As a continuation of the popular CAPA Masterclass series, Mr Harbison delivered a global big picture overview of the industry and where it will be in the next few years. Nine months on from the onset of this COVID-19 disaster he said we are fundamentally looking at a new platform from which the industry will build over the next decade.
What will the new situation be like? "Most people realise now, unless they're really deluding themselves, that it is going to be a structurally very different industry," acknowledged Mr Harbison.
Airlines are no longer strong and a much reduced level are stable
Insight from Ishka which provides data, insight, analysis and advisory services to help inform aviation investment strategies, shows how hard airlines have been hit with the percentage of airlines classed as 'Strong' or 'Stable' based on its credit assessments having halved from 24% at the start of 2020 to 12% now, with no airlines actually classed as 'Strong' as at Oct-2020.
Ishka analyst Siddharth Narkhede highlighted the trend that global airline capacity has trended downwards after modest recovery, with a wide variation in recovery between markets. He noted in regions such as Asia Pacific some airlines have seen returns to profitability, largely due to strong domestic markets or cargo. "Going ahead, the airlines which are focused on or have the benefit of a domestic market will be in a stronger position," he said.
Travel restriction uncertainty has led to shorter booking windows
There appears to have been a clear change in the consumption of air travel and general consumer behaviour. Skyscanner director of strategic partnerships, flights Gavin Harris said uncertainties surrounding travel restrictions have translated into shorter booking windows and an increase in last minute travel. Mr Harris added: "We're seeing a window of under seven days become the normal".
He acknowledged that the company has identified "a significant shift" to one way travel from return travel, with a spike around the Mar-2020 period with people trying to travel home. Mr Harris added there has also been a "prolonged and more recent shift" to domestic travel interest in multiple markets, with growth dominated by Asia Pacific markets.
COVID-19 accelerating trends of change at airports
Foster + Partners architect and senior partner Antoinette Nassopoulos-Erickson stated the impact of COVID-19 on airports "has hastened, accelerated trends of change that were already in motion before the pandemic", including "advancing the implementation of biometrics and contactless technologies" at airports.
Ms Nassopoulos-Erickson predicted that pre-departure and arrival health screening, which is being implemented in some airports during this pandemic, "may become a permanent process at airports" and eventually an integrated element to the future travel pass. She said that going forward for airports "technology will be essential, not just for health safety but for a smooth passenger experience, seamless travel with few touch points, using biometric passenger identification or travel pass for authentication and identification of the passenger, to allow the passenger to pass through every step, fast bag drops, automated documentation verification for security emigration, immigration, gate boarding".
Is there now light at the end of the tunnel?
News this week on successful COVID-19 vaccine trails may influence the return to some form of normality. Even if it could be many months until we can talk properly about recovery the market reaction to the news from Pfizer and BioNTech at the start of this week that its vaccine can prevent more than 90% of people from getting COVID-19 highlights that it could represent a landmark moment in this crisis.
Informa PLC director custom intelligence & analytics Duncan Emerton stated vaccines are the most scalable and long-term solution for "getting us out of this pandemic". He noted there is a key focus on the development of rapid diagnostic testing (RDT), with airlines including Virgin Atlantic and Cathay Pacific already offering RDT. Mr Emerton noted rapid testing is going to be really important for travel and the events industry and the return of business travel. However, he acknowledged "what we'll need to see in order for these to be adopted more broadly is for the price to come down".
IATA head of consulting - Asia Thomas Pellegrin acknowledged that vaccines will replace the need for testing, but said uncertainties linked to vaccine research, developments, trials, approvals, manufacturing, shipping, and inoculating at scale, are such that testing "is expected to remain necessary for the foreseeable future".
He explained that in order to lift quarantine requirements, states need to trust that tests are "accurate enough at preventing infected travellers from slipping through, what we call the false negatives". Mr Pellegrin added: "Tests must also minimise false positives who are uninfected travellers getting stopped". He added testing must not become "another undue economic burden during a crisis".
Looking to the future
We're only literally a few weeks away from the end of the year and the beginning of another one, which hopefully will be a lot better. But what do we do when we go into 2021? "It's not going to be just an adjustment. It's a fundamental change," warned Mr Harbison. As we go through this process, he said, the airline as industry itself has got to shrink.
"Many airlines themselves have shrunk already and will stay shrunk. There'll be much more financial losses. Airline consolidation is inevitable, including airline departures and restructuring, which is the keyword in this, which is a fundamental restructuring, not just a few adjustments to cost," he said.
As tourism is a "substantial proportion" of the labour force, there is "no surprise" job losses are "very concentrated in this particular area," Ms Hunter said, and "returning to normal" will require a vaccine or the ability to "work out" how to live with coronavirus, adding "getting this sector back to normal…is going to be really vital".
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