Unfortunately, the pandemic, which has become a global focus, has affected the aviation sector just like every other sector. So, what is the global impact on aviation, what has been done to recover from the crisis, and what awaits us in the new normal?
Following the first emergence of the virus in China, the International Civil Aviation Organization (ICAO) published a bulletin on January 24, 2020. This bulletin contained information on the required actions under the relevant annexes of the Chicago Convention and the symptoms of the disease identified as of that date. It was noted that the World Health Organization (WHO) did not recommend any travel restrictions at that time.
The bulletin also included a call to participate in the "Collaborative Arrangement for the Prevention and Management of Public Health Events in Civil Aviation" (CAPSCA) program. This voluntary program was established by ICAO, WHO, the United Nations World Tourism Organization (UNWTO), IATA, and the Airports Council International to prevent epidemics and other health problems like Ebola, SARS, and Covid 19 from affecting the aviation sector.
Following the bulletin, ICAO continued to liaise with WHO and other relevant institutions and organizations and shared its assessments.
However, as we all remember, due to the virus's ease of transmission and unfortunately high mortality rate, all countries quickly began to take measures and cut off their connections with the outside world.
To be more specific, according to data from the World Tourism Organization (UNWTO) on April 20, 2020, all 217 travel destinations were affected by the pandemic. 45% partially or completely closed their doors to tourists, 30% partially or completely suspended international flights, 18% imposed bans on passengers from specific locations, and 7% introduced a 14-day quarantine period or other similar measures.
Consequently, all these restrictions led to very serious economic losses in the aviation sector.
According to Airports Council International (ACI) data, while passenger traffic was 8.8 billion in 2018, this figure rose to 9.1 billion in 2019. If the pandemic had not occurred, this number was projected to reach 9.5 billion according to ACI's forecasts. However, with the restrictions, there was a 26% decrease in the first quarter compared to the previous year. The second quarter was even worse, as 64% of fleets were grounded. Again, according to ACI data, there was a reduction of 620 million passengers worldwide in the first quarter of 2020. April went down in aviation history as one of the most difficult months, as passenger traffic worldwide decreased by 90%.
Looking at the airline companies, the International Air Transport Association (IATA), in its assessment of the scale of Covid 19, forecasted a total revenue loss of $324 billion and a 50% drop in passenger numbers. (Since it is not clear how long the pandemic will last and no vaccine has yet been found, industry organizations cannot always make precise predictions, which is why IATA had previously forecasted lower losses but later updated this figure.)
Airports were also heavily affected by the halt in air traffic. According to ACI data, airport revenues worldwide fell by 35% in the first quarter of 2020. It is predicted that by the end of the year, there will be a total decline of approximately 57% in airport revenues due to the impact of Covid 19.
The situation is not very bright for aircraft manufacturers either. Airbus, which announced a loss of $522 million in the first quarter of 2020, is estimated to see its aircraft deliveries drop to 650 this year and 600 next year. The American aviation giant Boeing also had numerous aircraft orders canceled; Boeing, which had already faced order cancellations after the 737 Max accidents, also announced a loss of $641 million in the first quarter. The Canadian aviation company Bombardier announced a $200 million USD loss. The Brazilian aircraft manufacturer Embraer is also experiencing a problem indirectly related to Boeing. On February 26, 2019, it was decided to split the company into commercial and defense divisions, and Boeing was to acquire 80% of the commercial division for $4.2 billion, but the deal was terminated by Boeing on April 25, 2020. Not only these companies but also parts manufacturers and other related companies in the sector incurred losses due to the pandemic.
There were also companies that changed their production and marketing strategies during the crisis. For example, Honeywell, which also has production activities in space, aviation, and defense systems, started producing masks in addition to its work at its facility in Arizona, where it designs and manufactures rocket engines and auxiliary power units. The company, which made additions to the said facility to produce more than 20 million N95 masks monthly, also hired a large number of people to work in mask production.
During the pandemic, the transport of essential needs, of course, continued.
The transport of medical supplies was particularly critical. Therefore, air cargo companies continued their operations. However, air cargo was also negatively affected. According to statements by Vladimir Zubkov, Secretary General of The International Air Cargo Association (TIACA), there was a 35% drop in revenues for air cargo companies globally. During this time, IATA, ACI, and many other institutions and organizations called for support to cover the losses of the aviation sector.
So, with the sector so heavily impacted, what kind of support was provided at the international level?
First, I want to talk about some government support. As you may recall, the United States announced a support package to combat the Coronavirus on March 27. $58 billion of this support package was allocated to the aviation sector. The largest share of this package was allocated to airline companies, and items for air cargo companies and aviation employee salaries were also included. In addition to direct support, some of the support was arranged to be repayable. Furthermore, it was decided to provide $17 billion in support to "institutions critical to national security," which, although not named specifically, was understood to mean Boeing.
In Germany, at the end of May, the government and Lufthansa agreed on a 9 billion Euro support package. With the package, 20% of the company will be acquired by the Economic Stabilization Fund. In Italy, which took one of the heaviest blows from Corona, the state announced 500 million Euros in support, and Alitalia was nationalized. New Zealand is another country supporting the aviation sector. In March 2020, the Ministry of Finance announced a $12.1 billion support package, which includes a $600 million aviation support package. Hong Kong, China, and a few other countries are also among those providing direct support to the aviation sector.
As long as the pandemic continues, we may hear of new support packages.
I will continue from where I left off in my next article.
I hope we return to healthy days again very soon,
Best regards,