The Impact of the COVID-19 Pandemic on the Aviation Industry

Abstract

The impact of the pandemic is far from over, with most countries still grappling with whether and how to lift lockdowns and travel bans. The aim of this paper is to provide insights into the how the COVID-19 pandemic has impacted on international aviation. First, a brief review of the literature regarding previous crises that affected the aviation industry in recent decades is provided. Next, utilising PEST (Political, Economic, Socio-Cultural, and Technological factors) analysis, the influence of the pandemic on the aviation industry is investigated. The findings indicate that the aviation industry will enter a new round of the adjustment cycle, with the possibility of a large number of airlines going bankrupt, whilst others will need to reorganise, or be subject to merger with, or acquisition by, larger players in the sector. It would appear that the recovery of the aviation industry will be a long and slow process. Moreover, existing aviation business models may well need to be replaced by new ones, with airlines having to develop in the direction of unmanned and contactless service provision. The article is concluded with short-term and long-term recommendations for airlines regarding recovery of the demand for air travel.

Keywords

• airline
• aviation
• business
• PEST analysis
• COVID-19.

References

1. [1] IATA, “IATA / UPU Warn of Air Capacity Shortage”, IATA. Available at: https://www.iata.org/en/pressroom/pr/2020-05-04-01/ [Accessed September 2, 2021].
2. [2] IATA, “Air Passenger Market Analysis”, IATA. Available at: https://www.iata.org/en/iata-repository/publications/economic-reports/air-passenger-monthly-analysis---mar-2020/ [Accessed September 2, 2021].
3. [3] IATA, “International Air Traffic Drops 18.5% in April”, International Air Transport Association. Available at: https://www.iata.org/en/pressroom/pr/2003-05-23-01/> [Accessed September 2, 2021].
4. [4] M. Cherney, “Bankrupt Virgin australia's foreign backers BECAME liability in search for bailout”, The Wall Street Journal. Available at: https://www.wsj.com/articles/bankrupt-virgin-australias-foreign-backers-became-liability-in-search-for-bailout-11587462987 [Accessed September 2, 2021].
5. [5] T. Boon, “Air Mauritius placed into administration”, Simple Flying. Available at: https://simpleflying.com/air-mauritius-administration/ [Accessed September 2, 2021].
6. [6] M. Rochabrun, D. K. Kumar and N. Bocanegra, “World’s second-oldest airline, Avianca, driven to bankruptcy by coronavirus”, Finance. Available at: https://finance.yahoo.com/news/colombias-avianca-airline-files-bankruptcy-174035790.html [Accessed September 2, 2021].
7. [7] EMA. “Media Briefing COVID-19”. EMA. Available at: https://www.iata.org/contentassets/50aef8da0fbd47298a3bb2aa52a9ec77/010720_ame-media-briefing.pdf [Accessed September 2, 2021].
8. [8] B. Jones, “Power Line: The real reason crude oil went negative, top oil stock picks, and why the clean-energy transition endures”, Business Insider Australia. Available at: https://www.businessinsider.com.au/power-line-why-oil-prices-went-negative-levels-of-detail-2020-4?r=US&IR=T [Accessed September 2, 2021].

9. [9] M. DeCambre, “Buffett says he Dumped entire stake in AIRLINE-SECTOR stocks: 'the world changed for AIRLINES' Amid coronavirus”, MarketWatch. Available at: https://www.marketwatch.com/story/buffett-dumps-entire-airline-stake-saying-the-world-changed-for-airlines-2020-05-02 [Accessed September 2, 2021].
10. [10] A. Cento, “The airline industry: challenges in the 21st century”, Springer Science & Business Media.
11. [11] ANDERSON. Air travel in the Upstate affected by 9/11 attacks”. “GoUpstate. Available at: https://www.goupstate.com/news/20091230/air-travel-in-the-upstate-affected-by-911-attacks [Accessed September 2, 2021].
12. [12] D. E. Clark, J. M. McGibany and A. Myers, “The effects of 9/11 on the airline travel industry. In The Impact of 9/11 on Business and Economics”, Palgrave Macmillan, New York. (pp. 75-86).
13. [13] J. Price and J. Forrest, “Practical aviation security: predicting and preventing future threats”, Butterworth-Heinemann. s.n., pp. 1-43.
14. [14] G. Blalock, V. Kadiyali and D. H. Simon, “The impact of post-9/11 airport security measures on the demand for air travel”, the Journal of Law and Economics, 50(4), 731-755.
15. [15] H., Kim and Z. Gu, “Impact of the 9/11 terrorist attacks on the return and risk of airline stocks”, Tourism and Hospitality Research, 5(2), 150-163.
16. [16] R. Bor, “Psychological factors in airline passenger and crew behaviour: a clinical overview”, Travel medicine and infectious disease, 5(4), 207-216.
17. [17] D. Rassy and R. D. Smith, “The economic impact of H1N1 on Mexico's tourist and pork sectors”, Health economics, 22(7), 824-834.
18. [18] World Health Organization, “SARS outbreak contained worldwide”. Available at: https://www.who.int/news-room/detail/05-07-2003-sars-outbreak-contained-worldwide> [Accessed September 2, 2021].
19. [19] IATA, “COVID-19 Puts Over Half of 2020 Passenger Revenues at Risk”, IATA. Available at: https://www.iata.org/en/pressroom/pr/2020-04-14-01/ [Accessed September 2, 2021].
20. [20] K. S. Kohl, R. R. Arthur, R. O’Connor and J. Fernandez, “Assessment of public health events through international health regulations”, United States, 2007–2011. Emerging infectious diseases, 18(7), 1047.
21. [21] IATA, “Traffic Volumes Improve, but Costs Rising - Profitability Remains Distant”, International Air Transport Association. Available at: https://www.iata.org/en/pressroom/pr/2009-09-29-01/> [Accessed September 2, 2021].
22. [22] M. Terry, “Compare: 2009 H1N1 Pandemic Versus the 2020 Coronavirus Pandemic, BioSpace”, BioSpace. Available at: https://www.biospace.com/article/2009-h1n1-pandemic-versus-the-2020-coronavirus-pandemic/> [Accessed September 2, 2021].
23. [23] IATA, “IATA Economics’ Chart of the Week Passenger confidence key to the post-COVID-19 recovery in air travel”, IATA. Available at: https://www.iata.org/en/iata-repository/publications/economic-reports/passenger-confidence-key-to-the-post-covid-19-recovery-in-air-travel/ [Accessed September 2, 2021].
24. [24] F. Dobruszkes and G. Van Hamme, “The impact of the current economic crisis on the geography of air traffic volumes: an empirical analysis”, Journal of transport geography, 19(6), 1387-1398.
25. [25] C. Barbot, Á. Costa and E. Sochirca, “Airlines performance in the new market context: A comparative productivity and efficiency analysis”, Journal of Air Transport Management, 14(5), 270-274.
26. [26] M. Franke and F. John, “What comes next after recession?–Airline industry scenarios and potential end games”, Journal of Air Transport Management, 17(1), 19-26.
27. [27] L. Dwyer, “Globalization of tourism: Drivers and outcomes”, Tourism Recreation Research, 40(3), 326-339.
28. [28] D. Rodrik, “Premature deindustrialization”, Journal of economic growth, 21(1), 1-33.
29. [29] M. Nandha, R. Brooks and F. A. Robert, “Oil, oil volatility and airline stocks: a global analysis”, Accounting and Management Information Systems, 12(2), 302.
30. [30] IATA, “IATA Economics’ Chart of the Week Passenger confidence key to the post-COVID-19 recovery in air travel”, IATA. Available at: https://www.iata.org/en/iata-repository/publications/economic-reports/passenger-confidence-key-to-the-post-covid-19-recovery-in-air-travel/ [Accessed September 2, 2021].
31. [31] Al Jazeera. Report: US, Canada to Extend travel ban through June 21 “Coronavirus pandemic” Al Jazeera. Available at: https://www.aljazeera.com/news/2020/05/report-canada-extend-travel-ban-june-21-200513141155531.html [Accessed September 2, 2021].
32. [32] H. Pym, “Coronavirus: Social restrictions “to remain for rest of year.”, BBC News. Available at: https://www.bbc.com/news/uk-politics-52389285 [Accessed September 2, 2021].
33. [33] L. Ramsey, “The Anti-Globalization Pandemic”, Laurent Ramsey. Milken Institute. Available at: https://milkeninstitute.org/power-of-ideas/anti-globalization-pandemic
34. [34] R. Fontaine, “Globalization will look very different after the coronavirus pandemic”, Foreign Policy, Available at: https://foreignpolicy.com/2020/04/17/globalization-trade-war-after-coronavirus-pandemic/ [Accessed September 2, 2021].
35. [35] R. Leering, “Trade war: Where is Trump heading? ” , ING. Available at: https://think.ing.com/articles/trade-war-where-is-trump-heading/ [Accessed September 2, 2021].
36. [36] D. Dumas, Bondi beach: “How the Australian icon became a coronavirus hotspot”, The Guardian, Available at: https://www.theguardian.com/australia-news/2020/apr/05/bondi-beach-how-the-australian-icon-became-a-coronavirus-hotspot [Accessed September 2, 2021].
37. [37] R. Davies, “Ryanair boss says airline won't fly with 'idiotic' social distancing rules”, The Guardian, Available at: https://www.theguardian.com/business/2020/apr/22/ryanair-boss-says-airline-wont-fly-with-idiotic-social-distancing-rules [Accessed September 2, 2021].
38. [38] J. Shieber and D. Crichton, “Stock markets halted for unprecedented third time due to coronavirus scare”, TC. Available at: https://techcrunch.com/ [Accessed September 2, 2021].
39. [39] R. J. Partington, “The verdict on 10 years of quantitative easing”, The Guardian. Available at: https://www.theguardian.com/business/2019/mar/08/the-verdict-on-10-years-of-quantitative-easing [Accessed September 2, 2021].
40. [40] History.com Editors, “Great depression history”, History.com, Available at: https://www.history.com/topics/great-depression/great-depression-history [Accessed September 2, 2021].
41. [41] J. D. Sachs, “We’re already in a Great Depression”, CNN. Available at: https://edition.cnn.com/2020/05/18/opinions/coronavirus-recession-economy-public-health-trump-sachs/index.html [Accessed September 2, 2021].
42. [42] J. Lee, “Negative Oil Prices Were a Warning, Not an Anomaly”, Bloomberg. Available at: https://www.bloomberg.com/opinion/articles/2020-04-26/negative-oil-prices-were-a-warning-not-an-anomaly-in-covid-19-era [Accessed September 2, 2021].
43. [43] C. Olisah, “Crude oil prices surge higher, Brent crude nears $30 per barrel”. Nairametrics. Available at: https://nairametrics.com/2020/05/05/crude-oil-prices-surge-higher-brent-crude-nears-30-per-barrel/ [Accessed September 2, 2021].
44. [44] S. Ziv, “Don’t Be Fooled By Official Unemployment Rate Of 14.7%; The Real Figure Is Even Scarier”. Forbes. Available at: https://www.forbes.com/sites/shaharziv/2020/05/10/dont-be-fooled-by-official-unemployment-rate-of-147-the-real-figure-is-even-scarier/#68282e4855d [Accessed September 2, 2021].
45. [45] K. Purohit and T. Mukherjee, “Foreign tourists face hostility in India amid coronavirus panic”, Alzajeera. Available at: https://www.aljazeera.com/news/2020/03/foreign-tourists-face-hostility-india-coronavirus-panic-200324083648362.html [Accessed September 2, 2021].
46. [46] K. Jones, “How COVID-19 Consumer Spending is Impacting Industries”, Visual Capitalist. Available at: https://www.visualcapitalist.com/consumer-spending-impacting-industries/ [Accessed September 2, 2021].
47. [47] T. Lewis-Simó, “UCLA community responds to increased racism toward Asian Americans during pandemic”, Daily Bruin. Available at: https://dailybruin.com/2020/05/13/ucla-community-responds-to-increased-racism-toward-asian-americans-during-pandemic [Accessed September 2, 2021].
48. [48] L. Jue, “Activists Warn Anti-Asian Racism Likely to Worsen After Lockdown Lifts”, San Francisco Public Press. Available at: https://sfpublicpress.org/activists-warn-anti-asian-racism-likely-to-worsen-after-lockdown-lifts/ [Accessed September 2, 2021].
49. [49] Johnson, C. Y. (2020). Moderna’s coronavirus vaccine shows encouraging early results. The Washington Post. Retrieved from https://www.washingtonpost.com/health/2020/05/18/coronavirus-vaccine-first-results/
50. [50] B. Boshra, “Public health agency of Canada Using FLU tracking system to Monitor covid-19”, Montreal. Available at: https://montreal.ctvnews.ca/public-health-agency-of-canada-using-flu-tracking-system-to-monitor-covid-19-1.4920401 [Accessed September 2, 2021].
51. [51] K. Aziz, S. Tarapiah, S. H. Ismail, S. Atalla. “Smart real-time healthcare monitoring and tracking system using GSM/GPS technologies”. In 2016 3rd MEC International Conference on Big Data and Smart City (ICBDSC) (pp. 1-7).
52. [52] J. Bird, “Zero contact everything: Coronavirus causes the rapid rise of 'no touch' retail”, Forbes, Available at: https://www.forbes.com/sites/jonbird1/2020/03/29/zero-contact-everything-coronavirus- causes-the-rapid-rise-of-no-touch-retail/#4abd738e38cf [Accessed September 2, 2021].
53. [53] IATA, “Immediate and Severe Air Cargo Capacity Crunch”, IATA. Available at: https://www.iata.org/en/pressroom/pr/2020-04-28-01/ [Accessed September 2, 2021].
54. [54] World Health Organization, “Coronavirus disease (COVID-19) pandemic”. Available at: https://www.who.int/emergencies/diseases/novel-coronavirus-2019 [Accessed September 2, 2021].
55. [55] C. Y. Johnson, Moderna’s coronavirus vaccine shows encouraging early results”, The Washington Post. Available at: https://www.washingtonpost.com/health/2020/05/18/coronavirus-vaccine-first-results/ [Accessed September 2, 2021].
56. [56] IATA, “International Labour Organization. “Statistics and databases. Available at: https://www.ilo.org/global/statistics-and-databases/lang--en/index.htm [Accessed September 2, 2021].
57. [57] IATA, “IATA Economics’ Chart of the Week Passenger confidence key to the post-COVID-19 recovery in air travel”, IATA. Available at: https://www.iata.org/en/iata-repository/publications/economic-reports/passenger-confidence-key-to-the-post-covid-19-recovery-in-air-travel/ [Accessed September 2, 2021].