Twenty years ago, aviation was changed forever by the attacks on New York and Washington DC. The fact that militants, intent on martyrdom, had hijacked four aircraft to use as cruise missiles and that they happened on US soil caught security agencies on the hop and led to drastic new airport and on-board security measures. Aviation had not been immune to terrorism – Pan Am 103, which exploded over Lockerbie in 1988, was among the most notorious incidents – but the threat had suddenly changed substantially.
The outrage also set in motion a huge disruption in the industry in the first decade of the new century. Much of it may have occurred anyway, but 9/11’s shock proved a catalyst. In the USA, several major airlines entered Chapter 11 bankruptcy protection, followed by a wave of mergers. In Europe, a brash new breed of low-cost carriers – such as Ryanair and EasyJet – came to the fore, forcing established airlines to switch their short-haul business models. In the Middle East, the ambitious Gulf super-connectors, Emirates, Etihad and Qatar Airways, also seized their opportunity.
The impact of the pandemic on the industry has been much more serious than that caused by 9/11, when flights were only grounded for days. The question is how much will long-term travel habits change once borders are largely open? Will there, for instance, be far fewer business trips than before? And will the precarious cash positions of many airlines mean they will struggle to stay solvent, or will be vulnerable to takeover? Much could happen in the next years, of course, but the immediate evidence suggests major change is far from guaranteed.
Italy’s Alitalia – in deep financial trouble long before Covid-19 – has been effectively reborn as ITA, with European competition bosses last week deciding that the new entity does not have to pay €900 million in illegal state aid received by its predecessor. Meanwhile, EasyJet – a highly-geared carrier that has found itself in difficulties because of the UK’s unyielding approach to international travel rules – has turned down a takeover approach from rival Wizz and instead looked to strengthen its balance sheet with a £1.2 billion ($1.65 billion) share issue.
Japan Airlines is also going down the route of raising funding, through loans and bonds, to bolster its cash reserves and to help the acquisition of Airbus A350-1000 aircraft. British Airways is reshaping for a post-Covid era with plans for a new low-cost operation at London Gatwick, separate from its main business at Heathrow – the feeling being that short-haul leisure and “family and friends” segments will present more opportunity in the coming years than a premium, frequent flyer market that has been the carrier’s main source of profits.
The recovery from the pandemic is also likely to see accelerated progress to a greener industry. Again, it could be argued that this trend would have happened regardless of Covid, but “building back better” appears to be a sentiment that goes much wider than aviation. Sustainable aviation fuel – made from bio or waste sources – could help the industry achieve those goals. Last week, US airlines, through their industry body, increased their targets for use of SAF by a third as part of a pledge to achieve net-zero carbon emissions by 2050.
In the shorter term, the Delta variant continues to put a dampener on what had been a robust recovery by the US airline sector in the second quarter, with American Airlines, United Airlines and Delta Air Lines all trimming their financial forecasts last week. Delta’s CEO Ed Bastian (who, for understandable reasons, refers to it simply as “the variant”) says that it could be early next year before a long-anticipated rebound in business travel takes effect. Many in the industry had been hoping that Labor Day – the traditional end to the holiday period – would be the turning point.
What the crisis has proved is that forecasting – even of the short-term variety – is almost impossible, when vacillating Covid infections, illness and death rates can spark sudden and far-reaching changes in both consumer behaviour and travel rules. What seems clear after many months of lockdowns, border closures and other restrictions on movement and social interaction is that no government on Earth can defeat the virus or wish it away. The outlook for the aviation industry over the next few years depends largely on our collective attitude to living with Covid-19, and how much we as a society value the freedom to travel by air.
welcome aboard the new airside
We took our community to the next level with an elevated look, innovative features, and new tools.