Opinion

The high flying Aviation industry: what is left of the huge crash?

In April 2020, 20.5 million jobs evaporated. The air transport industry provides 65.5 million jobs globally and 10.2 million direct jobs

The global recession that began in 2020 was a distinct one as it was not resulting from a market crash or a housing bust but an unknown virus. The wave of loss and economic depression that trailed the pandemic year 2020 led to the suspension of economic growth as industries struggled to stay afloat.

The high flying Aviation industry

While some sectors were able to thrive through the heat of the covid-19, others could not afford the luxury of remaining in business.

The year 2021 has been expressed as a year of recovery as most sectors are trying to maintain the balance to stabilize their businesses. Walt Disney Co. is a good example of an enterprise that found it hard to maintain equilibrium, hence Disneyland Resort in Anaheim was left with no option but to close down. Thousands of workers were laid off and there was no release of a Marvel Studios movie all year.

The airline industry is a sector that experienced and continues to go through a plunge that might take years to recover. Just a few industries have experienced a massive downturn like the world aviation sector since the covid-19 crisis. With the surge in the number of daily infections, it is hard to predict when the sector will commence full activities that will kickstart the recovery. Airline chiefs have predicted that some travel companies will not make it through the pandemic.

‘I need to be clear – there is a risk that as an industry, we will not see beyond this crisis if we do not first address the issue of how we get people flying again,’  Sean Doyle, British Airways CEO stated.

The covid-19 vaccine has been seen as a means that would speed the commencement of activities. This has however been counteracted by the International Air Transport Association(IATA) analysts who stated that the covid-19 vaccines and testing procedures worldwide would not speed the recovery of demand for air travel. This would however take several years and would not reach the pre-crisis level before 2024.

Captain Nogie Megisson, Chairman of Airline Operators of Nigeria (AON) revealed that the pandemic has cost domestic carriers almost 400 billion naira and the dismissal of 250,000 staff. With the grounding of over 120 aircraft, the huge cost of servicing for equipment and planes that have been abandoned for months is a major cause of concern.

Cargo is still generating more revenue than the passenger business. Although it cannot make up for the loss in passenger revenue, it has significantly made up a larger part of the sector’s revenues. This had made it possible for airlines to thrive and remain in business.

Hence, IATA’s prediction of air cargo’s speedy recovery before commercial operations. The analysts forecast that cargo operations should recover to 2019 levels during 2021.

In a bid to assist the aviation sector in Nigeria, the Federal Government approved a bailout fund of N5 billion to operators. Senator Hadi Sirika, the Minister of Aviation disclosed that N4 billion would be for domestic airlines while the remaining N1 billion would be shared among other agencies and aviation companies severely impacted by the pandemic. The move of the government is well appreciated. This, however, cannot begin the work of recovery in the sector. The fund would be shared among 18 scheduled and non-scheduled carriers.

Nigeria’s aviation industry contributes $1.7 billion to the country’s GDP. With the prevalent crisis, there is the possibility of losing over $900 million of the country’s GDP. The Chief Operating Officer of one of the airlines revealed that C-checks maintenance was about $2 million per airplane as they would have to fly them overseas. Most of the planes have been grounded due to the lockdown that took place in April. This requires that they be taken for C-checks.

Senator Adeyemi Smart, Chairman, Senate Committee on Aviation urged the government to review the fund to a reasonable amount that can help bail out operators.

The United States aviation industry was given about $25 billion funding from the government to assist in the smooth running of activities till March 2022. The Brazilian government also ordered a relief package for its aviation sector. This includes the suspension of the air navigation fees payment by airliners for six months. If a reasonable sum is not given by the government to help commence activities, the country may experience a total close down of some air transports.

The new normal for travelers is domestic or short-haul travel for safety reasons. The implications of this are as the whole aviation industry will be heading towards recovery in 2021 compared to 2020, domestic markets are expected to perform better than International services.

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This, however, does not bypass the undeniable fact that a full recovery will take years. According to experts, passenger volumes will not return to 2019 levels until 2024.

The impact of the aviation sector is worldwide, some regions will experience recovery faster than others. The Asia Pacific will be the first to experience recovery, beginning with Chinese air operators. The country’s domestic market has begun making a profit since the end of 2020.

The major factor that made for the Chinese airlines quick recovery than other regions is the country’s ability to successfully control the virus coupled with the number of cargo operations. Airlines that have large cargo operations are performing better financially than those with just commercial passenger flights.

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Akbar Al Baker, CEO of Qatar Airways stated that while the industry outlook remains largely negative in the short term, months of forced lockdowns could lead to a spike in flight bookings when conditions improve.

He further stated that people will want to travel again, experience the world, meet friends and family. [I see] business travel restarting’.

‘In many ways, the restrictions have made people realize how precarious the ability to travel really is. And was perhaps taken for granted, he added.

Peace Omenka

I'm a news reporter/ researcher. My major expertise is developing feature stories around trending issues.

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