News & Media

A New World

By Martin Rockman, Founder & Director at VMR Travel
27 Apr 2020

The Future Of Air Travel Post COVID-19


Quo Vadis Air Travel

Recent IATA data shows that more than 8500 aircraft were grounded in February and an additional 12400 in March resulting in the majority of the worldwide fleet being grounded. It is widely accepted that only 4% of global passenger traffic is still operating and as IATA was pointing out markets with severe travel restrictions cover 98% of global passenger revenues.

By the end of April global capacity will be down around 75% on a daily basis compared to April 2019 and while IATA’s global forecast projected a capacity growth of +4.7%  for 2020 the current schedule now indicates a cumulative year on year decline of 29% by end of May this year.

Where does that leave us?

Looking at the seat offerings for May and the coming months the data suggests that airlines are expecting a recovery but they are likely to adjust their schedules as the outlook clarifies throughout April. Capacity may even recover to around 45% by end of May but it all depends on the so called ‘flattening of the curve’ .

In very simple terms the more the curve is flattened the more recovery we will see as the curve, cure or treatments will decide the lift on travel bans. In the US domestic market we have already seen a significant decline in new cases under 10% of total cases  (April 18)  and simultaneously an increase in domestic flights to ca 10000 (source : IATA) . Of course the worldwide scenarios are different, so far only the US and Asia have allowed domestic air travel  and Australia is debating it. In Europe, Africa and wide parts of Latin and South America all domestic flying has come to a complete standstill even though their new case numbers are continuing to slow down. It can be expected though that these countries will follow suit over the coming months and slowly open up their domestic traffic.

While undoubtedly that is the right step in the right direction it is safe to assume that passengers will not flock back to airports in big numbers. Restoring passenger confidence will be the order of the day and most crucial to any development. 47% of passengers said they would wait at least a month or two before flying again, 28% said they would even wait six months (Source: IATA April survey in 11 countries). That is a long time to bridge.

But what is it that are we going back to?

Lets look at two factors – airlines and passenger behaviour.

Airlines will have a massive overcapacity in the market and I would expect the effect to be similar to 9/11 in as much as that we will see a massive cleansing effect. Older aircrafts will be retired sooner than planned for, underperforming routes will be closed down or see a significant reduction in frequencies and airlines with a pre COVID cashflow problem will most likely disappear. In a recent supplier call representatives of Americas three biggest airlines indicated that they could possibly retire up to a thousand aircraft and an equivalent of up to 105000 airline jobs. In Europe the Lufthansa group have said that from their entire fleet of 763 aircraft up to one third could remain in storage. That will have a massive effect on routes and frequencies but also on airfares. Who would want to start a price war in times when massive losses need to be recovered and profitability is key?

On the other side of the globe Singapore Airlines has cashed itself up with access to a 13B $ finance package that will most likely see itself go shopping. Malaysia Airlines is in dire need of support, Cathay is suffering the effects of the crisis in Hong Kong plus Covid-19, a few hours south Virgin Australia is on offer where Singapore Airlines already owns a stake. Last but not least the Indian market has no significant international airline with Air India having been on the verge of bankruptcy for a long time and then there is Vistara, Singapore’s Indian joint venture. Singapore Airlines will grow and use the opportunity to establish itself as an Asian powerhouse even more.

So we will see consolidation and market restructuring with less participants, fewer routes and different fares.

Let’s now look at passenger behaviour and buyers preferences.

The biggest shift I see coming is in loyalty. Loyalty was important where passengers (and buyers) saw an advantage in nonstop routes and fast connections. What if airlines drop routes and reduce frequencies? At the moment we see passengers routing from the US to Europe via Doha as that connection is still being flown while nonstop flights have been cancelled. It is safe to expect that post Covid-19 not all routes flown before will be offered again. Thus passengers will fly new routes, possibly using different airlines than before and there is your change in loyalty. Buyers will also have to factor that in as it might be necessary to form new alliances especially in light of cost factors.

But the change in travel behaviour will have far reaching consequences as it is expected that domestic travel will be preferred over longhaul with passengers seeking that additional safety when staying closer to home. They may also drive or take the train instead of flying. Travel will also be impacted by everyone’s financial situation probably resulting in less premium traffic.

More importantly we expect a significant change in booking behaviour. It is very realistic to see shorter booking windows and with that higher airfares as passengers and bookers alike monitor health risks. We don’t expect anyone to start flying again before the middle of June and passenger numbers rising to a max of 30% in the 3rd quarter and maybe up to 50% in the last quarter of this year.

A crucial point though will be the public’s assessment of how safe it will be to fly. 3 bullet points come to mind : Testing, fogging and social distancing. How will airports and airlines integrate Corona testing, how effective will airlines fog their cabins and how can social distancing become part of waiting, boarding and flying procedures?

The public will also have to judge how risk free vouchers and refunds are moving forward. As passengers are monitoring the current hassle over booking refunds more attention will be paid to cancellation policies and T&Cs. Hotel guests and airline passengers alike are going to be expected to pay much more attention to booking policies than before.

VMR in cooperation with TravelLeaders will continue to monitor the developments and offer a constructive dialogue with all parties involved. As an integral part of the industry we are keen on evolving into this new world together with our clients and partners. Our recent presentation on the development of air travel post crisis was a great success with very positive feedback and we will have many more to come. Communication is key and there is so much we can learn together.

Travel will change in many ways but it is still here to stay and so are we!

Stay safe everyone!







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