This article first appeared in Forbes.
Except for healthcare, there are few industries more severely affected by the latest coronavirus pandemic than global aviation. Airlines around the world are confronting the challenge of a sharp decline in demand, complicated by almost total uncertainty about when the virus will be under control and travel can return to normal.
Many of the hardest hit countries, such as the United States and Italy, have seen ticket sales plummet. In Italy, in recent weeks, the drop exceeded 80 percent at times.
In the US, failure to conduct early, broadscale testing and to respond more aggressively have led to a rapid spread of the virus. The number of confirmed US cases of COVID-19 — the name for the disease caused by the coronavirus — was close to 400,000, as of April 8, according to the US Centers for Disease Control and Prevention. That’s five times higher than the official COVID-19 count in China, where the population is four times the size of the US.
The collapse in demand has led major airlines worldwide to announce severe cost-cutting measures, request government assistance, and, in the case of certain airlines, ground fleets. Many airlines are seeing more cancellations than bookings. Unless the virus is effectively contained within the next couple of months, we expect the depressed demand environment and reduced global revenue passenger kilometers (RPKs) — a widely accepted metric of air travel demand — to persist well into 2021.
WHEN WILL IT END?
Containing the coronavirus is proving a challenge. While China — COVID-19’s country of origin — reported zero new cases on March 18, it saw an uptick in new cases in the latter part of the month, almost entirely connected to people arriving from other countries. In response, on March 27, China banned virtually all foreigners from entering the country. It now requires returning Chinese nationals to go into a two-week quarantine. The government also reduced the number of international flights.
This setback is an example of why a recovery in aviation may take longer than many had hoped. Travel may not return to normal until the virus is conquered worldwide and international borders are reopened.
The Pew Research Center estimates that three billion people live in countries where borders have been completely closed to tourists, business travelers, and others who are neither citizens nor residents; 93 percent of the world’s population lives in countries with some cross-border restrictions on people who aren’t citizens or residents. Like China, almost all nations now require citizens and residents to undergo some form of quarantine after arriving.
Aviation Industry Reactions To Three Historic Events
These global crises produced double-digit capacity reductions and gradual recoveries that took 12 to 18 months
The full article continues in Forbes.
AUTHORS
Tom Stalnaker is a Washington DC-based partner and global aviation practice leader in the transportation and services practice.
Khalid Usman is a Washington DC-based senior vice president in the transportation and services practice.
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