What will happen to airlines after coronavirus? How will the pandemic affect flights as we know them? The travel industry won't be the same after the coronavirus pandemic and, in this article, we'll focus on the impact of COVID-19 on airlines.
The aviation industry supports more than 65 million jobs around the world and $2.7 trillion in world economic activity (3.6% of global gross domestic product). By 2036, it is expected that aviation will generate $5.7 trillion in GDP and the number of air travelers is expected to grow to 8.2 billion from 4.4 billion air travelers in 2018. It is clear the importance of aviation in the tourism industry, which is one of the world’s largest industries, but it also provides an immeasurable contribution to global trade, business, and economic development.
Between 2009 and 2017, revenue in the global aviation industry grew at a CAGR (compound annual growth rate) of around 5.9%, reaching $754 billion in 2017. Pre COVID-19, Commercial airlines were expected to generate a combined revenue of $872 billion for 2020.
How Has COVID-19 Affected Airlines?
On February 20th, IATA announced that its initial assessment of the impact of the COVID-19 outbreak in the airline industry was going to represent a total global lost revenue of $29.3 billion. This estimate assumed that the center of the public health emergency was supposed to remain in China and also they assumed a V-shaped recovery. 7 weeks later (on April 14th), the new impact assessment showed that lost revenues could be as high as $314 billion or a 55% fall in passenger revenues resulting in a liquidity crisis for most airlines. Even under its most positive outlook, IATA still projects passenger traffic in 2025 will remain 10% below the levels originally envisaged before the crisis.
In early April, worldwide flights were down almost 80%, making the COVID-19 the worst impact in the airline industry. Approximately $50 billion of international passenger revenue was lost from Jan to Apr 2020. According to ICAO, airlines may be faced with 1.5 billion fewer international air travelers this year.
Which Airlines Have Been Most Affected by Coronavirus
Airlines have been one of the most affected sub-industries within the travel industry. In May, Berkshire Hathway sold all of its holding in the airline sector. Over $6 billion worth of stock from American Airlines, United, Delta, and Southwest. Buffett said he “made a mistake” investing in the sector, which the pandemic has changed “in a very major way” with no fault of the airlines, leaving limited upside for investors.
One of the key reasons airlines have been able to “survive” during this pandemic has been their ability to access government support. In May, IATA estimated governments had provided around $123 billion in financial aid to airlines during the crisis which $67B has to be repaid. As a result, it is estimated that airlines’ net debt will have increased from $430B at the end of 2019 to $550B by the end of 2020.
Amid the plunge in passenger traffic, a number of major airlines around the world have already sought government support. Flybe, South African Airways, LATAM, Virgin Australia and Avianca are some airlines that have filed for bankruptcy.
What Will Happen to Airlines After The Coronavirus Pandemic
The global airline industry is facing an unprecedented challenge in the face of COVID-19. According to a Simplifying report called “The Rise of Sanitized Travel”, more than 70 areas of the passenger journey are expected to either change or be introduced and multiple touchpoints that will be transformed as we know it. Below is our guess of how the passenger journey will look like:
- During the online check-in process, airlines will request travelers to provide an immunity certificate, health, and wellness declaration.
- At the airport, touchless check-in counters, health screening measures and contactless solutions are some examples of what is expected. Social distancing will be required during check in areas, gates, jet bridges and during the airplane (as much as possible).
- Boarding process will be different. Touchless boarding, following social distancing measures, Delta, for instance, will be boarding all flights from back-to-front. Blocked middle seats is still something to be defined
- Increased aircraft cleaning and sanitizing will be done before every flight.
- have been adopted by some airlines (Delta, JetBlue and United)
- In flight, most airlines have mandated passengers and crew to wear personal protective equipment (face masks and gloves), sanitizing services and products will be offered.
- Upon landing, there is still a lot in discussion regarding what the process will look like. Self quarantine, COVID-19 test at the airport are some measures under consideration.
Enhancing sanitation and hygiene will be a priority for travelers. Airlines will continue to tailor sanitizing procedures and hygiene measures in order to ensure the safety of passengers and stimulate the market again.
New Technologies & Startups To Help Airlines After Coronavirus
Airlines are seeking to be as capital efficient as possible. Companies that allow airlines to reduce their costs, automate processes, increase operational efficiency and improve travelers' communication/relationships will experience a significant interest from the stakeholders. Below are some examples of relevant startups:
Customer support Automation
- RubiQ: The solution automatically identifies a cancellation, sends emails\SMS to all affected passengers, and allows them to rebook\claim refund through our AI Assistant while making all the information they need accessible.
- Mindsay: Mindsay’s platform enables companies to reduce costs by automating recurring requests, enhance customer experience by bringing relevant assistance, and boost sales by pushing ancillaries at the right time.
Improving Travelers Communication & needs
- Sherpa: Sherpa launched a new product tool to help customers navigate the new travel landscape. Sherpa is aggregating data from multiple sources and allowing travel companies to keep their customers informed at each stage of their journey as travel begins to open again.
- Bluedot: BlueDot protects people around the world from infectious diseases, leveraging human and artificial intelligence. The startup has developed a patented global early warning system to track and predict the spread of dangerous infectious diseases.
Cost Reduction Technologies
- Automation Hero: Automation Hero has built a next-generation intelligent process automation platform for the enterprise combining RPA, embedded AI, Big Data and the human in one powerful end-to-end platform
- Jiffy.ai: Jiffy.ai, is a web-based AI-enabled intelligent RPA platform that can process unformatted/unstructured data with ease. With its codeless data ingestion, model training, and model improvement, Jiffy.ai gets smarter, faster.
Innovation in travel is happening. Don’t be left behind.
At Plug and Play's Travel accelerator we are in touch with corporations and startups that are changing the world as we know it. Join our platform today.