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5 April 2020
With the aviation sector badly hit by the global COVID-19 crisis, the aviation industry is entering a crucially transformative time. Words like “Adaptation”, “Pivoting” and “Recovery” are taking on a new importance. As we go through this pandemic, AviaPro consultants are looking through the uncertainty at what lies ahead for our industry, arguably one of the hardest-hit by the crisis.
As the gears of industry grind to a halt and losses are accumulating across the board, experts are beginning to argue that the classic economic V shape, where the economy briefly and sharply declines before making a strong recovery, is not to be expected in the current scenario.
Brace yourselves, say the economists: we may be looking at a W-shape scenario, or worse, an L-shaped recession, with a prolonged recessive period that won’t return to trend line growth any time soon.
That said, the reduction in scheduled passenger flights in China had already bottomed-out to as low as -70% in mid-Feb; in Europe, it’s now as low as -60%; and in North America almost -10% … If certain markets can begin planning for a growth spurt, ‘wave inversion’ is still expected to hit the United States harder as domestic air travel demand plummets.
"We can already begin to highlight some positives at the macro level." - Jorge Abando, AviaPro Consulting’s Head of Industrial Services
Meanwhile, new aircraft deliveries are being deferred, aircraft values have fallen into double digits, and only a return of demand will reverse the trend.
It would be wise to expect that not all parked aircraft will return to service. According to investor Adam Levine-Weinberg, the coronavirus crisis has already forced American Airlines to accelerate retiring its Boeing 757s and 767s.
If one sector is holding out, it is the freighter market, which is holding its own and allowing trade to go on in order to meet consumer needs.
IN THE NEWS:
While this article argues that globalization is too important for continued economic development, it also acknowledges that in the long run, globalisation may have more to do with sharing knowledge, and less to do with sharing portions of the supply chain.
According to BBC business reporter Jonty Bloom, “a great deal of globalisation is not about moving manufactured goods around the world, but moving people, ideas and information”.
Read more about this here.
In this Forbes analysis piece, journalist James Asquith argues that “the recovery in demand will be long and slow. However, it will happen.”
He interprets the current crisis as “The second golden age of air travel” having “just been and gone”, and explains why he believes that airlines’ fight for survival will be waged through passenger ticket prices and
Read the article authored by James Asquith here.
Do you have questions about how the COVID-19 pandemic is impacting your company, and what actions you can take to minimize negative impacts while preparing for the global economic recovery? Please write to us at firstname.lastname@example.org, and let’s start a conversation.