By G S Bawa
Drastic reduction of fleets, staff cuts, accelerated closure of unprofitable subsidiaries, adjustments to security measures and sluggish demand. This is what the aviation industry faced during the COVID-19 crisis. The elements for complex coordination include Airports, Airlines, Sky (rather skies!) and the Passenger; all these have complex geopolitical, national & international, and Operational & Environmental influence.
Geopolitical Pressures – At The Global Level
Geopolitical Pressures are political issues between two or more countries that cause tension and global unrest. This is particularly relevant in present circumstances, where the ongoing Russian-Ukrainian war is causing inflationary pressure on fuel and cost-of-living prices.
Many airports are concerned about the effect of geopolitical pressures. These issues include longer flight times (on account of planes having to avoid the Russian-Ukrainian airspace and therefore fly longer routes) and rising jet fuel prices. Add to this, a cost-of-living crisis – reducing the disposable income passengers have to purchase plane tickets – and it becomes clear airports’ means of income and livelihood are threatened by the continuation of the war.
Statistics by the International Air Transport Association (IATA) found that jet fuel prices had risen, up to USD 150 per barrel on 21 March 2023. This was a rise of 39% from the previous month and 121% year-on-year1. Consequently, airlines must either absorb costs themselves (a precarious decision since profit margins are already slim) or increase airfares, burdening costs onto travellers.
This was a tough reality (since 2023) for Asia-Pacific travellers, as it was reported by CNN Business, that airfares across this region are rising more than other regions and were expected to surge further beyond 2023. In some cases, they reported that customers are paying twice what they did four years ago.
Geopolitical pressures were a main topic of discussion at recent conferences. The challenge is that of economic and geopolitical uncertainty and those that we are currently facing; high inflation, rising costs, and difficulties in finding a qualified workforce.
Further, the ongoing conflict in Israel and Gaza, which has seen airport-based protests, the increase in aggressive behaviour at airports and in aircraft cabins between travellers with differing views, and we have since seen stories like that of an American Airlines passenger being asked to remove his ‘Palestine’ sweater to minimize the potential for offense to be caused to other passengers. All these factors could be potential major security issues for airports and airlines.
According to ACI World’s ASQ Global Traveller Survey 2023 globally, 54% of respondents travelling for leisure and personal reasons reported that economic and geopolitical events have influenced their travel plans in the past year.
Airports at Operational Level
With rising inflation, overhead costs, and challenges recruiting enough personnel, airports are struggling to remain operationally efficient. Some airports have reported having to shut terminals down to save on costs, or close airport sections to keep limited staff at more ‘important’ passenger touchpoints. Some airport retail spaces and food and beverage outlets remain shut or with limited opening hours due to staff shortages.
Airports were experiencing a shortage of ground handlers, which impeded their operational efficiency and resulted in an ‘overwork’ on current staff. The industry has seen how “operational challenges affect consumer’s confidence in airports. Having cancellations and delays knocks the general confidence of passengers.
Achieving operational efficiency has always been a key focus area for airports, however, this challenge is further compounded by rising inflation, energy and material costs, workforce shortages and changing behaviours of passengers, making efficiencies difficult to achieve.
However, ways that airports have been trying to improve operational efficiency include implementing new emerging technologies such as virtual queuing which allows passengers to reserve their place in line without physically waiting which reduces congestion, streamlines check-in and increases efficiency.
Other security-related technologies include automated screening lanes, and next-generation security scanners which allow passengers to keep their laptops and liquids in their hand baggage, thereby reducing the time required to unpack belongings and will reduce queues. Self-baggage drops afford many efficiencies in that the passenger becomes your unpaid airport worker because they scan, tag, and check in their own bag.
The shortage of staff can be tackled by the introduction of artificial intelligence to create chatbots and virtual assistants, as well as helping with demand prediction and resource allocation; autonomous vehicles such as self-driving shuttles and baggage carts; and robotics, which allow staff to focus on more high-value tasks and personalized interactions with passengers.
A Peep Into the Future – Demand Projections By ICAO, ACI and IATA
On 14th Feb. 2023; ACI World has released its flagship World Airport Traffic Forecasts 2023–2052. The projections indicate that –
- The global passenger traffic is set to reach 9.7 billion by the end of 2024, surpassing pre-pandemic levels, and suggests a doubling by 2042 and a 2.5-fold increase by 2052.
- By the end of 2024, global passenger traffic is expected to reach 9.7 billion, surpassing the 2019 level for the first time since the COVID-19 pandemic.
- Global passenger traffic is projected to grow at a compound annual growth rate (CAGR) of 4.3% from 2023 to 2042 and 3.6% from 2042 to 2052.
- Global passenger numbers are forecasted to approximately double from 2024 to 2042 and to be 2.5 times higher in 2052.
- By 2024, international passenger traffic is forecasted to approach the 4 billion mark, with domestic passenger traffic reaching 5.7 billion.
April 2024, the global aviation regulatory body, the International Civil Aviation Organisation (ICAO), has projected a two percent increase in passenger traffic in the first quarter of 2024, compared to 2019, noting that carriers would maintain profitability. The group noted that demand this year was expected to rise by 3-4 percent, reflecting a Compound Annual Growth Rate (CAGR) of 0.5 percent since 2019. It has been flagged that the implementation of ICAO’s post-pandemic guidance was now equally crucial to ensuring the resilience and sustainability of this recovery; and the goals include decarbonization by 2050 supported environmental sustainability, driven by ICAO-led initiatives for cleaner technologies and fuels.
The International Air Transport Association (IATA), the umbrella body for over 300 global airlines forecast for 2024 paints a promising picture for the aviation industry, with expectations of record airline revenue reaching $964 billion. This projected revenue signifies a substantial rebound and resurgence for airlines, reflecting a renewed Vigor and Vitality within the industry. The anticipation of 4.7 billion passengers flying in 2024, surpassing pre-pandemic levels, underscores the strength of the projected recovery and the heightened interest in air travel.
In addition to the positive outlook for airline revenues and passenger numbers, the financial projections for the aviation industry in 2024 indicate a robust recovery. The predicted net profits of $25.7 billion, coupled with a 2.7 percent profit margin, underscore the industry’s resilience and capacity to navigate the economic challenges. However, factors such as jet fuel prices and oil costs are expected to influence the industry’s expenses and overall profitability, highlighting the need for strategic cost management and risk mitigation strategies. Hence the Caution is; that the potential impact of global economic uncertainty and armed conflicts on the industry’s forecasts underscores the importance of adaptive financial planning and risk assessment. The recovery trajectory, as such, envisioned for the aviation industry in 2024 encompasses a phased and strategic approach, with domestic travel anticipated to lead the rebound before international travel gains momentum.
Sustainability and the Passenger Experience
Sustainability directly influences the passengers’ experience and cannot be underestimated, as such it is becoming increasingly important to passengers and there have been many prominent protests from climate activists in recent years, so the spotlight is well and truly on the industry to change.
World over, consumers are becoming increasingly aware of the impact of their lifestyle choices and showing more willingness to adopt sustainable and eco-friendly routines. According to ACI World’s ASQ Global Traveller Survey 2023 globally, 72% of travellers expect to see a green environment at airports and 43% of respondents have heard of sustainable aviation fuels, showing an increasing awareness and consciousness of the role that airports play in global carbon emissions and an interest in how they are working with stakeholders to tackle emissions. Despite this, many airports are not very good at telling their passengers what they are doing in terms of sustainability and certainly something that airports as a sector must become better at.
Airports are aware of the urgency to decarbonise and sustainability is integral to every airport’s strategic plan with many aiming to achieve Net Zero emissions; this refers to the aim of negating the amount of greenhouse gases produced by human activity by reducing emissions and implementing methods of absorbing carbon dioxide from the atmosphere. The aviation sector certainly isn’t alone with this target as many industries today, like retail and the food and beverage industry, are all looking at ways to achieve, sustainability. For airports, working to Net Zero by the year 2050 means that all operations – airlines, ground handling, terminal – will reduce greenhouse emissions close to zero, by 2050. The aviation industry has made good progress toward this target. In a report by the Air Transport Action Group, it has been found that:
• Aviation is responsible for 12% of CO2 emissions from all transport sources, unlike 74% of emissions from road transport
• 2.1% of global human-induced CO2 emissions come from aviation
As of April 2023, there are 14 airports worldwide that regularly use sustainable aviation fuel (SAF), including Los Angeles, Oakland and Stockholm
The above statistics demonstrate that the air transport industry is actively working to lessen the harmful impact it has on the planet, and are looking for suitable replacements to ensure their longevity.
Some of the ways airports are looking to reduce their carbon emissions include diversification of intermodal travel and improving access to the airport by sustainable transport, electrification of fleet vehicles, and transitioning to green energy sources such as solar and wind power.
Appetite for Travel – Post COVID-19
Despite such a prolonged period of stagnation during the pandemic, there is a renewed appetite for air travel. According to the recent ACI World ASQ 2023 Global Traveller Survey, 56% of respondents are planning to travel within the next three months compared with 51% the same time last year. Industry experts have flagged that the domestic passenger numbers are already surpassing the numbers of passengers that we had in 2019; and the international passengers will recover earlier than expected, rather than 2025 as previously thought, it will recover in 2024. This means that by mid-2024, we will be fully recovered to 2019 numbers. We still have certain headwinds in front of us, but we are so happy that it is coming back on track. If we want to double the size of the industry in the next 20 years, with more than 19 billion passengers by 2041. This means we must work on efficiency, digitalization technology, and investing in the current and new infrastructure, and it will be crucial for the future.”
Travel Trends – The Summer of Discontent
As said earlier, post-COVID-19 passenger numbers surged quickly and suddenly in eagerness to enjoy the magic of travel; people started giving them different names such as WOW Factor, The Summer of Discontent, Revenge traveller”, etc. What was coined as ‘the summer of discontent’ which saw operational issues at airports due to a shortage of workforce, which was widely reported in the news, passengers have been concerned about delays at airports, the reliability of their travel plans and whether their baggage would appear at the other end. This led to passengers arriving at the airports earlier and taking their baggage as hand baggage so that they could keep an eye on it. A shortage of staff places further stress on airport processes and capacity, leading to disruptions in services and a degraded passenger experience. It is perhaps not surprising that passengers still experience concerns over the airport experience with regard to long waiting times and crowded airports.
The value passengers place on experiences is increasing, and materialism is on the downward trend. The rise in premium product sales, such as airport lounges and premium security, etc. is a clear indication of it. Other stress-free services for seamless travel shall help in creating cherishable memories along the way. As such, airports need to move into the experience industry, and create unexpected experiences and a ‘WOW factor’. Consumers buy from and visit brands and stores that they have an emotional relationship with and going above and beyond in the travel experience helps cement this emotional relationship with the passenger.
Overall, passengers are evolving at a rapid pace and airports must try and anticipate and stay ahead of trends and forecasts. They can do this using data and analyzing their passengers constantly in order to monitor their feelings and emotions along the airport journey. Airports must focus on delivering a superb passenger experience, it is said, that if you have 1% increase in passenger satisfaction, their spending will increase by 1.5%. So, there is a direct correlation between investing in quality and experience and a positive return on investment and I personally believe that a Happy Passenger spends more at airports!
‘Sky is the Limit’ Is An Old proverb
In aviation parlance, in most situations, coordination is about the conditions under which aircraft move forward and upward and vice versa; deploying instruments, equipment and human coordination depending upon the terrain such as regular flying zone, Defence Flying Zone, or International Flying Zone. This is in addition to the regular technical navigational requirements. The term military aviation refers to the development and use of military aircraft, while the term civil aviation refers to all nonmilitary aviation, such as air transportation provided by airlines or the carrying of cargo by commercial aircraft; but once in the air Aircraft is Aircraft and both need to respect each other; as one has thrust while other has the Human Resource on Board. For any Nation, both are important and essential. Coordination is the function of management that ensures that different departments and groups work in sync. Therefore, there is unity of action among the people involved in action; be this as groups, and departments. It also brings in the synergy and harmony of carrying out the different tasks and activities to achieve the Nation’s Pride and Economy in a more objective manner.
People working under two different domains, i.e., Defence and Civil Organisations need to provide a unique bridge for “Civil – Defence” cooperation in aviation. Resources in terms of technical know-how and expertise for enhancing airspace capacity, flight efficiency, military mission effectiveness and civil-defence interoperability with reduced costs in a secure Single Pan-India Sky are essential.
‘Sky is the Limit’ is an old proverb; For aviators, even the sky is not the limit! Airspace plays a vital role in enhancing the aviation of any nation. India is blessed with long and wide Air Space. Seamless Airspace with a befitting surveillance system has its own importance in providing real-time information for facilitating efficient and effective coordination both in the air and on the ground. The key objective shall remain to support the Nation for Defence and Civil requirements in aviation. Cooperating with international organizations to improve network performance by balancing the needs of civil aviation with those of national security and defence will add value and help in staying up to date with the latest civil-defence developments by following the common stream of communication networks.
One key priority, i.e., flexible use of airspace and airspace management is the spirit of civil-military collaborative decision-making, allowing airspace users to share the designated airspace in an efficient and effective manner, at all times.
Networks of teams need to be developed for tangible solutions for improving strategic, practical and tactical processes concerning health aviation for the country both in terms of Defence and Civil.
- The establishment of a local, Regional / Sub-regional, and National Airspace Management Support System is essential.
- Solutions both technical and administrative for civil-military aviation coordination are essential and all concerned shall have access to the same.
- A pan-India repository of information supporting civil-military key performance indicators shall be drawn and effectively shared among all concerned.
- Improved Operational Air Traffic Routes and Rules shall be notified in a befitting manner.
- Overall Enhanced Harmonization of Civil – Defence at the apex level is essential.
- Automation with the least human intervention in the era of Artificial Intelligence and Robotics is possible; as such a road map shall be drawn to meet future challenges.
The Dynamic Flexible Use of Airspace has been attempted and it is the need of the hour to deploy AI & Robotics to Automate the Process to enhance the benefits that shall aim to improve network performance and to provide safe, efficient and accurate information about the flow of traffic. Key Concern areas shall include –
- Introduction of performance-driven operations based on the management of airspace configurations at the network level;
- Continuous sharing of information, in real-time, between all stakeholders.
Automation shall drive home the benefits such as –
- Increased flight efficiency.
- Reduction in distances and time and resultant reduced fuel burn.
- Improved real-time civil-defence cooperation.
- Reduction in airspace segregation needs.
- Enhanced Air Route Network.
- Overall, increase in air traffic capacity.
- Overall, reduction in delays in general air traffic, with better information.
- Efficient and Effective ways to separate defence and civil air traffic.
- Enhanced real-time civil-defence coordination at network level.
- It will be possible to temporarily control the airspace for discrete operational requirements.
Creative Solutions – Airports
Airports are coming up with creative solutions to mitigate greenhouse gases, and this shows that more airports are submitting to the needs of the hour and realizing the urgent need to eliminate the pollution of harmful gases to retain their licenses to operate in the future. Airports have set an ambitious target of carbon neutrality by 2025 and have started building solar parks which will produce up to 100% of the electricity that the airport consumes.
Legislation is key in the development of sustainable air travel and ACI World and IATA have been enforcing net zero legislation, and encouraging airports from across the world to adhere to it. However, the discussion of Net Zero by 2050 in aviation isn’t a new topic and has been talked about for many years. Topics that have been gaining traction that airports are taking more notice of include the production of green fuels, green financing, Sustainable infrastructure and ENERports. It is believed that, under ENERports, airports can participate in the energy transition for the whole aviation ecosystem and can move towards becoming energy hubs or ‘ENERports’ that supply the whole ecosystem that services the airports. As of now, people know airports as a hub to connect people and airlines, but airports shall also be perceived as Energy Hubs that provide sustainable energy for the whole ecosystem and go beyond our role as just facilitators of air travel.
Creative Solutions – Airlines
Yet another, most upcoming subject under Aviation Lense is Corporate Social Responsibility – Green-Financing Corporate social responsibility has become more important in recent years, and now investors are requiring companies to evidence that they are integrating sustainable business practices. Green Financing has been defined as ‘any structured financial activity that’s been created to ensure a better environmental outcome and a more resilient future.’ It is a ‘sign of the world economy’s accelerating transition away from the fossil fuel era’. Green financing has entered the mainstream of aviation because there is more demand to integrate sustainability into business practices and models.
Green-financing is popular in aviation because it rewards borrowers when they achieve ESG targets. For instance, participating airlines who successfully achieve preventative targets of carbon output, or increase the proportion of efficient technology, can be rewarded with rent abates or reductions in margins on their financing. This was the case with the Dublin Airport Authority (DAA) which offered low emissions discounts to airlines that operate lower-emission aircraft. The incentives come in the form of a reduction in Dublin Airport’s ultra-low-cost aeronautical charges. DAA will charge airlines that fly high emission aircraft more. Swedish airport operator Swedavia also introduced environmental emission charges at its largest airports, Stockholm Arlanda (ARN) and Gothenburg. Corporate social responsibility has become more important in recent years, and now investors are requiring companies to evidence that they are integrating sustainable business practices.
Through the innovative use of revenue management software, Swedavia is able to automatically calculate charges, using industry emission data sets. This enables Swedavia to incentivize airlines to switch to sustainable aviation fuel and more efficient aircraft and accelerate the transition to more sustainable aviation. Calculations are kept transparent to the airlines through easy-to-understand invoices.
IATA; introduced the idea of Green-Financing, calling it a “pool of financial resources to help fund green technology.” This concept has been replicated by other airport groups but is yet to be recognized at the global level. Once adopted; this allows the group to incur a ‘green debt’ and help finance or refinance projects that have a positive environmental impact.
Similarly, in a review by financial service companies, they identified a pressure facing airlines to decarbonize and expand green-financing budgets. Airlines are looking to create resources such as:
• Green bonds: a fixed bond used to fund projects of environmental benefit
• Transition bonds: proceeds used to fund a firm’s transition that has a lesser environmental impact (like transitioning from jet fuel to SAF)
• Sustainability-linked bonds: a fixed bond, where its aims are governed by ESG objectives.
Airlines are making more of an effort to develop sustainably and are making said developments more accessible and affordable. Creating green-financing options will help reduce their inflationary costs while also supporting projects that have a good, environmental benefit and have supporting projects that have a good, environmental benefit.
Author’s Note:
The article is purely based upon my author’s research and analysis of the industry, which he has compiled exclusively for the target audience as reference material for a better understanding of the aviation sector from the current global perspective.
The purpose of this article is to share the concerns on a common platform to keep the readers informed on these issues and stay abreast of aviation affairs.
Gurmukh Singh Bawa is the former General Manager, Airports Authority of India, Secretary General, the Air Travellers Association and Secretary Public Relations Society, Delhi. Currently, he writes on subjects like Airport Economics, Airport Statistics and Data Collection, Traffic Studies & Surveys and Traffic Forecasting, Commercial Aspects of Airports, Airport Marketing, Airport Non-Aero Enhancement Strategies, Corporate Communication, Organization Image Building, Public Relations, General Management, Motivation, Quality Control, Project Management, Training and Training Methodologies
