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Covid-19: Economic Impact of Pandemics on Aviation

July 27, 2020

The estimated revenue loss for the world’s airlines in 2020 due to the outbreak of COVID-19 is $314 billion.

As the pandemic continues to send economic shockwaves across the world, the aviation sector finds itself in the firing line of a potentially devastating financial crisis. Unprecedented travel restrictions throughout the first half of 2020 have forced aviation operations to all-but grind to a halt as both the tourism sector and business travel feel the full force of a global lockdown.

While the disruptions to aviation are likely to continue, airlines and other businesses with a stake in international travel are exploring how they can negotiate the challenges of recent months and adapt to the new normal in search for pragmatic solutions.

Join us as we explore the latest news on the aviation industry, discuss how airlines have responded to COVID-19, and what steps they can take to regain financial stability as the fog clears.

A Vicious Cycle: Current Issues in the Aviation Industry

One of the biggest challenges faced by the airline industry in recent months is the co-dependency of aviation on a cocktail of disrupted industries.

While there’s a tendency to focus on how travel restrictions have reduced the number of flights that airlines can run, it’s important to also consider the indirect impacts of these restrictions on industries that rely on these flights in ‘normal’ times.

Reigniting the airline sector isn’t as simple as flicking a switch and running more flights. Whether it’s waiting for the demand for tourism to increase or negotiating the commercial implications of so-called ‘air bridges’ between restricted locations, the aviation sector’s response to COVID-19 will be heavily influenced by the broader economic climate and changing consumer attitudes towards international travel.

Airlines Are Economic Linchpins

To take a slightly more positive spin, the coronavirus has shown the world how intrinsically dependant we are on air travel.

While the negative impacts of COVID on the aviation sector are indisputable, the stark realisation of how the travel disruptions have influenced global markets should fill airlines with confidence that the demand for international travel will return.

The ultimate question is how can airlines leverage this demand and their strategic position as an economic linchpin to fuel growth and regain strength as an industry?

How Can the Aviation Sector Bounce Back?

A recent report by Deloitte on the impact of COVID-19 on the airline sector takes a closer look at what steps businesses can take to adapt to recent events.

Global Aviation Leader, Bryan Terry identifies the following strategies to help airlines find their edge in an increasingly vulnerable marketplace to move towards a brighter future.

Empathetic Communication

While it’s easy to recoil into survival mode and view financial adversity as a time to dedicate all of your focus to revenue-generating initiatives, the report stresses the importance of maintaining a strong company culture and providing comfortable environments for employees to push through this difficult time.

Airlines must put their people first and protect their best interests to drive a united effort. Mr Terry explains how organisations must be “swift and generous with voluntary offers to defer and diminish the impact of any involuntary measures.”

Not only is empathetic communication important to maintain healthy internal affairs, but it’s also a vital attribute to manage expectations with industry partners, shareholders, and customers across the world. As we continue to live in uncertain times, organisations that show empathy towards people’s disrupted lives and adapt to their changing needs will be best positioned to regain financial stability.

Streamlining the Supply Chain

Despite the unprecedented scale of COVID-19, it’s important to note that the aviation sector isn’t a complete stranger to financial pressure. Whether it was responding to the 2007-08 economic crash or improving security measures following the September 11 attack on the World Trade Centre, airlines have a proven track record of demonstrating resilience and staring in the face of adversity.

With this, the aviation sector must harness these lessons to find innovative ways to streamline its supply chain, cut costs, and improve liquidity.

Forming strategic partnerships and reducing the number of suppliers is crucial to cut operational costs and improve the feasibility of running flights. As Mr Terry explains, rewarding co-dependant suppliers that share similar risks is an effective way to cut costs in these uncertain times by establishing value-based agreements.

Adapting to Changing Consumer Preferences

The key to success for airlines over the next six months is versatility. While easing travel restrictions will help to kickstart international flights, the aviation sector has a long way to go before the vast majority of customers will feel safe to travel.

Airlines must take purposeful measures to prioritise passenger safety and fill customers with complete confidence that they’ve taken all necessary precautions to promote responsible travel. A versatile approach will help to protect brand loyalty and leverage brand affiliation to support long-term recovery.

Specifically, airlines should be sensitive with their marketing campaigns and avoid advertisements that don’t align with the pandemic. Initiatives such as removing expiry dates on air mile rewards, minimising customer service barriers, and offering automatic credit on cancelled flights will help airlines soothe anxieties and keep customers on their side.

What Does the Future of Business Travel Look Like?

As airlines continue to grapple with change and negotiate new challenges, promoting sustainability in the aviation industry will remain a hot topic throughout the second half of 2020.

From a professional perspective, we’re excited to see how business practices will evolve over the coming months and how our attitudes towards international business travel could shift as a result of COVID-19.

Celebrate Global Relationships With INAA

Here at INAA, we’re committed to offering up-to-date information about the aviation industry and keeping a watchful eye on how the ongoing pandemic could shape international business relations.

As strong advocates of collaborative learning and sharing knowledge, we’re fascinated by recent events and how we can leverage digital technologies to maintain strong relationships with partners around the globe.

Our international community of 140 member firms across 50 countries centres around a shared vision to make global business personal and take personal business global. We connect accounting firms who are committed to delivering quality professional services and sharing knowledge to create a united force for positive change.

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