Held under the patronage of H.H. Sheikh Ahmed bin Saeed Al Maktoum, President of the Dubai Civil Aviation Authority, Chairman of Dubai Airports, Chairman and Chief Executive of Emirates Airline and Group

Aviation Outlook 2021: On the Road to Recovery

We may have entered a new year, but the global coronavirus pandemic is by no means a thing of the past. With many countries and even whole regions experiencing second waves and sudden sharp spikes in infection rates leading to national lockdowns, the fight against Covid-19 remains a daily reality for much of the world. However, renewed hope is being supported with science, as January 2021 sees the rollout of massive national vaccination programmes that are already giving the aviation industry cause for a measure of cautious optimism. 

No quick fix – normalisation is a long way off

To put the global industry’s position in perspective, the start of 2021 sees aviation attempting to rationalise the previous year when global passenger traffic fell by at least 67%. During 2020, state aid to the sector reached a record level of $220 billion, while industrywide debt rose to $125 billion – five times that of the previous year. In December, Bloomberg estimated that overall losses for carriers in 2020 exceeded $118 billion. This represents the worst year in a generation for aviation, dwarfing losses in the 2008 slump, and putting every single airline worldwide to the test.

Even in many countries that have successfully contained the virus, air travel remains significantly suppressed. At the end of November 2020, Australia had managed to bring its ‘new cases rate’ almost down to zero, yet domestic travel stayed at just 11% of pre-Covid levels. Asia Pacific as a whole saw international passenger levels fall by 95.6%, as travel bans took their toll. So, even as vaccination starts to make a dent in Covid-19 infection rates, it will likely take many months or even years before this translates into normalising passenger levels.

Air travel bright spots – Reasons for optimism in 2021

Vaccination efficacy: January 2021 is witnessing the rollout of three internationally distributed vaccines with over 90% effectiveness, alongside multiple local vaccines. While at the time of writing many national vaccination programmes are experiencing stark logistical difficulties, overall the situation is markedly better than predicted in late 2020. Faster vaccination of populations will lead to faster aviation normalisation, as passengers become more confident about travel again and rising rates of vaccine certification will ease the operational challenges of airlines and airports.

Release of suppressed demand: Linked to rising vaccination levels, as the threat of Covid-19 recedes, people will be eager to make up for lost time with loved ones, take holidays and re-establish links both personal and professional. If successful vaccination programmes are combined with the lifting of travel restrictions, then a large and sustained demand surge (at least in the relative short term) is all but inevitable.

Optimising fleets: Currently 9 out of 10 ‘superjumbo’ jets worldwide are grounded, with a large proportion due to be mothballed or converted to cargo planes, and many decommissioned entirely. While hugely expensive for many airlines, this is an opportunity for them to make bold long-term restructuring changes to their fleets, optimising them with newer, more fuel-efficient models capable of better servicing the new industry reality which requires more targeted and sustainable methodologies.

The Middle Eastern Context – ME Aviation in Early 2021

2020 hit the Middle Eastern aviation industry hard, due to the importance of several prominent Gulf States’ airports as global hubs. Last year’s losses for ME airlines are estimated at over $7 billion following a 73% fall in passenger demand – the biggest regional pandemic-related collapse in demand

IATA predicts that 2021 will see demand grow by 43% this year, which puts overall levels at -61% of 2019, but will likely prove to be the start of an accelerating recovery trend. At least initially, ME aviation demand will be rebuilt through rising domestic travel and more speedy cargo flight growth, especially in light of the reopening of the Saudi and Qatar borders. It will take significantly longer to see business travel and international long-haul flights through ME hubs return at anything like pre-pandemic levels.

Overall, early 2021 should be viewed as a time for ME airlines and airports to reassess and redefine their strategies. Innovation has long been a core strength of leading ME aviation players, as shown by the swift introduction of effective viral screening technologies across various regional airports. On 11th January Abu Dhabi Airport announced the introduction of next-generation biometric technologies, featuring low-touch processes, greater facial recognition tools and ‘biometrics on the go’ via crew members’ mobile devices. Dubai Airport, host city of Airport Show 2021, is also working closely with airlines and leading tech providers to boost its suite of biometric-based security and safety assets.

As the early months of the year unfold, we can expect the Middle East’s aviation players to couple bold innovation with pragmatic restructuring across the board. In light of last year’s losses, aggressive cost-cutting and dynamic optimisation remain the order of the day.