Throughout 2021, the passenger business segment in most airlines has continued to report low returns. Prominently, the industry has noted a decline in the rate of passenger travel, with the global Revenue Passenger Kilometers (RPK) dropping to 26% in 2021 compared to the 50% RPK value for the year 2020.
In comparison, the demand for private jet charters has continued to increase dramatically. More people consider private travel as a flexible, unrestrictive, and low-risk alternative to commercial airlines. Available reports indicate that the demand for charter travel has increased by over 53.5% to reach a new record high of 4.2 million private jet flights this year.
Against expectations, the air cargo business has remained a strong foothold for many airlines in 2021, reporting a remarkable 13.1% growth in global Cargo Tonne Kilometers (CTK). This figure has surpassed the World Trade Organisation projections, which estimated an 8% increase in world trade from the aviation sector in 2021.
The air cargo business has also gained from unusual situations, such as the one experienced in the Suez Canal on April 2021. Following the blockage of the canal, the resulting stranding in the waterway disrupted global supply chains by halting the movement of goods between the trade hubs in Middle Eastern Countries, Asia Pacific, and Europe. This raised the demand for air cargo services as the market looked for alternatives to deal with the resulting stranding and delays.
In another industry development, Airline companies like Qantas and British Airways have decommissioned some of their iconic aircraft from service. This move has stemmed from the need to offset sustained financial losses by reducing spending on maintenance and storage. Affected aircraft include older classic models such as Airbus A320s, B757s and B767s.
Meanwhile, large airlines exit 2021 as the best performers in comparison to their smaller counterparts. While large airlines have implemented mechanisms to offset sustained revenue losses, smaller airlines have remained with no other option than to rely on government cash infusions to stay alive.
The estimated government spending in the global aviation sector since the start of COVID-19 through the last quarter of FY2021 stands at $180 billion. However, some stakeholders assert that increased government support for airline companies has created an unfair playing field in the aviation industry.
While underlying fundamentals have remained weak throughout the year, the aviation industry has not experienced any major mergers or acquisitions in 2021. This is a positive signal that global airlines are gradually coming out of the COVID-19 crisis and are no longer considering “integration deals” as a last resort to remain afloat.
Given the financial damage caused by COVID-19, the aviation industry cannot ignore the cost implications of the pandemic on the human factor – its workers.
Some airport-based workers and pilots have had their working hours reduced, others furloughed, and some have lost their livelihoods completely through layoffs. Reported data indicate that over 58.5% of airport-based workers in Europe have lost their jobs in the past year due to the ongoing crisis.
The industry has also experienced accelerated digitisation, with global airlines actively pursuing technology-supported innovations. Artificial Intelligence (AI) and Augmented Reality (AR) technologies have been critical in optimising airline operations. Currently, over 97.2% of airlines aim for big data and AI, with 76.6% capitalising on these technologies to develop cognitive learning initiatives.
Aviation companies have moved away from legacy infrastructure and begun to adopt cybersecurity systems and hybrid cloud infrastructures. These technologies have provided new ways of addressing persistent security risks, reducing inefficiencies in data processing and management, increasing agility, and building high-performance systems.
Furthermore, the aviation industry has moved towards integrated and Aerosafe training methods. Today, there is an increased emphasis on online training through Zoom and Google Classrooms with current figures indicating more than a dozen online classes compared to less than five two years ago.
The sustainability issue has remained at the centre of ongoing negotiations among aviation stakeholders. The pandemic has imposed more pressure on airline companies to keep up with the greening journey to achieve the sustainability agenda. Primarily, the industry has focused on decarbonising the aviation sector and promoting green technology investments.
Looking to the future, global airlines anticipate an optimistic recovery scenario despite current uncertainties that have engulfed the entire aviation industry. IATA predicts that the industry will continue to witness losses of up to $12 billion in 2022, a 78% drop from the losses incurred this year due to the COVID-19-related effects.
Industry experts, however, fear that should the COVID-19 crisis prolong, this may culminate in the entrenchment of habits, promoting alternatives to air travel such as virtual business practices. These practices may further complicate the recovery processes.
On the plus side, COVID-19 adversity has compelled airline companies to innovate, accelerate their efforts towards sustainability, and think creatively, which, if done correctly can ultimately translate to improved performance, greater transparency, and increased profitability.
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Vilma Vaitiekunaite
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About Gediminas Ziemelis:
Throughout a business development career spanning more than 24 years, Gediminas Ziemelis has established over 50 start-ups and green-field investments in various industries such as IT, media, luxury furniture, pharma, clinics, agriculture, and across other industry sectors. At present, these companies are either owned by PE “Vertas Management”, or have previously been sold and are now components of other sizeable organisations.
Gediminas Ziemelis is the founder and chairman of Avia Solutions Group – a leading global aerospace services group with almost 100 offices and production stations providing aviation services and solutions worldwide.
Spanning his career to date, G. Ziemelis has received many prestigious awards and industry recognitions. In 2016, G. Ziemelis received a prestigious European Business Award in recognition of his visionary business management and development skills. The same year, under his leadership, Avia Solutions Group was named a national public champion in the category of Entrepreneurship, earning a spot in the top 110 European businesses. Twice – in 2012 and again in 2014 – Ziemelis was acknowledged as one of the top 40 most talented young leaders in the global aerospace industry by the leading USA aerospace magazine ‘Aviation Week’.
Over his career, Gediminas Ziemelis has taken part in many impressive business ventures. Between 2014 – 2017, he personally supported and consulted Chinese Banks (including ICBCL, CMBL, and Skyco Leasing) concerning financing aircraft sale-leaseback transactions where the total value was more than US$ 4 bn.
Between 2006 – 2019, Avia Solutions Group Chairman executed successful IPOs of 4 companies at OMX and WSE, oversaw many public bonds issues, along with the raising of public capital worth more than US$ 400 M.
His total net worth is US$ 1.1 bn, according to local business media.
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SOURCE Avia Solutions Group
