Aviation’s Post-Pandemic Recovery on a Knife Edge

The COVID-19 pandemic has had a profound impact on air travel. Department of Transportation statistics show passenger traffic dropped 60% in 2020, sending ripple effects throughout the U.S. commercial aviation industry.

Unlike past disruptive events in aviation, including September 11, 2001, and the economic recession of 2008-2009, passenger airlines entered this crisis in a relatively strong financial position, with 10 consecutive years of industry profit from 2010 through 2019. In addition, while passenger traffic has fallen, air travel has remained vital for cargo, especially for essential PPE and vaccinations in support of the COVID-19 crisis. Nonetheless, there is likely to be a long, multi-year recovery before aviation passenger traffic returns to 2019 levels.

Aviation businesses have taken a range of actions to respond to the dramatic reduction in passenger demand. Airlines, airports, and others leveraged federal assistance, such as payroll support and grant funding, provided in two 2020 federal relief laws. In 2020, for example, the Department of the Treasury awarded $28.2 billion in payroll support assistance for aviation to help airlines and contractors keep employees on their payroll. Industry association and credit rating agency representatives said that federal assistance, in addition to providing direct support, also increased confidence in the aviation industry, which enabled aviation businesses to raise money in private debt and equity markets to strengthen their cash reserves. Some aviation businesses have also reduced labor costs through various means, including through early retirement programs and furloughs. Further, aviation businesses reduced non-labor operating expenditures and certain capital costs. For example, airlines reduced capacity and accelerated the retirement of older aircraft to lower maintenance costs.

The recovery of the aviation industry to pre-pandemic passenger levels depends on factors outside the industry’s control—including declines in COVID-19 infections and the recovery of the U.S. and global economies—as well as on industry dynamics in how airlines respond to financial pressures and the changing demand for air travel. Moreover, the effects have been uneven across the commercial aviation industry with certain sectors faring better or worse depending on their business model, customers, and location. For example, according to representatives from an aviation manufacturer, airlines are likely to continue to postpone the delivery and purchases of long-haul aircraft over the next few years to better align with passenger demand. In turn, this would affect demand for aviation manufacturing and aircraft maintenance services.

As the recovery unfolds, Congress may contemplate additional ways to support the aviation industry’s recovery. The challenges facing the aviation sector are unprecedented and many uncertainties remain as to the pace and extent of recovery. Previous work by the Government Accountability Office on federal assistance to the private sector identified three fundamental principles that can serve as a framework for considering future assistance to the aviation industry. These principles are (1) identifying and defining the problem; (2) determining the national interests and setting clear goals and objectives that address the problem; and (3) protecting the government’s interests. In applying these principles, the following issues emerge and may help inform how best to design any response:

  1. identifying which type of assistance would best help achieve a defined goal;
  2. targeting support to sectors that have been the most affected;
  3. helping small communities stay connected to the national transportation system; and
  4. addressing the longer-term public health impacts of the pandemic on aviation.

It is worth noting that transportation, and particularly airports and airlines, has often led the way on virus prevention measures including UV cleaning, sanitization stations, testing, contact tracing, and mask requirements. These great resilience efforts have not gone unnoticed by travelers, without these measures the decline in passenger numbers would have been much worse for the industry.

While many are optimistic for a post-pandemic economic recovery – we are all itching for a vacation – the speed and degree to which the aviation industry will be able to rebound is likely to vary across different industry sectors. Credit rating agency representatives predict that low-cost, leisure-oriented airlines are likely to recover faster than network airlines that rely more heavily on business and international travelers.

Read the full report at GAO 

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Kylie Bielby has more than 20 years' experience in reporting and editing a wide range of security topics, covering geopolitical and policy analysis to international and country-specific trends and events. Before joining GTSC's Homeland Security Today staff, she was an editor and contributor for Jane's, and a columnist and managing editor for security and counter-terror publications.

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