The COVID-19 pandemic has affected all industries and the economy overall. The aviation and travel industry has taken a particularly nasty beating out of nowhere. As we're halfway through 2020, the situation doesn't seem to improve enough to allow the air industry to take to the skies fully just yet. The future of aviation and airlines currently, is stuck in limbo.
What's the market like now?
As of 10 July 2020, the new confirmation that COVID-19 can be airborne especially in poorly ventilated spaces, will drive the appeal to travel in a pressurised can in the air is going to plummet among both leisure and business travellers. It should not come to a surprise that the uncertainty of the market is one that ultimately will kill businesses, and in this case, airlines. The industry cannot only put all its resources into life-support and keep the business afloat. The dam will crack, and when it does, the air industry will turn to chaos.
COVID-19 is the hardest hitting pandemic the world has seen since the Spanish Flu, and it is also one that has the most devastating effects on the economy. How will the air industry evolve to cope?
How does the industry work?
The airline industry is now in a bubble of survival, and the bubble is growing day by day, which may continue to grow after COVID-19. When this bubble burst, the question will be when air travel starts to pick up again. To understand the effect, we need to understand the basics of airlines and their business.
Airlines exist to carry people and cargo from Point A to Point B. If you take the aircraft and slice it in half horizontally, you get the two main business for the airlines. When COVID-19 happened, airlines were not only in a money-losing standpoint but also were suffering because of the imbalanced business equilibrium and became very bottom-heavy. Airlines don't make enough money on cargo or passengers alone. They need both of these to be successful.
Is the bubble really an issue?
When the world saw air travel becoming ever accessible and more affordable, airlines invest most of their money on the passenger experience and forgo freight aircraft. So they are in a position where their planes now are too expensive to run to service the air freight industry. As a result, they end up only maintaining flights for repatriation of citizens and running at 300%-700% of the usual rate. This phenomenon creates an almost unprecedented demand, causing the bubble to grow. The price bubble for travel and cargo is at an all-time high, and when the time comes for travel to continue, this bubble will burst and what we will see is many airlines struggle to stay afloat and drive the demand back up.
There are multiple reasons why demands will drop:
- The cost of airfares and cargo will be at an all-time high
- New normals will drive the appeal of air travel down, and they will not see the travel demand rebound as quickly as they would hope
- The market will have a demand, the carriers will have the supply, but the price mismatch will cause a gap in the market.
This gap will not only continue to grow as the aviation industry started to recover, and airlines will have to find new ways of operating, both passenger wise and cargo wise. The traditional ways of the industry will be hard to sustain, and airlines need to be flexible on how to rebound faster and more efficiently and start to reposition in a modern stance in the market and offer more instant and more flexibility.