The battle against the Corona virus created an extraordinary situation, halting flights almost completely — domestic and moreover international flights. It seems furthermore unprecedented in its scale, geographic span, and duration (days still counting). The crisis already threatens airlines round the globe. The future for the aviation industry is ambiguous at the moment with a variety of scenarios and policy suggestions being floated on how air travel will be able to resume. It may take anywhere between two years to five years for flights to gain some resemblance to how they were operated and experienced until not long ago — unless many of the measures, checks and restrictions suggested now prove to be unnecessary by the end of next year.
The demand for international flights is in sharp decline as prospect air passengers are deeply worried of contracting the virus during travel or while staying in another country, and becoming ill with COVID-19. But even if consumers were willing to take their chances and travel, their options currently are very limited, if any, because most airplanes are simply grounded due to border closures and severe travel restrictions. The fall in air travel is therefore caused not just by lower demand but also by serious lack in availability of flights forced by governments’ orders. It is noticeable, nevertheless, that governments are reluctant to accept tourists from abroad even more strongly than residents of one country are being reluctant to take the risk and travel to another country. Many countries are self-protective, driven by fear of the virus being imported into the hosting country and transmitting COVID-19 to its residents. As the risk of the coronavirus lingers, more focused accurate measures will have to be taken to identify and incept ‘corona-susceptible’ air passengers at countries’ gates (outbound and inbound) instead of superfluous bans.
When airlines do return (forthcoming) to carry out international flights, at least more substantially than exist nowadays, they are expected to increase availability in a very gradual pace, flying at first to limited destinations (e.g., closer or ‘virus-free’ countries), and at reduced frequency, and then cautiously expanding travel options. Continuing restrictions and checks of air travellers may further curtail demand for international flights. Interestingly, not much, and probably not enough, is said about monitoring and protecting entries through gates other than in airports, such as railway stations and seaports. Additionally, passengers may be encouraged to travel by train to closer destinations (domestic or in neighbouring countries that can be reached in 2-4 hours), but are trains safer for travel than airplanes? Standing issues concern both the risk of exposure during the journey and the risk of contagious passengers carrying the virus between cities and countries. It is not that clear how priorities should be set between airplanes and trains, for instance, on shorter routes, within or across borders.
Air passenger travel worldwide suffered a serious blow in March. During this month the virus made its major advance, spreading especially in Western Europe and the USA. According to figures published by the International Air Transport Association (IATA), the industry-wide volume of revenue passenger kilometres (RPK) (including domestic and international flights) fell 52.9% in March 2020 compared with March of last year. It implies in seasonally-adjusted terms that air travel of passengers returned to levels last seen in 2006. The negative impact of COVID-19 is greater than in the aftermath of the 9/11 terror attacks of 2001. The decline in RPKs is expected to have deepened in April as lockdowns were imposed and extended in so many countries.
The decline in RPKs on international flights (55.8%) was greater than on domestic flights (47.8%)(March changes year-on-year). Specifically, the fall in international RPKs is evident more strongly in airlines in Europe and North America (~54%) than airlines in the Middle East and Latin America (46%) or Africa (43%)(airlines classified by their region of registration). As noted earlier, capacity was also reduced by flight cancellations, thus creating a significant cap on potential RPKs of air passengers. But at least initially the drop in capacity followed the decline in demand; the capacity was reduced deliberately to contain the decline in load factors (the proportion of available seats on a flight that are sold and occupied by passengers). The capacity, measured in available seat kilometres (ASK), dropped 42.8% in March year-on-year on international flights; load factors declined meanwhile by 18.4 percentage points* (more significantly in North America and Asia Pacific). (Sources: IATA Press Release 36: “Passenger Demand Plunges as Travel Restrictions Take Hold“, 29 April 2020 + Economics Report “Air Passenger Market Analysis”, March 2020; * for all flights, domestic and international, load factor level dropped 21.4pp, from 82.1% high in March 2019 to 60.6% low in March 2020).
The effects of the Corona pandemic crisis on air transport are complex and multi-faceted. They can be identified on three major fronts: (1) Supply-side — airlines (e.g., aircrafts, pilots); (2) Demand-side — leisure and business travellers; (3) Government-side — restrictions on cross-border flows, social distancing, and quarantine requirements (see: “Coronavirus: How Will Airlines Get Flying Again”?, Theo Leggett, BBC News: Business, 30 April 2020). Implications will have to be addressed on each front in aim to formulate measures and models of operation that will enable air passengers to travel as reasonably as possible. Business and academic travellers (e.g., for attending conferences and exhibitions) may be particularly negatively affected by constraining requirements. It appears already very clear that the extent and composition of requirements, restrictions and checks (e.g., medical tests) imposed on airlines, airports and air passengers for the foreseeable future are going to have a critical effect on the willingness of air passengers to take flights sooner and more frequently.
Consider as a special example the requirement from passengers to self-quarantine for 14 days — Having to stay at home upon return from travel, confined and unable to go back to work, seeing family or doing any other activities outdoors after each travel, may be very restrictive and too costly. The thought of it might be greatly discouraging for consumers from travelling abroad, inducing them to consider very carefully each travel, and to minimise flights as much as possible until this requirement is lifted. However, requiring air passengers who come as tourists to quarantine for 14 days in the hosting country, and doing so in a private residence (e.g., a measure planned in the United Kingdom), is most likely to have a fatal impact on incoming tourism as long as such a requirement is in place. It will be damaging not only for airlines and airports but also for hotels, restaurants, and other venues of touristic attraction since it may extend their business troubles far longer.
In the early period after air travel is awaken, aviation experts expect that airlines will start with lower air fares to stimulate demand from air passengers. Yet, if airlines are required to keep middle seats on each row vacant for maintaining social distancing on aircrafts, they will need to raise air fares significantly (by at least 50%) to compensate for a low load factor on each flight (in other words, the fewer passengers on a flight will have mostly to bear the cost burden). (“Air Fares Face Turbulence When Flights Slowly Restart”, Justin Harper, BBC News: Business, 6 May 2020). This requirement will pose a significant cap on the numbers of passengers that may board flights, receiving strong opposition from IATA. Economists of IATA estimate that the capacity of seats allowed to be occupied will be reduced by 33%-50% (e.g., suppose that on a row with 3-3 seats, 2 or 3 seats have to be left vacant). The bookable capacity is expected in these circumstances to achieve just 62% (setting a maximum on load factors); a survey of 122 airlines conducted by IATA suggests that airlines break-even at a load factor of 77% on average (only 4 airlines can make profit with load factors under 62%). Considering that subject to seasonality differences airlines get to fill 80%-85% of the bookable capacity (i.e., normal load factor), then with the cap imposed, and given current pricing policies, the airlines may get an effective load factor of 53%, guaranteeing loss for most of them. (“IATA Economics‘ Chart of the Week” on Social Distancing, 8 May 2020; distinction between domestic and international flights is made for part of the information on load factors.)
Air fares can be expected to climb gradually in any case as demand for international flights is revived, but the cap generated by rules of social distancing may lead airlines to raise prices much higher. In an optimistic scenario for the airlines, air passengers may be fighting over the lower capacity of bookable seats and the airlines will be able to fulfill nearly all of them. Still, according to the analysis of IATA that will not be enough for the great majority of airlines to make profit on their flights. As long as demand remains relatively weak, it will be less feasible for airlines to charge the air fares needed just to break-even due to capped load factors. Brian Pearce, IATA’s chief economist (cited by Harper in his BBC article), argues that wearing face masks would be more effective for safe flying on board aircrafts than leaving empty seat-spaces between passengers sanctioned by social distancing. The consequences for airlines are made clear. The implications (cost, inconvenience) do not seem bright for air passengers either way.
Many question marks still hover above air passenger travel for coming months. The purpose of restrictions and checks, in intention to keep passengers and aviation personnel safe from contracting COVID-19, is well understood and appreciated. Nonetheless, some of those measures enforced and planned are constricting the possibilities for travel of interested air passengers and debilitating the aviation industry. Hence, it is hoped that authorities, airlines and airports will be able to devise schemes, agreed between more countries, that will monitor, inspect and reduce the threat of infection without making barriers on flight journeys formidable for air passengers. If we are fortunate enough, those measures will be relieved step by step in the course of the next five years, and air travel flows again more freely.
Feel Well. Keep Good Health.