Explained: How Covid-19 could affect aviation in the long run

In the drop in flight numbers since March, data showed the impact has been stronger in
international than domestic markets. Interviewees thought the crisis would lead to consolidation
and a significantly smaller industry.
* Full-service network carriers are likely to be major losers since the recovery in international
markets will be slower and they may face new competition with the potential entry of new
airlines in their home hub markets.
* Regional airlines were identified as possible short-term winners during the recovery period as
they could potentially help FSNCs adjust their feeding capacity.
* Low-cost carriers are expected to concentrate in primary markets with possible entry in hub
airports, and a general reduction in frequencies at the route level.
* Regional and secondary airports are likely to lose out as capacity is freed up in larger markets,
attracting airlines and enabling larger hub airports to reinforce their positions.
Interviewees were concerned about the recovery of business travel, mainly due to the
cancellation of meetings, incentives, conferencing and exhibitions (MICE) events, and the
uneven lift of travel bans. Teleworking was seen as a serious threat to demand, with the current
context of digital transformation and cloud apps offering better solutions for teleworking than the
traditional videoconference.
Countries whose economies depend greatly on civil aviation, such as Singapore and the United
Arab Emirates, have provided direct cash infusion to save key airlines. The UAE government is
fully supporting Emirates through equity infusion while Singapore has announced a $500 million
package for the aviation sector, a $2.8 billion bridging loan and a $10 billion rights in equity and
convertible bonds which will allow Singapore Airlines to survive the COVID-19 storm relatively
unscathed.

The most recent estimates suggest that demand for air transport will increase by an average of
4.3% per annum over the next 20 years.
If this growth path is achieved by 2036 the air transport industry will then contribute 15.5 million
in direct jobs and $1.5 trillion of GDP to the world economy. Once the impacts of global tourism
are taken into account, these numbers could rise to 97.8 million jobs and $5.7 trillion in GDP.
 
By mid-2030s no fewer than 200,000 flights per day are expected to take off and land all over
the world. 

 And this growth is not limited to passenger traffic. We anticipate that cargo traffic in terms of
tonnage – to continue to grow along a similar curve.
As we look to establish what a post COVID-19 aviation sector might be like, it’s difficult to get
past the human cost and statistics, particularly sat working from the confines of our homes. Over
40 major airlines have grounded their fleets and most have suspended over 90% of their flights.
Moreover, some of the most financially secure airlines, including the likes of British Airways
have stated they are in a “fight for survival” despite having both a robust balance sheet and
strong backing from parent company IAG.  Lufthansa is permanently reducing the size of its
fleet and shuttering one of its low-cost carriers. SAS also announced yesterday it expects demand
to take years to recover and are reducing the size of its workforce by 5,000 staff to respond to
market conditions. 
Furthermore, the current lack of testing data from the globally infected population makes it nigh
on impossible to evaluate how long the crisis might continue and how long we might remain
unable to travel for. 
Recommendations
The changed Scenario is likely to put many constraints on the airline industry. Extension of the
lockdown and projected fall in air traffic would force the airport operators to recalibrate their
expansion plans.
 Aviation is fundamental to the support and growth of local and global economies and an
essential part of our world as travellers. So, what changes could the aviation industry make to
support recovery and how do these fit in with long term goals.
1. Restoring traveller confidence in air travel
In the short term we can realistically expect countries to keep their borders closed, so domestic
travel will initially return, followed later by international flights. 
Travellers will undoubtedly be nervous, so responsibility will fall to airports to reassure anxious
travellers that they are taking every precaution to safeguard their health and safety. The industry
will need to respond - additional health screening facilities, washrooms, cleaning facilities will
all require at least temporary modification to existing airport facilities. The possibility of further
complications or a second wave of the virus means that airports need the flexibility and space to
accommodate these facilities for a longer period than any of us would like.
 Technology will need to be quick to respond to the challenges and suppliers are already looking
at touch less triage at self-check in facilities. This would automatically suspend travel if the
customer’s vital signs displayed potential symptoms and would reduce the risk of transmission
before the individual came into contact with other passengers or staff.
 The challenge for most airports remains the availability of self-check in booths and an ability to
retrofit new technology to existing hardware.
 
2. Accelerating the creation of a seamless passenger journey
 Not a new concept to the aviation industry, but this pandemic could accelerate the development
of biometrics and statistical analysis of physical and behavioral traits to automate traveller
recognition.
 Processes which avoid physical contact and natural choke points where travellers queue through
security and border control would vastly improve passenger experience and reduce future
potential for transmitting disease.
 Equally the replacement of travel documentation with facial recognition simplifies the normal
processes of check in, bag drop, border control, security clearance and boarding. Again, this
would dramatically reduce wait times, queuing and improve experience and lessen the potential
for an infected individual to contaminate others.
 Whilst technology is developing to make this a reality it requires significant investment and
trialing before we will see widespread uptake.  At a time when budgets will be stretched to
breaking point it seems third party investment would be essential to support cash strapped
airports, who in the short term would struggle to justify cost-benefit returns.
 
3. Maximizing the value of predictive maintenance regimes
 The obvious opportunities for most airports during a quieter period are for maintenance and
repair of core infrastructure. In a time where managing cash flow will be critical, it’s essential
that focus is placed on ensuring that these works deliver long term performance, safety and
importantly OPEX savings.
 Avoiding reactive maintenance to protect cash flow for most airports is critical. The ability to
accurately predict maintenance requirements will help support their long-term financial planning
and ultimately capture and quantify savings.
 Tailored predictive maintenance can deliver savings in excess of 30% on annual maintenance
costs, which will support and safeguard airports’ challenged budgets when needed most. 
Opportunities still exist to modernize and develop maintenance programmes and also take
lessons learned from other sectors e.g. utilities, which have embraced these strategies for many
years and reaped the benefits.
 

4. Accelerating the journey to net zero

 Aircraft are frequently singled out for accounting for 2% of global carbon dioxide emissions.
Aircraft manufacturers are working on lighter, more fuel-efficient fleets with alternative fuels,
but airports themselves also have a part to play in moving towards net zero carbon. In late 2019,
200 members of ACI Europe, the trade association for European airports, committed to produce
net zero carbon emissions by 2050. Others like Swedavia have gone further with commitments to
meet this goal as soon as 2020 for the Stockholm Arlanda Hub. The current hiatus of aviation
activity offers an opportunity to consider how the COVID-19 crisis could expedite a zero-carbon
airport.
 Initiatives to drive this journey must be integrated across the terminal, airfield and broader
infrastructure of an airport. This needs to consider how airports can encourage the use of low
carbon planes, for example offering lower landing fees to these aircraft. Other considerations are
reduced taxiway times, access to low carbon or zero carbon energy sources for on-stand power
and low carbon fuels for heating / cooling of terminals.
 
All these initiatives need to be framed within an overarching strategy and linked to data driven
solutions and roadmaps, which consider an airports activity from surface transportation to the
operation and ongoing development of the asset. 
 
Measures taken by the Government as well as recommended for revival
Ministry of civil aviation has decided to waive of Fuel throughput charges which were levied on
fuel companies by airports across the country for the transportation of jet fuel to airline
operators.
Under financing lease agreement of aircraft, service tax was chargeable only on 10% of lease
rental value meaning 90% abatement. Under the operating lease agreement custom duty was not
leviable. Considering the fact that leasing reduces the cost of airline operation, Revenue
department has now fixed the IGST levy on no cost or nil for aircraft imported on lease. Initially
under GST it was 5%.
Loan repayment support to the airline operators.
Government should support and fund the ventures which are in distress.
Loans should not be declared as NPAs and no collateral should be enforced for the current
financial year. The Time lines need to be relaxed & banks need to be instructed to not to levy any
penalties for late payments.
Fair Pricing & government control on the prices of ATF and other supporting tax benefits. Fuel
expenses account for approximately 40% of operating cost of airlines.
ATF tax should be lowered to 10% & brought under GST.VAT from state side should be
reduced from 30 % to 10 % or below. This will enable airline to offer cheaper tickets and boost
the air passenger’s increase.
Similar support is required in service tax rate on air ticket after abatement was 6% and 9% in
case of economy & business class.
Whereas GST, rate is 5% & 12 % with ITC in economy & business class which results in excess
burden to business class on airtickets.This increased the price of tickets & impacts the cash flow.
Import, leasing, repair & maintenance taxes-Under GST There is an exemption on aircraft import
via the leasing route. This move has brought big relief to the civil aviation industry by resolving
the issue of double taxation.
Finance Minister has cut the GST rate of MRO services from earlier 18% to 5% to give relief to
MRO sector...
Supporting the labour force working in the sector –The airline industry is labour intensive and
the manpower cost are substantial, the employees are facing wage cut or unpaid leave ,The
government should intervene and ensure the Indian Pilots & crew should be retained and if
necessary the expatriates should be laid off first. Another option is four day work week which
will reduce the cost by 20 %.

Future Perspective to sustain In the Industry

Use of artificial Intelligence-Increased Screening at the airports is likely to create logjams &
deteriorate the traveller’s experience. This will not be in the interest of an already affected
aviation sector. Cognitive technology like face recognition, software & body scanners are
increasingly used world over.AI projects may be put in place to make the check –in process
smoother & faster. Human Capabilities can be augmented by AI There by cutting down the time
without compromising securities.
Promotion of Tourism in key states- such as in Indian context, In last few years states like
Maharashtra, Kerala, Goa have been getting large number of tourists due to preference of air
travel but due to Pandemic apprehension is that there would be a reduction in large number .It
will be in the interest of government & the entire transportation industry to change the mindset
by promoting tourism in country by announcing packages with state tourism bodies & hospitality
sector. The tourism sector gave employment to 42.7 billion in 2018-2019 FY.
Promoting Enhanced Hygiene in the airport & Tourist destinations-Travellers should be
provided with Disposable gloves & masks at the entrance of airport & it should be made
mandatory within the airport premises. Similarly at tourist locations, entry fee should include
cost of disposable mask & gloves and separate dustbin should be there for the disposal of these
particular items

Researcher View on Future perspective

Researchers have assessed the initial impact of Covid-19 on air transport and found that it is
likely to lead to a smaller, consolidated sector in the future.
The research, led by Cranfield University, involved a series of in-depth interviews with senior
aviation industry executives, along with analysis of flight and air freight data. The paper is
published in the Journal of Transport Geography.
In the drop in flight numbers since March, data showed the impact has been stronger in
international than domestic markets. Interviewees thought the crisis would lead to consolidation
and a significantly smaller industry.
“Along with other sectors of the economy, air traffic is vulnerable to external factors, such as oil
crises, natural disasters, armed conflicts, terrorist attacks, economic recessions and disease
outbreaks.

Measures to be taken by the airlines

Ensuring hygienic travel & managing traveller sentiment, the airlines have to add hygiene in
there critical deliverables like on time performance, low fares, consistent onboard & ground
service lower marketing expenditure.
Customer complaints to be addressed efficiently. Consistency in facilities like rescheduling
ticket in possibilities of cancellation due to health concern, may be incorporated .This will ease
the pressure uncertainty & promote advance booking of tickets.

Conclusions
Aviation is a critical industry and one which drives economic activity. Hence following measures
needs to be taken:-

1.Measures that reassure travellers that their health is not at risk once travel is permitted, can be
framed to align with the industries long term aspirations of safety, seamlessness, improved
financial and carbon performance.

2. Unmanned aircraft innovations; artificial intelligence; biometrics; robotics; block chain;

alternative fuels and electric aircraft. Aviation is therefore ideally positioned to support the
innovation discourse and its potential impacts on new mobility.

3. The reality is that – in order to accommodate the forecast growth - drastic improvements and
efficiencies for airports and air traffic management will need to be found. For this – we need
innovation.

4. Alternative fuels can significantly change the current scenario of aviation in support of the
environmental protection. The vast investment in Artificial Intelligence (AI) and Big Data could
be seen as a promising way of increasing safety, efficiency and sustainability. These
technologies can help improve aviation infrastructure and airspace utilization.