Even more than the 9/11 terrorist attacks or the 2008-2009 financial crisis, Covid-19 rocked the aviation industry to its core. Many of the scars will be permanent and visible. Based on our most recent analysis, the aviation industry is unlikely to recover to pre-Covid levels until the second half of 2022 at the earliest – and even then, it will only be in domestic travel.
Between bankruptcies and consolidations, there will certainly be 20 fewer airports flying worldwide by 2023. And those that survive will serve simpler networks, built almost exclusively around connections through their larger hubs and markets.
Cheaper flights, but fewer options
For consumers, the sector’s contract likely means fewer direct flights and less choice in flights from smaller cities. Initially, carriers may cut rates to increase demand, but the effectiveness of that strategy will be limited by economic uncertainty and high levels of unemployment in many countries. Discounts will likely only last until the sector begins to see a sustained demand rebound, which will depend on the virus and the development of a vaccine.
More airline employees will lose their jobs
But while airlines need to reduce payroll roles to reduce costs, they also need to retain the right employees to facilitate growth when the sector returns.
No full recovery for business travel
One factor holding back demand is the expected shrinkage in business travel. We expect that for the foreseeable future, at least in 2021, at least 25% will remain below pre-pandemic levels, as companies cut back on travel between their own offices and facilities, instead of relying on video conferencing. Such internal travel, which also includes management meetings and professional development, accounts for about 40% of the total business demand, according to our analysis. We expect external travel to return, but at a slower rate than domestic holiday travel.
International travel will remain slow
Another area that is not expected to fully recover over the next three years is international travel, in part based on the number of travel restrictions that have been put in place to prevent Covid-19 from slipping across borders. Americans today are unable to travel to many countries due to concerns about increasing numbers of coronavirus cases in the United States.
More than half also said that the coronavirus will change the way they travel and their choice of destinations for the foreseeable future, favoring places based on safety and hygiene. International travel, which is likely to be more dependent on the development of a vaccine, is not expected to return to 2019 levels by 2023.
We predict that only China, South Korea, Italy, Norway, New Zealand and Greece will be able to meet 75% of 2019 domestic travel demand. These countries are one of those that could have contained the virus and see a return in bookings. Recovery in the rest of the world will come significantly slower – with the United States, for example, expecting the end of 2020 to be at only 40% of demand.
Although the sector’s long-term outlook is bleak, the expected industrial contraction – similar to what followed the last major recession – should help fuel another period of growth and profitability in the second half of the decade. the airlines that survive.
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