Could covid-19 shake up air travel for the better?
Governments’ re-entry into airlines may spur more competition
(Special report from the print issue of The Economist)
Feb 11th 2021
Economy passengers taking one of the few international flights still running have had an unusually pleasant experience of late. Exasperated cabin crew battling to close overhead lockers full to bursting with wheelie-bags, duty-free booze and laptop cases have been replaced by masked attendants presiding over planes two-thirds full at best and often with only a handful of passengers. Some report sleeping across empty rows of seats. The collapse of passenger numbers and revenues will damage the industry. Yet previous disruptions have shaken up the airlines to the benefit of the flying public. It could happen again.
- The advantages of the previous big interruption to air travel, the second world war, are debatable. The experience of servicemen crammed into uncomfortably spartan transport aircraft, argues Eric Zuelow in his book, “A History of Modern Tourism”, created a generation without pre-war expectations of air travel as glamorous and luxurious. When those same aircraft were converted for civilian use, travellers accepted being packed in like sardines. The cattle-truck economics worked in passengers’ favour when deregulation brought competition to a previously highly regulated and often state-controlled industry. Air fares tumbled everywhere. Between 1995 and 2014 they fell by half in real terms, according to iata, a club of the world’s airlines.
- World wars aside, past crises have passed speedily. The terrorist attacks of 9/11 and the financial crisis of 2009 were “nasty shocks”, says Brian Pearce, chief economist of iata, but “small bumps in the road” compared with covid-19. At its height in April 2020 flying was down by 94% over a year earlier, measured by total revenue passenger kilometres (rpks). Current estimates are that rpks in 2020 will be down by 66% on 2019, when (including domestic flights) 4.5bn passengers took to the skies. Only 1.8bn people buckled up last year. By the end of it, some 30% of the global fleet was still grounded, according to Cirium, an aviation-data firm. And the sense of optimism that had slowly grown took a fresh hit early in 2021 as more transmissible and dangerous variants of the virus emerged, leading to renewed border closures and capacity cuts.
- The plunge comes after years of bumper growth. In each 15-year period since 1988 rpks doubled. They were expected to do so again between 2018 and 2033, according to Airbus, the European half of the duopoly that builds the world’s biggest passenger jets. Boeing, its American rival, notes an acceleration over the past decade, when growth averaged 6.5% per year, above the long-term average of 5%. Darren Hulst of Boeing is confident of an eventual return to a growth trend of 5% a year, even if over the decade from 2019 the number may be closer to 3.7%. In the meantime it will be a rough ride for airlines. Only 2.8bn passengers are expected to take to the air this year.
- Signs of recovery are scant. Domestic flying in China and Russia has largely recovered, but in Australia it is still down by 86% and in America, the world’s biggest domestic market, it has fallen by 60%. International routes are suffering the most. Despite huge capacity cuts (only a quarter of the international flights scheduled a year earlier were still running in January), load factors are still low. Planes are often taking off a third full at most.
- The opportunity for travellers to stretch out comes at a heavy cost. Full service will not resume for a long while. Mr Pearce says the gradual deployment of vaccines merely makes him more confident about his baseline forecast of a return to 2019 levels by 2024. Not all air travel will recover at the same pace. Domestic flying will continue its rebound, followed by regional international traffic. The last part of the industry to refill its seats will be long-haul flying. This has a disproportionate impact on legacy airlines that still rely most on long-haul international routes.
Could covid-19 shake up air travel for the better?
Governments’ re-entry into airlines may spur more competition
(Special report from the print issue of The Economist)
Feb 11th 2021
Economy passengers taking one of the few international flights still running have had an unusually pleasant experience of late. Exasperated cabin crew battling to close overhead lockers full to bursting with wheelie-bags, duty-free booze and laptop cases have been replaced by masked attendants presiding over planes two-thirds full at best and often with only a handful of passengers. Some report sleeping across empty rows of seats. The collapse of passenger numbers and revenues will damage the industry. Yet previous disruptions have shaken up the airlines to the benefit of the flying public. It could happen again.
- The advantages of the previous big interruption to air travel, the second world war, are debatable. The experience of servicemen crammed into uncomfortably spartan transport aircraft, argues Eric Zuelow in his book, “A History of Modern Tourism”, created a generation without pre-war expectations of air travel as glamorous and luxurious. When those same aircraft were converted for civilian use, travellers accepted being packed in like sardines. The cattle-truck economics worked in passengers’ favour when deregulation brought competition to a previously highly regulated and often state-controlled industry. Air fares tumbled everywhere. Between 1995 and 2014 they fell by half in real terms, according to iata, a club of the world’s airlines.
- World wars aside, past crises have passed speedily. The terrorist attacks of 9/11 and the financial crisis of 2009 were “nasty shocks”, says Brian Pearce, chief economist of iata, but “small bumps in the road” compared with covid-19. At its height in April 2020 flying was down by 94% over a year earlier, measured by total revenue passenger kilometres (rpks). Current estimates are that rpks in 2020 will be down by 66% on 2019, when (including domestic flights) 4.5bn passengers took to the skies. Only 1.8bn people buckled up last year. By the end of it, some 30% of the global fleet was still grounded, according to Cirium, an aviation-data firm. And the sense of optimism that had slowly grown took a fresh hit early in 2021 as more transmissible and dangerous variants of the virus emerged, leading to renewed border closures and capacity cuts.
- The plunge comes after years of bumper growth. In each 15-year period since 1988 rpks doubled. They were expected to do so again between 2018 and 2033, according to Airbus, the European half of the duopoly that builds the world’s biggest passenger jets. Boeing, its American rival, notes an acceleration over the past decade, when growth averaged 6.5% per year, above the long-term average of 5%. Darren Hulst of Boeing is confident of an eventual return to a growth trend of 5% a year, even if over the decade from 2019 the number may be closer to 3.7%. In the meantime it will be a rough ride for airlines. Only 2.8bn passengers are expected to take to the air this year.
- Signs of recovery are scant. Domestic flying in China and Russia has largely recovered, but in Australia it is still down by 86% and in America, the world’s biggest domestic market, it has fallen by 60%. International routes are suffering the most. Despite huge capacity cuts (only a quarter of the international flights scheduled a year earlier were still running in January), load factors are still low. Planes are often taking off a third full at most.
- The opportunity for travellers to stretch out comes at a heavy cost. Full service will not resume for a long while. Mr Pearce says the gradual deployment of vaccines merely makes him more confident about his baseline forecast of a return to 2019 levels by 2024. Not all air travel will recover at the same pace. Domestic flying will continue its rebound, followed by regional international traffic. The last part of the industry to refill its seats will be long-haul flying. This has a disproportionate impact on legacy airlines that still rely most on long-haul international routes.