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Higher fares, fewer routes, pre-flight health checks, and less free food: The coronavirus pandemic is ushering in a new era of air travel. A seismic shift is taking place as the world’s airlines reassess their operations and how they will emerge from the crisis. In eerily empty airports, wearing masks and social distancing already show a change in behavior among the few remaining employees and travelers. A long shake is coming that will touch almost every aspect of the flight after the limits of motion are relaxed.
“We should be prepared for a slow and choppy recovery even after containing the virus,” Delta Air Lines Inc. Chief Executive Ed Bastian said in a letter to employees this week. “I estimate that the payback period could take two to three years.”
In a matter of months, the Covid-19 reset the clock in a decades-long aviation boom that has been one of the great cultural and economic phenomena of the post-war world. The explosion in air travel reduced the planet, created jobs and hundreds of millions of travelers for the first time, and dispersed rich and poor families on the continents. Now everything is on hold, and airlines have reduced seating capacity by more than 70% since January, according to analyst firm Cirium.
It is unknown when people will be willing to pack again in closed cabin spaces, though a survey by the International Air Transport Association found that 40% of recent travelers anticipated waiting at least six months after the virus was contained earlier. to fly again. Budget operator EasyJet Plc is among those planning to keep the middle seats empty, at least initially, to reassure customers about personal space. At Korean Air Lines Co., the cabin crew now has goggles, masks, gloves, and gowns.
Cabins after fever
Settings are likely to change as operators try to squeeze more money out of customers. Some will upgrade premium cabins while their fleets are on the ground, resulting in an even sharper difference between upper-class sections and increasingly inexpensive seats, said Volodymyr Bilotkach, professor of air transportation management at the Institute of Technology. from Singapore.
In Asia, one of the latest redoubts for all-inclusive fares, airlines could also increasingly charge economy passengers separately for things like baggage check-in, legroom and meals, he said. Bilotkach, who wrote the book “The Economics of Airlines,” published in 2017. Even before the virus struck, operators there generally made only $ 3 of profit from each customer, according to IATA. In Europe and the USA In the US, where additional charges are already rising, the figures were $ 5 and $ 17, respectively.
Cheap flights can be found for now, as airlines compete for a handful of passengers, while signs of a recovery show that traffic on China’s busiest routes increased at least 7% from February lows. IATA Executive Director Alexandre de Juniac said wearing face masks could reassure passengers, but keeping the middle seats empty would be a challenge and would reduce the maximum seating capacity below equilibrium levels.
The industry has weathered storms before, but none as harsh as this one. Nearly two-thirds of the world’s 26,000 passenger aircraft are on the ground, and some 25 million jobs are at risk. IATA warned that carriers face a $ 314 billion deficit in ticket sales this year, and half of them face bankruptcy in two to three months without government help.
Luton, England-based EasyJet has data science teams that model various scenarios on how soon demand returns, at what levels, what prices people will pay and how much to charge to make a profit on a given flight, CEO said. Johan Lundgren. A conference call last week. No one knows the answers. “We just have to be very flexible,” he said.
One concern is that customers will be discouraged by health-related entry rules that may differ from country to country, especially during an uneven opening process. In the same way that airport security tightened after the September 2001 terrorist attacks in the United States, travelers may be subject to tests such as temperature controls, or may even need health certificates to fly, according to the BCG consultancy. . That could be time consuming and complicate flight schedules.
“It must be fast and safe. Something that is a relatively minor burden, “said Dirk-Maarten Molenaar, director of BCG’s travel and tourism practice in Europe, the Middle East and North Africa.
The essential nature of air travel, which underpins trade, diplomacy, business and tourism, is forcing governments around the world to support carriers. On Monday night in the United States, the Treasury Department disbursed its first round of payroll assistance to airlines. Around that time, Virgin Australia Holdings Ltd. came into administration after failing to guarantee state aid. Increasingly distressed, the carrier made eight different calls for financing before finally collapsing.
More are bound to fail, resulting in less competition, Bilotkach said at the Singapore Institute of Technology. Large low-cost airlines are likely to survive along with flag carriers, but many will be partially owned by governments, or at least owed money, so they will likely cut the most marginal routes and may increase prices, he said. Less established services like London-New Orleans or Amsterdam-Salt Lake City would be among the first to leave, he said. “Rates will remain at pre-crisis levels or slightly higher,” said Bilotkach, who sees a recovery as two to three years off. “There will definitely be fewer flight options available.”
Essential trips
The virus has led to an increase in remote video conferencing, which could trigger a new assessment of the need to fly, according to UBS Group AG. “He’s definitely put it back in his mind, even if he’s not an environmentalist,” said Celine Fornaro, director of research for European industrial capital at London-based UBS. “What is my essential journey?”
Fornaro hopes that the shift from air travel to high-speed trains in Europe and China will accelerate. Some low cost, short hop routes are likely to disappear. Flights less than 300 miles accounted for a fifth of the European market last year, according to a UBS report this month. If reflected in other regions, such as Asia, the trend would partially relax the dramatic expansion of the aviation industry. Short-haul flights, particularly in Europe, were already under attack for the embarrassing flight move that encouraged travelers to use lower-carbon means of transportation.
Bouncing
It is difficult to predict any outcome as the crisis unfolds. But there is sure to be a pent-up demand to visit family and friends once the travel bans are lifted, said Jared Harckham, New York-based vice president and managing director of aviation at consultancy ICF International Inc.
While airlines may have to cut prices initially to attract passengers, hygiene concerns will gradually fade away, said Rico Merkert, professor of transportation and supply chain management at the University of Sydney business school.
“There will be some base demand,” said Merkert. “Many airlines have issued coupons, so all of these people must also be transported.” More generally, passengers must prepare for a new order on airlines and planes. With reduced total capacity, carriers will favor smaller, more manageable planes like Boeing Co.’s Dreamliner and Airbus SE’s A330 over giants like the A380, BCG’s Molenaar said. Unheard of alliances could emerge between national airlines as smaller rivals wither away, he said. “The industry could look very different,” he said. “It could be that you go back in time, almost.”
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