With over 62% of airplanes grounded in April, the value of the top 10 insured airports has shifted, said Suki Basi, managing director, Russell Group speaking to AM Best TV.
A professional approach to risk management has never been more vital for the aviation industry
12 November 2020 | Blog Post
Republished with the kind permission of Insurance Day. Read the PDF Version of the article here [Page 6 out of 8]
The aviation sector is in a bad place right now. Before the COVID-19 pandemic there were high hopes that the inexorable rise of globalisation would result in massively increased demand but the best laid plans of operators and investors went awry in 2020. Of course, there is cause for cautious optimism that a return to flight will happen at some point but a number of things will have to happen before we get to that happy place, which I will discuss in this article.
Mass, affordable air travel has played a key role in globalisation bringing the promise of travel to far off destinations that used to be reserved for the privileged few. Anyone dreaming of long distance air travel needs to put their plans on hold for the time being but the airlines and airports remain hopeful of a return, which is why they are pushing for uniform global testing guidelines to waive strict quarantine requirements that are decimating travel, according to a recent Reuters report.
With airline trade group IATA forecasting a 66% decline in 2020 air traffic because of the pandemic, Reuters says that: “a global aviation manual now under review by a UN body suggests global guidelines calling for the use of highly reliable tests when screening passengers to detect the novel coronavirus ahead of flights.”
It seems that global COVID-19 challenges require global solutions, which is why the broad availability and use of an effective COVID-19 vaccine has become so vital if the aviation sector is able to pick itself up again. Airlines won’t see a direct benefit from vaccines until their potential customers get vaccinated. That process may take some time because it is likely that first responders and high-risk populations would likely be the first groups to get access to any vaccine.
Creating a vaccine is not enough; it should also be effective, and distributed swiftly and broadly to a population as soon as it is available. The world’s civilian cargo fleet, as well as military cargo capability, would likely play a key role in distribution.
Another challenge facing the aviation industry is people risk. Or, to be more precise, the lack of people risk in an environment in which redundancies, furloughing employees, and early-retired staff, causes the sector to lose many skilled, experienced employees. Being an airline crewmember, whether as a pilot or a flight attendant, is a professional choice and a lifestyle choice. Once that employee leaves, especially for a different lifestyle, returning to aviation may not be attractive.
In spite of the layoffs and furloughs among airlines around the world, there may be plenty of idle aircraft capacity to deal with a rapid upsurge in passenger demand. According to FlightRadar24, worldwide commercial traffic had its most severe reduction in late March 2020, with traffic dropping by 75% compared to late March 2019. By mid October 2020, the number of flights represented a 42% drop from the same period in 2019.
Consumer confidence over potential COVID-19 infection risk during air travel is another issue, for example, in an area such as mask pushback by passengers. While Boeing has worked with the University of Arizona to show that Boeing’s aircraft cleaning requirements reduce transmission risk, Boeing has an ongoing public trust issue due to the 737 MAX situation, so any advice or suggestions the company gives about the safety of their product may not be as trustworthy as suggestions from an objective third party.
General trends in society, such as rising infection rates and changing public policies may have more influence over public perception than any action an airline may take. Commercial activity, including aviation, will return to something resembling normal more quickly if corporate and political leaders work with, rather than against, public health leaders and researchers.
Business travellers will return, and which airline gets their business will depend on convenience, price, previous relationship, and incentives. Even if economic conditions return to pre-pandemic levels, business travellers may not be as willing to travel by air if that business can be effectively done remotely, or if that traveller is in a high risk category for contracting COVID-19.
After six plus months of operating in a travel-restricted environment due to COVID, many businesses and workers have had to learn how to conduct at least some business remotely, and if the end result is as good or better than before, air travel may be less attractive.
There are some grounds for optimism, however, as new, innovative technologies could play their part in making the return to flight experience a lot more pleasurable in the not too distant future. Connectivity and big data will play its part here, allowing airports and airlines to plan better, track technology and regulatory developments, and adapt to new transportation modes.
Airline sector futurologists anticipate that a new digital ecosystem can be in place and shaped to fully serve the passenger 5-10 years from now and possibly sooner with a bit of good will and collaboration between governments, manufacturers, operators and passengers.
The growing use of biometrics could render passports obsolete and create an experience in which passengers have a walkthrough airport experience. Your face would effectively become your passport, which means you will no longer have to stop at any touch-point from check-in to boarding.
Of course that opens up a whole new can of privacy concerns as well as the potential for increased cyber disruption but without new risks there would be no need for risk professionals so it promises to be interesting times ahead for the aerospace risk sector and those wishing to re-open the gates to departure lounges around the world!
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