One of the most impacted sectors over the last 17 months, the aviation industry is finally witnessing green shoots, globally. The industry which once ruled the skies remained grounded for over a year across all destinations, resulting into an overall disruption of the entire ecosystem. The new normal for the world, such as social distancing, travel restrictions, virtual meetings instead of corporate and MICE physical meetings, have adversity to already struggling industry.
After 17 long months of a rollercoaster ride, the industry has started witnessing a slight uptick in growth. Globally, Governments are now focusing on speedy inoculation of their citizens to put a full stop to the pandemic. With the covid-19 numbers going southwards, destinations are now opening borders and adapting to strategies such as ‘Coexisting with covid-19’. All these conditions are projecting a better demand for the global aviation sector. Moreover, revenge tourism is also driving domestic tourism. Despite these positives, the industry is nowhere close to the 2019 or the pre-pandemic levels. Demand performance for June 2021 showed a very slight improvement in both international and domestic air travel markets.
As per IATA reports, international passenger demand in June was 80.9 per cent below June 2019, an improvement from the 85.4 per cent decline recorded in May 2021 versus two years ago. All regions, with the exception of Asia-Pacific, contributed to the slightly higher demand. Also, total domestic demand was down 22.4 per cent versus pre-crisis levels (June 2019), a slight gain over the 23.7 per cent decline recorded in May 2021 versus the 2019 period. The performance across key domestic markets was mixed with Russia reporting robust expansion while China returned to negative territory.
Willie Walsh, Director General, International Air Transport Association (IATA), says, “We are seeing movement in the right direction, particularly in some key domestic markets. But the situation for international travel is nowhere near where we need to be. June should be the start of peak season, but airlines were carrying just 20 per cent of 2019 levels. That’s not a recovery, it’s a continuing crisis caused by government inaction.”
Current Scenario
Domestic aviation across the globe have been witnessing demand, but there have been a few hindrances but country to country.
“We see domestic passenger markets recovering strongly. The global figures hide the fact that in India, for example, the domestic market is highly regulated at the moment with the government imposing both capacity and pricing restrictions, which is slowing down the recovery. Without those restrictions, I’ve no doubt that the domestic position in India would be significantly ahead. The June figures were also slightly disrupted by some outbreaks in a number of Chinese cities which caused the Chinese government to impose restrictions,” Walsh explained.
On vaccination, majority of the Asian countries have been lagging behind on their vaccination drive. With vaccination playing a major role in restart of travel, Asia is slowly restarting the aviation and it can take anywhere over six weeks to reinstate healthy numbers.
Speaking about the Asian markets, during the CAPA virtual aviation conference, Tony Fernandes, Group CEO, AirAsia, stated, “We’re kind of 18 months into the pandemic, and we’re still in lockdown, cases are record high. Domestic travel is very small at the moment. I’d say, overall, on the fleet, would be maybe 10 per cent of our fleet flying right now. So, we’ve probably got another six weeks of this and then I think things are going to start beginning to open up permanently.”
India is witnessing a positive sign in the domestic market. State Government’s reducing restrictions and allowing people to travel has once again created demand. But the Government’s price capping has not gone down well with the industry. Indigo is hopeful that it will return to the 80 per cent capacity seen in February and March. Speaking about domestic market and the price capping, William Boulter, CCO, IndiGo, explained, “We do see demand has come back – some observers think it’s coming back faster than it did after the first wave… we look forward, optimistically. We’ve made it clear that we would like to get back to 100 per cent capacity and we would like to see the price limits removed. We would obviously like to get back to the situation as it was in 2019.”
In the European market, aviation sector has witnessed a steady restart and now are working towards building capacity. The EU passport initiative has helped to boost confidence amongst travellers which is contributing to the boost in tourism growth.
Eddie Wilson, CEO, Ryanair DAC, stated, “I think it’s been a relatively strong build driven by much lower fares coming back from around a million passengers in April to the five million as we made our way up into June. I think we’re seeing that we originally had said we’re going to be north of 60 per cent of capacity and reasonably confident for the summer months that we will get up to around 75 to 80 per cent of capacity for this summer. The EU passport, the digital COVID certificate has given people the confidence to book, and with the UK and Ireland lagging, but I think the UK have with the announcement recently by the prime minister that they’re getting back to normal, we expect that will make its way into travel and we will see the return to travel without restrictions for member countries.”
International tourism
Despite opening up, international aviation is still only at one fifth of what it was pre-covid. There have been a lot of encouraging decisions by governments across the globe to open up their borders.
As per IATA reports, Canada and Singapore have recently announced timelines for the reopening of their borders. In the case of Canada, initially for people traveling from the US who are fully vaccinated from August, and it will open for other international destination from early September. The UK announced that people who are vaccinated from Europe or from the US can travel to the UK without restriction.
“International travel continues to lag significantly behind—still only about 20 per cent of where we were in 2019. And I think the message is simple. It’s clearly not where we expected to be, particularly in the context of transatlantic. But also, the performance of international travel markets is not where we need to be,” Walsh adds.
Airlines across the globe are now looking at various strategies to further get back to pre-covid levels, both in terms of passengers as well as revenue. The African continent recently witnessed the implementation of the African Continental Free Trade Area, which will further boost aviation demand across the region.
Yvonne Manzi Makolo, Chief Executive Officer, Rwandair, said, “We’ve managed to restart most of our African routes. We suspended some of the thinner routes, so we have about three routes which we’ve suspended for a few months now. We’re not ready to restart until things change, but most of the African routes are up and running, especially the regional routes, and we really want to focus on connecting Africa even better than we were before. It’s still an underserved market and we believe that there’s a lot of potential in terms of blinking the African market to each other and beyond the African continent. We’re likely to see a lot of trade between African countries, a lot of movement of goods and people across the African continent, so that’s huge potential for us and that’s another reason why we need to get this pandemic under control and get Africans vaccinated.”
Meanwhile, the Asian countries have been very cautious in terms of opening up their borders, even for the regional destinations. “International, we’ve seen Thailand kind of talking about opening October. Indonesia wanted to make a go of Bali a few weeks ago, but that may have slowed down, Philippines wants to open up tourism. It’s kind of a big thing. I think those with two vaccinations will start to be allowed to fly, but I think probably towards the end of the year, October or November we’ll start seeing it,” Fernandes adds.
Vaccine inequality
Air travel recovery is also linked to the rate of vaccination across the globe. Today, due to socio-economical challenges, in most of the low and middle-income countries, the vaccination rate is way below the global average. Also, another major hinderance for the international aviation recovery is the approval of vaccinations. WTTC believes that the lack of international coordination to agree on a list of approved vaccines, is creating yet another major stumbling block for the restart of international travel.
Virginia Messina, Senior Vice President WTTC, stated, “Reciprocal recognition of all vaccine types and batches is essential if we are to avoid any further unnecessary and damaging delay to restarting international travel. The failure of countries to agree on a common list of all approved and recognised vaccines is of huge concern to WTTC, as we know every day travel is curbed, more cash-strapped Travel & Tourism businesses face even greater strain, pushing ever more to the brink of bankruptcy. We can avoid this by having a fully recognised list of all the approved vaccines – and vaccine batches – which should be the key to unlocking international travel, not the door to preventing it.”
As per WHO, vaccine inequity will threaten all countries and risks reversing hard won progress on the Sustainable Development Goals. Sharing his views about the vaccine inequality, Dr Tedros Adhanom Ghebreyesus, Director-General, World Health Organization, said, “Vaccine inequity is the world’s biggest obstacle to ending this pandemic and recovering from COVID-19. Economically, epidemiologically and morally, it is in all countries’ best interest to use the latest available data to make lifesaving vaccines available to all.”
These effects have been witnessed, especially, in the Asia and Africa market. The aviation industry has also been majorly hit by the vaccine inequality challenge which has prolonged the recovery time.
Fernandes, stated, “I am ever optimistic, that there is an ending to the pandemic. The vaccines are coming in and we can see from our brothers in Europe and America, that life is becoming to go back to normal. Now, due to the inequality, I don’t know, however you want to look at it, of vaccines, we’re about five months behind everybody, but we’ll get there in the end.”
Similarly, the entire African continent has witnessed a severe shortage of vaccine and only less than two per cent of the people in the continent have been vaccinated.
Echoing similar opinion, Makolo, added, “A lot of African countries have managed to contain the pandemic pretty well for the last, almost, year and a half now, including Rwanda, which is where we operate from, but unfortunately, given the issue of vaccine inequity, a lot of African countries have not been able to get the vaccines that they had hoped for, including Rwanda, so we’re seeing a situation where for the entire African continent, less than two per cent of the population is vaccinated, which is very worrying, and which gives us a lot of concern in the aviation industry in terms of the food we start off of the industry.”
Fleet expansion
Despite challenges, IndiGo is receiving its fleet delivery as scheduled. The airline has witnessed a 15 per cent improvement in terms of fuel burn.
“There’s no change in our aircraft delivery schedule due to COVID-19. We are very much still on schedule, we have not delayed or deferred any aircraft orders from Airbus or ATR. I think I’m right in saying that in 2020 IndiGo was Airbus’ largest customer in terms of the number of aircraft delivered, at around 44. We find that receiving these aircraft as scheduled helps with our fuel bill, we’re taking delivery of A320neos and A321neos, and the improvement in fuel burn is around 15 per cent, which obviously assists greatly in reducing our cost per available seat kilometre,” Boulter says.
RyanAir will be inducting over 60 Boeing- 737 MAX aircrafts in 2022. The airline is set to witness a better sustainability and revenue with the new fleet.
“As I say, there’s over 60 of them arriving for summer ’22, and we’re just working through where they’re going to go at the moment. They’ve got 16 per cent less fuel, burn 40 per cent less emissions, and eight more seats, and it really is, as we say, going to be a game changer for this airline, particularly on its cost and environmental footprint as well, and that will gradually become a larger part of the fleet over the next number of years,” Wilson adds.
