

Aside from the cost of flying and the lack of comfort – two characteristics that once again emerge in our current condition – people were unwilling in the 1930s to embark on such dangerous missions.

It took many years for each of these constraints to be overcome. It really took until after the second World War for intergovernmental agreement on new norms was achieved, mostly around standardising safety regulation.

Today, national borders are closed, but passenger confidence will spawn recovery

Today, most national borders are effectively closed to airline operations. And once again it is the fear of illness, and perhaps death, that has been clearly demonstrated as a major deterrent to air travel. Air travel is itself a generic spreader of disease, as are other forms of transport; that is a prime motivator of government restrictions on international travel, making extensive cross border operations near-impossible.

But it will ultimately be the willingness – or not – of travellers to fly that will decide how and when air travel recovers. And they will make their decisions based on their personal confidence about safety.

Clear evidence is now emerging that even short haul domestic travellers are actively deterred from flying where COVID-19 cases are surging; recent experiences in the US and elsewhere have shown that. Simply adding capacity and even ultra-low fares will not persuade travellers back into the air if sanitary and health conditions are risky. The basic challenge is winning hearts and minds.

Safety should not be a marketing weapon

Some airlines are blocking middle seats as a token move towards social distancing, and marketing the fact as a travel incentive. This cannot ultimately allow commercial returns for the airline, but it may help build customer loyalty for the future.

For nearly a century, airlines have eschewed marketing passenger safety. Selling a “safer” in-flight solution, whether by keeping a middle seat empty or using other differentiators is not where airlines need to be. From a public point of view it is clearly highly preferable for standards to be agreed - or set - across the industry. Seeking to differentiate on safety grounds can rapidly undermine consumer confidence in the industry overall.

In other words, aviation’s recovery rests in the hands of airlines and airports collectively – not individually - to provide an environment for travel which is visibly and practically safe.

That won’t be easy. It will require significant operational changes to provide the levels of comfort and security that the bulk of travellers need.

By the same token, governments have also shown they are unwilling to open borders unconditionally where their residents are likely to be at risk. It has to be assumed that these policies also reflect popular feeling, as well as a perceived national health responsibility.

So, for the time being, we remain firmly rooted in the 1930s.

How quickly we forget; being prepared

 A few years after the briefly devastating 2003/04 SARS phenomenon it was largely forgotten by most of the world, despite the WHO announcing that the next similar event was “not a matter of whether, but of when”. Even the appearance of the H1N1 and MERS viruses did not enlighten national authorities, preoccupied with more pressing economic and political matters.

 Exceptions were one or two prescient governments like Korea and Taiwan, allowing them to avoid the worst of the COVID-19 impact. Each had suffered quickly with SARS.

 Even Hong Kong, where flag carrier Cathay Pacific had been only days from being forced to ground its entire fleet, failed in its preparations.

Despite its proximity to mainland China, which can be seen by the naked eye from some regions, Taiwan, with a population of 24 million, has had only 486 cases and seven deaths from coronavirus as of mid-Aug-2020.

Perhaps in future other jurisdictions will be similarly well prepared – but probably not, particularly where the event is politicised in the conflict between the economy and avoiding infection. This increasingly appears a fallacy, as the two issues are joined at the hip.

CAPALIVE “Unprecedented” is the word most often used. It means: There is no precedent for this uncertainty

Many observers have sought to extrapolate from earlier occurrences like the viral SARS and the Global Financial Crisis of 2008 onwards.

There is no precedent for what is happening now.

This is important to recognise, because it makes sound predictions from our new starting point impossible. Some things will never be the same again (even though many things that appear impossible today may look different in a year’s time.)

Emphasising the scale of difference, in 2009 the century’s steepest global y-o-y drop in passenger numbers occurred post-GFC, falling -0.4%*. (*ICAO Annual Report 2015, Appx 1)

Estimates for the full year 2020 are that passenger traffic will be down by some 60%. 

Annual pax numbers decreased by only -0.4% after the GFC in 2019

GFC PAX DECLINE

In 2020 pax numbers will fall by ~60% (annual seat capacity will reduce by ~40%)

To read the full text of the report "Aviation returns to the 1930s",
please go to Airline Leader #53, to download the entire 57 page issue free of charge.
See contents index below.

Airline Leader #53: Contents

AIRLINE LEADER CONTENTS

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