Losing Altitude – an insight into the recovery of U.K. aviation

By Aoife Doyle

The economies of commercial aviation are no stranger to turbulence. Whether triggered by an economic downturn, terrorism or fears over public safety, the industry endures. Nevertheless, COVID-19 poses a challenge unlike any faced by the travel industry before. Since air travel is predominantly to blame for the exponential spread of the virus and was one of the first industries to feel the impact, predictions for the recovery of global aviation are alarmingly pessimistic with many industry experts believing that a full recovery to pre-COVID levels of travel is years away. In the U.K., airlines’ recovery plans are being unpredictably paused by changes to restrictions on air travel, raising the significant £28bn question over the future of the U.K.’s airline industry.

During the first weeks of lockdown, U.K. airlines grounded most of their fleet as governments closed international borders and banned all but essential travel. Two of the largest UK based airlines Jet2 and Ryanair suspended as much as 99% of all scheduled flights. Due to the unprecedented nature of the COVID-19 pandemic, airlines were faced with a sharp decline in travel, coupled with the complete uncertainty of the virus and limited foresight as to when travel could return to normal. Since the start of the pandemic the ICAO has reported a 4.9% to 5.2% contraction of the global economy, indicating that the burden felt by the “great lockdown” could rival the Great Depression. Despite signs of life in July, the Airport Operators Association, a trade association representing the interests of UK airports, revealed that compared to last year passenger traffic was down 97% for the same period.

Aviation is one of the most global economies, connecting people, cultures, and businesses across continents. The direct economic benefits of commercial aviation are endless as the turnover generated by airline companies and the value of U.K. exports contribute significantly to the GDP. Similarly, airlines direct investment into communities and jobs provided are the foundation of many regions throughout the UK. The outcome of such a prolonged period of diminished demand for travel does not only have lasting effects on the airline industry. In mid-June Huw Merriman, the chair of the Transport Select Committee published an unsettling report warning of the prolonged impact of suspended air travel stating that the government should also be concerned of the strategic importance of aviation, underpinning the economic prosperity of nations.

The effect of the pandemic on U.K. airlines is vast. As the summer season draws to a close, the sustained plunge in travel caused by the pandemic has compelled airlines to continue to operate a reduced schedule – translating to billions in loses for the industry. U.K. based airlines have had the opportunity to revise their future plans for growth in an attempt to stay afloat. Many of the biggest U.K. airports including all four London airports operate under a ‘take-it-or-lose-it” rule. This rule states that if airlines do not occupy 80% of take-off and landing slots then they risk losing them to other carriers the next year. The new outlook of air travel will be determined by the actions of airlines in their recovery. The need for global unity in restarting the market is of the utmost importance. 

With Coronavirus occupying news headlines other issues have been pushed aside, in particular the pending exit of the U.K. from the European Union. Still to be decided is the security of relatively unrestricted travel for British citizens to many countries within the E.U.. These highly debated deals are crucial to mapping out a new chapter in history for the country. Merriman simply states that if we want to talk about these big deals and future trade, we’ve got to have an aviation sector that can actually deliver it.” Subsequently such insecurity in the future of travel, the recovery of the industry and in particular the speed at which it becomes an asset to a country once again rather than a liability is of foremost significance.

Despite dark skies above, there is some light behind the clouds. At the beginning of August, Ryanair implemented phase two of its aggressive ramp up of scheduled flights and is routinely flying more than 80% of its Boeing 737-800s fleet on commercial services daily. Whilst the number of passengers travelling are far from those predicted the fact that international travel is being facilitated is encouraging.

With Britons travelling abroad more than any other nation in 2019 the need to address the diminished consumer confidence is preeminent. The International Air Transport Association director general and CEO, Alexandre de Juniac said “The freedom to fly is more accessible than ever,” however, with such stringent restrictions this freedom is in jeopardy. In the recovery plan to pre-COVID levels of air travel in the U.K. implementing safety precautions is paramount. The introduction of air bridges, a reciprocated agreement between two countries allowing free travel between them without having to quarantine on arrival were vital in facilitating the easing of restrictions on international travel to and from the U.K. Many airlines were extremely quick to criticise government plans as they claimed adding and removing countries from a safe-to-travel list could negatively impact consumer confidence and their economic recovery. Despite initial hesitations, Skyscanner, a leading online travel agency and metasearch engine, reported a 53% increase in flight booking within the week travel restrictions were partially lifted. The safety and security of travel is overriding, and although the foundations that have been laid there is a long way to go until passengers can travel freely again.

These are unprecedented times for the industry. In a world in which nothing is certain it may seem that the experience of flying will never be the same again, yet the industry has bounced back before. Aviation is critical for the vitality of economics, and as a result the means in which airlines and governments collectively cope with the crisis and approach the recovery will set the course of the air travel industry for the foreseeable future.

The views expressed in this article are the author’s own and may not reflect the opinions of the St Andrews Economist.

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