In the last 15 years, we have witnessed the disruption of many industries. The hotel industry by Airbnb, transportation by Uber and retail by Amazon. The aviation industry has now been disrupted by a virus.
What makes the disruption of the aviation industry unique is its speed and scale. Within two months we have seen a near total shutdown of airports around the world. According to the International Civil Aviation Organization (ICAO), international passenger capacity fell by 33% over the past 2 months and airlines will suffer a potential loss of approximately USD 90 to 112 billion of revenues in the first half of 2020. This creates a massive challenge for airport owners and operators. But within this chaos comes a chance to develop greater efficiencies and explore new opportunities.
Restarting the Aviation Industry
The implications of COVID-19 will last months,
not weeks. As regional economies restart, aviation will clearly be part of this
recovery. The initial stages of recovery will be led by domestic and regional
travel, with long haul being the last sector of the aviation sector to restart.
Cargo will take a leading role for the economic recovery. Global supply chains are increasingly stretched as the global shutdown bites. Passenger traffic will begin with narrow body point-to-point travel with large hub airports taking a back seat. Airports will need to be able to open profitably with reduced passenger loads and a strong emphasis on cargo.
Implications for Airports:
The SARS epidemic of 2003 resulted in a U
shaped demand curve, with travel recovering 5-7 months after the peak of the
epidemic. Due to the widespread nature of the COVID-19 pandemic the recovery of
demand is likely to be somewhat slower. However, the aviation industry should
expect that passenger numbers will initially recover and then resume growth. In
order to prepare for this, here are some steps Airport owners and operators
a) Investing in operational efficiencies
In the short-term airports should invest in operational efficiency, making their operations more resilient. This will enable stronger profitability during the economic recovery which governments will strongly encourage with stimulus and infrastructure projects.
A strong focus on asset performance and changing business models from time and materials to an outcome-based maintenance model will show long term benefits as well as have a short term impact on cash flow and profitability. Smarter maintenance strategies will allow issues to be prioritized and funding to be allocated to the core business operations.
b) Mitigating risks of further spread of the virus
Protecting the health and safety of travelers and staff is a high priority for airport operators, as they strive to minimize any risks caused by the spread of the virus. The introduction of temperature screening and health declarations may become the norm as the industry restarts. Airports should invest in the right technology to ensure they can still provide a seamless experience for passengers and staff. Thermal scanners and contactless biometric access are just some technologies they should have in place.
c) A chance to drive sustainability
The aviation industry’s contribution to global emissions is undeniable. Simultaneously, airport expansions have significant environmental risks including noise, carbon emissions, air quality, landscape, biodiversity and water. With most airports today operating at limited capacity, owners and operators alike should seize this opportunity to conduct energy audits. This will highlight consumption patterns and identify Facility Improvement Measures (FIMS). FIMS related to lighting, HVAC systems or other utilities can allow for significant cost savings as Airports strive to reduce their OPEX. Catania Airport and Dubai Airports are shining examples of how efforts made in sustainability has helped improve the bottom line.
Airports and economies that react quickly and can ramp back up as passenger demand recovers will come out from this pandemic stronger and in a better position to capitalize on bottled up demand as the global economy recovers.
Aviation has a strong future and the COVID-19
pandemic will accelerate changes in the aviation business. As always, the
nimble and responsive airports will be the ones in the best position to rise
and grow in the coming recovery.
What do you think the future of the aviation industry would look like? Get in touch and let’s discuss how digitalization can help restart the industry: https://www.linkedin.com/in/duncan-hand-11671230/