26 Apr Our Comments on The Airline Sector, Post Covid-19
The COVID-19 pandemic has had a profound impact on the air cargo, air freight and overall airline industry.
In 2020, the industry was worth $328 billion, which is 40% less than it was before the pandemic. This is due to lower traffic numbers and expected growth within the industry returning only after 2024.
When we look at the statistics in 2019, the levels were much higher, in fact, they were at their highest.
In this article, we make our comments on how we believe the airline sector is poised as we transition into a post-pandemic global market.
#1 Leisure charter flights will fuel the recovery phase
With the globe entering the tail-end of the pandemic, business travel has only just started to pick up once again after a two-year hiatus. It is predicted that more remote work and other flexible working arrangements will become the new normal post-pandemic. As a result, the airline industry envisions fewer corporate trips happening while we recover from the aftermath of the pandemic.
When the world experienced pandemics and crises in the past, leisure trips were usually what rebounded first. This was the case in the U.K. following the 9/11 attack and the global financial crisis. However, business trips took four years to return to pre-crisis levels after the attacks on the World Trade Centre. Therefore, we expect that as the pandemic subsides, the rise in leisure trips will outpace the recovery of business travel.
#2 The staggering levels of debt will lead to ticket price increases
It has been a struggle for the airline sector to stay afloat with the lack of inbound and outbound flights. Furthermore, coping with high daily cash burn rates has added insult to injury for the air service industry. Therefore, it is predicted that to make up for lost time, we will see an increase in average ticket prices.
#3 Airfreight will see undersupply for some time
It’s no secret that the COVID-19 pandemic has dampened the aviation industry. However, the biggest survivors are dedicated air cargo. During the pandemic, eCommerce sales skyrocketed to unseen heights. On the other side, passenger flights, which were responsible for the deliverance of around half of total air cargo, were grounded. As a result, cargo yields increased by about 30% in 2020 and 2021.
Air cargo is always looking for ways to increase their business, and this high demand could be the perfect opportunity. In response to the high demand and low supply of air freight right now, carriers could investigate short- to medium-term opportunities to boost their cargo services.
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