Thursday, August 11, 2022

Lowering 2022 Expectations For World Aviation Makes Sense

By Bikram Vohra

As 2021 trundles into the past and 2022 manifests itself with more sobriety than gaiety the aviation industry glibly uses the phrase ‘cautious optimism’ to signpost the hopes and aspirations of the New Year. It is a phrase tossed around like it was a commodity on a supermarket shelf and you could pick it up in bulk. Fact is that no one knows if the Omicron dimension is going to be a body blow that further cripples a badly bruised industry. 

While we can find comfort in spikes of activity where cargo is concerned or bizjets and charters are given a boost the cruel fact is that nothing has changed enough to indicate that passengers per se are ready to fly. Necessity is still the keyword and flying is now a chore. With disparate demands on medical safety at different airports, fears of being stranded and gouging fares we could well face a downturn again. While we can fling clouds of bright-eyed positivity and hide behind statistics conjured like rabbits out of a hat, the fear of the slippery slope has to be factored in.

First off, why are people flying? Besides the human need to meet family across borders and continents during the holiday season gives the false premise that the keel is righting itself. Come January and there will be a slump. In normal times people fly out more out of necessity, not so much pleasure or spontaneity. 

Necessity is predicted to several of life’s milestones including birth, marriage, celebration of anniversaries and death. It is more personal and for countries like India there is also the additional call for obligatory responsibility to the larger family. Sickness, legal wrangles, parental concern, education, all sorts of summons. In the past two years presence has been replaced by long distance financial injections and though all this might sound a bit bizarre and distant it does impact on the decision to fly. Ergo, more empty seats.

By that token airlines are now losing affection in the public by upping their price to the point of extortion. It is moot whether lower prices would increase upload or whether it is worth the loss in numbers to hike the cost of the fare. The new kid on the block expected to be a leader is the new ‘first time’ flyer. 

Carriers are hoping that the greenhorn will compensate. The sense of wonder, the concept of the unique experience so long seen outside one’s ken, that excitement of the adventure will trigger a sort of mini-stampede. The new rich, again a huge 150 million in India, are a fresh market but whether they will overcome a fear for an adventure is up for grabs.

Much of their intent could be blocked by the costs of PCR and Rapid swab tests at airports, which are prohibitive. Add to that the six hour pre-flight call to arrive and delay in flights as well as topsy turvy schedules and limited options and you can get the feeling that aviation’s self-delusion is part of the deal, if we often enough keep saying things are looking up, like cobras to music they will dance to the tune and look up.

There is general acceptance that whether it is Omicron or more hostile movement up the Greek alphabet domestic travel is easier and likely to lift itself a bit from the level of the belly flop.

It is estimated to reach 93% to 95% of the pre-pandemic level in 2022 – an improvement of 20 to 25 percentage points from 2021 figures. Again, these are only educated figures totally subservient to multi-government dictates in response to the next curveball.

IATA released some happy numbers. Total passenger numbers are expected to increase to 3.4 billion next year from 2.3 billion in 2021, but that will be 1.1 billion below 4.5 billion in 2019. Passenger revenue in 2022 is expected to jump about 67% year-on-year to $378 billion. Air cargo is forecast to remain a bright spot, with demand seen rising 13.2% above the 2019 levels, IATA said.

All this sad to say is made of jello. Between knee-jerk airport closures, a lack of global policy, more medical hurdles, fake news, more confusion through multiple takes on the Covid protocols and the efficacy or the lack of it, of a dozen vaccines. The average global citizen is clueless about what is going on in his name, he is like a deer in the headlights.

IATA’s Director General Willie Walsh has been widely quoted saying, “We expect 2021 losses to be nearly $52 billion—cut dramatically from the $138 billion lost in 2020. Losses will further reduce in 2022—to about $12 billion,” he said during the group’s annual general meeting.

“In total, the COVID-19 crisis will cost aviation $201 billion in losses before we return to profitability in 2023,” he added.

On the plus side IATA estimates a higher demand for air cargo which is expected to continue. With the 2021 demand at 7.9% above 2019 levels, even hiking further to 13.2% above 2019 levels for 2022 that is money for jam but is it enough?

The second key phrase is profitability in 2023 just a year away. As if it was dressed and waiting in the wings for its cue to appear onstage. As we have known, business class traffic saw a fall of 67%. Premium economy is the popular upmarket option for 2022. First class has become declassee in what can only be called grand irony. 

While the wealthy can opt for bizjets and we may well see a pickup in this category the merely well off professional will find comfort in ground based options like teleconferencing. Two years of compulsive practice have shown that it may not be as effective as being there but it works well enough to avoid travel costs and risks. The loss to an entity if senior echelons are affected by the virus and are forced to home quarantine can play havoc with the corporate bottom line.

There is also another fear that has been articulated. The war between the industry and the cyber powers over the dangers of 5G causing safety fractures by interfering with the C band used by airlines. While this might sound like a page from sci-fi, one side is afraid of the potential threat while the other sees aviation as running scared and yelling ‘wolf’ because it needs an excuse to cover its own bumbling splintered reaction to Covid. 

The 5G waves could possibly impact on the cockpit navigational systems that are used to track a plane’s altitude and aid landings in bad weather. Wrong data output is the result. You can imagine a monsoon, snowbound or foggy low visibility landing if the C band is unreliable.

We will hear more about the 5G controversy in 2022 but for now one would imagine that simply holding the line at the 2022 levels through the coming year would be successful enough.  

Trade body Airlines in the UK was more honest. Its chief executive Tim Alderslade was quoted: “We have a bleak few months ahead with potentially little to no revenue, yet still need to be able to deliver for passengers and UK plc in the spring and summer. The cost to the wider economy will be hundreds of millions of pounds if we can’t open up. Unless the government takes action to remove the remaining emergency travel restrictions, the Chancellor must urgently come to the table with economic support for the aviation industry.”

In that lies the rub for all 5000 airlines with ICAO codes. Can governments dare to lift these restrictions and risk utter chaos through a raging pandemic just to give the air industry a boost?

In 2020 as the year reached midway many nations closed borders, imposed lockdowns and quarantines for travellers.

In 2021 many nations closed borders, imposed lockdowns and quarantines for travellers.

In 2022 many nations are closing borders, imposing lockdowns and quarantines for travellers. They are also blocking flights, banning carriers from suspect nations whose list has grown longer by the day.

So the same difference. While there is no magic formula airlines need to get a little friendlier and make flying a lot more fun than it is as of now. 

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