Friday, May 24, 2024

Climb Power For Aviation In 2023

Bikram Vohra

Several factors come into play when any projections are to be made for 2023 and civil aviation. Right in the front, even as we like to believe that we are collectively on a course to getting back to pre-pandemic 2019 levels, there is a spectre sitting on our shoulders. What if the Covid variant hits us again? Aviation was probably the worst hit in 2020/21, and all our plans would fall apart if this second wave was to mark its arrival in the coming year. Indeed, the industry is much more resilient and will recover faster but still be badly hurt. The Director General of the United Nations agency World Health Organisation (WHO), Tedros Adhanom Ghebreysus, has said, “This pandemic is nowhere near over and with the incredible growth of Omicron globally, new variants are likely to emerge.” It is not a scaremongering but a common sense assessment and one that travel and tourism should keep in mind. Starting off this piece on a cautious note is aimed at a pragmatic approach to an industry still
picking up the pieces.

Let me elaborate on one aspect that proves the need to ensure we don’t wear rose-coloured glasses and play pretend. I am referring to business travel, once the core impetus for commercial aviation and now an also-ran. Covid paid to that segment, and even the most hopeful will agree that global business travel will not in the foreseeable future reach pre-Covid levels and, by December 2023, not likely to cross more than a 65% uptick at best. As high as 70 percent of the corporate world has sliced its travel budgets and has no desire to revive them anytime soon. There is a temptation to shrug off this revenue stream by seeking sanctuary in tourism and leisure travel as the replacement for business. That is apples and oranges, and while the tourist per se offers welcome respite, it doesn’t have the same clout even if it does hit the 97% pre-Covid marker expected of it in the coming year.

The new mantra of biz tourism combining both aspects to create a new passenger profile may take some time to become a spur of any worth. Being marketed as the ‘leisure’ group, it hopes to exploit the overlap between the two categories. If it does catch on and carriers begin to offer deals for this genre of traveller, lesser-known destinations may get a boost. Longer vacations using the ‘work from anywhere concept to relax and work in the same environment could see some traction in the coming year.

Then again, oil prices have soared as Russian energy supply fears have intensified, leaving airlines exposed to extremely volatile fuel prices. This bumpy road has still to be navigated, and with no end in sight, it is difficult to predict what the impact will be on air travel trends over the next twelve months. Even as the industry experiments with sustainable aviation fuel (SAF) alternatives and a smaller carbon footprint, the clean air targets are calling for older aircraft to be mothballed. There is also the unspoken fear factor of flying over war zones, and many European carriers will feel the pinch of re-routing if Russian airspace stays a no-fly zone.

On the positive side, once China relaxes its stringent Covid policies hopefully by March 2023, it is likely to confirm that the Asia Pacific region is the leader of the resurgence. But yes, the sun is certainly peeking out of the clouds, and play is on the cards. This year passenger demand growth of 59.8% is expected to outpace capacity growth of 47.8%, which confirms the sunny-side-up picture. In this scenario, India plays a major role. Indian carriers are expected to generate INR 1,113.1 billion ($14.4 billion) in operating revenue, including INR 147.6 billion from cargo and ancillaries. International Air Transport Association (IATA) has predicted that India will be the world’s third-largest market for aviation, by the year 2024. The untapped potential of half a billion people purely on domestic routes will give India a plus 6% annual upswing.

This upward line on the graph may stay so through 2024 and make 2023 a profit year if all the concerns are softened and do not adversely impact the growth. Stats indicate that globally in 2021, domestic traveler numbers were 61% of 2019 levels. This was expected to improve to 93% in 2022, and now 103% in 2023, 111% in 2024 and 118% in 2025., all things being steady. Most carriers should break even or show tolerable losses and minor profits. Do not expect to get a normal edge till the end of 2025. It must be remembered that the industry lost $137 billion in 2020 and $42.1 billion in 2021. In 2022 thanks to the uplift and the pressure on Covid-inspired claustrophobia, the loss will be about $9 billion.

Speaking about concerns, the increasing holler for single-pilot flights is disconcerting. A report in Forbes says: Over 40 countries, including Germany and the United Kingdom, have asked the United Nations body that sets aviation standards to help enable single-pilot flights, and the European Union Aviation Safety Agency (EASA) has also been working with plane makers to determine how
solo flights would operate.

It is a moot point whether this demand will worry passengers seeing as how the comfort zone of two pilots is a given. Even a toilet break means no one on the flight deck. And that is going to be a matter of profound unease. This is a major issue and a contentious one. The pilot’s association Air Line Pilots Association, International (ALPA) is horrified and says that; Commercial aviation is the world’s safest mode of transportation, and history shows that having at least two fully qualified, highly trained, and well-rested pilots on the flight deck is an airliner’s strongest safety asset. Airliners are designed for more than one pilot on the flight deck because safety and operations require it. Yet some special-interest groups continue to push for reducing the flight crew on board large aircraft—possibly down to even a single pilot—to cut operational costs. Surely, there must be other ways of cutting costs. It might not become a reality just yet, but this year we will see more pressure being put on International Civil Aviation Organisation (ICAO) to further examine the option.

Airline Reporting Corporation quoting IATA, stated, ‘As 2022 ends, the future looks brighter for the aviation industry. Despite the clear challenges standing in the way of a full recovery — including fuel prices, labour shortages, and global economic uncertainty — 3.8 billion passengers are expected to keep the skies busy in the new year and generate $498 billion in revenue. IATA said it expects the industry to post a “small” net profit of $4.7 billion in 2023. This is all good stuff. It is a .06% dart into the black but relief after three years in the red, even though it is a far cry from the $26.4 billion take home registered in 2019.

“The trajectory for the recovery in passenger numbers from Covid-19 was not changed by the Omicron variant. People want to travel. And when travel restrictions are lifted, they return to the skies. There is still a long way to go to reach a normal state of affairs, but the forecast for the evolution in passenger numbers gives good reason to be optimistic,” said Willie Walsh, IATA’s Director General. And we can echo that sentiment.

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