CRISIS AT THE SUMMIT – AVIATION’S SILVER LINING WITH A LIGHT AT THE END OF THE TUNNEL

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Civil aviation has become a major industry in our time. Without air travel, mass international tourism would not exist, nor could global supply chains function. Some 40 % of high-tech sales depend on good quality air transport, and there is no alternative mode of transport for perishable commodities such as fresh food or cut flowers.

Demand for aviation is characterized by constant fluctuation, procyclicality, seasonality, directional flow and perishability. Factors affecting air traffic include Gross Domestic Product (GDP), population growth, political stability, amount of leisure time and market access.

The civil aviation industry has been ridden with crises since 2000, some of them man-made, others caused by nature.

  1. The Terrorist Attack 9/11: 11 September 2001, the terrorist attacks of 9/11 had a devastating effect on air travel. US airspace was closed for a week and international travel was severely affected. Available seat kilometers for winter 2001–02 were down by 15 % on Transatlantic and Trans-Pacific routes.
  2. SARS 2002–03 It is claimed that the Severe Acute Respiratory Syndrome (SARS) epidemic (November 2002–July 2003) caused more damage to air transport than 9/11 and the Iraq war put together. Traffic in April 2003 was down 18.5 % year on year. Especially hard hit were airlines in Asia and airports in Hong Kong (China), Singapore and Seoul, where traffic decreased 40–60 %. 
  3. Economic crisis 2008–09 As a pro-cyclical industry, civil aviation suffered major losses during the economic crisis of 2008–09. In 2008 operating losses for the 150 biggest airlines were US$15 billion and in the United States 13 airlines went bankrupt. In Europe, Scandinavian Airlines (SAS) was the one reducing most capacity, by 40 %. The economic crisis resulted in varied outcomes for airline personnel.
  4. Volcanic ash problems in 2010 The eruption of a volcano in Iceland, in April 2010, caused the largest breakdown in civil aviation since Second World War. During the first week 100,000 flights were cancelled and the costs for the global economy during that week were calculated as US$4.7 billion. The disruption affected some 10 million passengers.
  5. Coronavirus 2020: The impact of the coronavirus could result in passenger airlines losing up to $113bn (£87bn) in revenues this year, the International Air Transport Association (IATA) has said. The potential $113 billion passenger revenue hit is financially on par with what the industry experienced in 2009, during the global financial crisis.  

However, since 1970 the number of flights has tripled and the number of passengers grown five-fold, Currently the forecasts indicate that air traffic volumes will more than double in the next 20 years. The industries directly supported by aviation will grow in tandem, increasing business-to-business and consumer benefits and choices, improving efficiency, spurring job creation, and sparking local and national development.

Aviation’s global stature as an economic engine is evident. If the global aviation sector were a country, its total contribution (direct, indirect, induced, and catalytic) of USD 2.7 trillion to the gross domestic product (GDP), and the 65.5 million jobs it supports, would be comparable to the United Kingdom’s economic size and population.

Aviation has continued to expand. It has weathered crises and demonstrated long-term resilience, becoming an indispensable means of transport. Historically, air transport has doubled in size every fifteen years and has grown faster than most other industries. In 2018, airlines worldwide carried around 4.3 billion passengers annually with 8.3 trillion revenue passenger kilometers (RPKs). Fifty-eight million tons of freight were transported by air, reaching 231 billion freight ton kilometers (FTKs). Every day, more than 100,000 flights transport almost 12 million passengers and around USD 18 billion worth of goods.

Silver Lining: With change as the only constant, the aviation industry will make changes, accordingly, ensuring that they can cope with any situations faced. Many of the disasters caught the aviation community by surprise. However, the aviation community was able to react quickly to the crises as suitable contingencies and strategies in place knowing that the passenger demand will bounce back. Airlines always preparing for the next possible kind of crisis because nothing ever stays the same. The aviation community have learnt valuable lessons from the recent aviation-related crises: They not only gave us an indication of how a serious pandemic, or a natural disaster can quickly create a crisis, but also showed us how important it is to identify potential crises, how it’s going to affect us and how we’re going to respond and manage these crises accordingly. They are mindful that while it is difficult to expect the unexpected, they continue to prepare themselves as best as possible through a series of crisis management plans and exercises that hone their reflexes and ensure they can minimize the fallout from any unpreventable emergency.

The ReveMax Solution is part of the silver lining where it can optimize and maximize the revenue of the airline with the existing and forthcoming demand. This one stop shop with a 360-degree solution brings in efficiency and transparency to the Commercial process as to bring clarity in doing business. Airlines need to use this time at hand to make their internal and external processes robust as to be prepared for the burst of demand which will be coming their way, once this short-term crisis is under control.

References

1.      Aviation Benefits Report 2019

2.      GDFCAI/2013 – International Labor Organization

3.      https://www.theguardian.com/business/2020/mar/05/airlines-could-lose-up-to-113bn- on-back-of-coronavirus-says-iata4.      https://www.flightglobal.com/airlines/iata-flags-up-to-113-billion-revenue-hit-from-coronavirus-crisis/137101.article

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