2021 yet another dramatic year for airlines globally

22 October 2021 Consultancy.uk 3 min. read
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Despite the growing enthusiasm for international tourism in the coming three months, 2021 will still be a dramatic year for aviation. A new study suggests that a sluggish uptake of business travel, a slow vaccine roll-out, and staffing issues, may see airlines facing huge losses at the end of the year.

The global aviation industry has been enduring one of the most difficult periods in its history over the last two years. With the number of airlines to have collapsed already at its highest level since 2012, the disappearance of international travel amid a protracted global health crisis pushed even more firms to the brink. It is a situation the industry is still struggling to rebound from.

According to the latest study of the aviation sector by strategy consulting giant Bain & Company, the revenues of the global airline industry will reach $235 billion by the end of 2021. Having been decimated by the Covid-19 lockdown, this shows the industry still has a long way to go to bounce back. Its income remains a whopping 65% lower than its pre-pandemic total revenue from 2019, of $666 billion.

Global commercial demand, indexed to 2019 levels

The researchers behind Bain’s latest airline industry benchmark concluded that this slow recovery means it is now inevitable that the sector will suffer huge losses at the year’s end. The report, released at the start of October, estimates that airline losses will soar to nearly $52 billion this year.

When considering how aviation demand may develop in the coming years, the researchers at Bain developed four different scenarios. While in the long-term, the analysts determined it was certain that the aviation sector would recover strongly, in Bain’s most pessimistic case, total turnover will still only be around 80% of 2019 levels at the end of 2023. In this scenario, it could take as long as 2025 before the market returns to pre-coronavirus levels.

On the other hand, in the most optimistic scenario, researchers estimated a significant, decade-high boom. In this case, the sales volume of the summer of 2013 would be reached – but it is also a scenario which relies on a rapid roll-out of the Covid-19 vaccine in all parts of the world – enabling unrestricted travel to return in earnest. As some regions are still lagging behind, this assumption seems increasingly unlikely.

Turbulence ahead

There are some key opportunities for airlines which will boost their prospects in the coming months. Three major drivers of commercial travel are set to return to business as usual. These are the US' announced plans to open to European travellers from November; the move from Australia to open to international travel for the first time in 18 months; and how the possible development of travel flows from West to East in the winter months – a time when historically many tourists like to head East for some much-needed sun.

Global demand and supply for pilots

One key test for the airline sector will be tempting business travellers back into the air. The vital target group is key to growth in the industry, but is lagging behind in its rebound. A report by strategy consultancy McKinsey & Company relatedly estimates that revenue from business travel will be about 20% lower in the post-corona era than before, while even amid the initial success of its vaccine roll-out, UK business travel remains less regular than pre-pandemic.

At the same time, as with many other industries, the Covid-19 pandemic is creating another problem for aviation: a shortage of pilots. According to Bain, while this might not be especially pronounced when travel is still relatively muted, from the beginning of 2022, companies will really feel it.

With many pilots having traded in the cockpit for a job in a sector where there was more security in the pandemic, many roles still remain unfilled – similar to what happened in the hospitality industry.