The Economics of Effect of Covid-19 on the Aviation Industry

The whole world has been affected by the pandemic, but few industries have been hit as hard as commercial air travel. Not since the shutdown of flights following the World Trade Center attacks, the worldwide SARS pandemic, and the global recession of 2008, has the airline industry been so close to ruin. As the world struggles to recover, what will be the impact of the pandemic on the airline industry?

1. Loss of Revenue

In 2020, the global estimate of the loss in revenue alone was 391 billion USD [1], and with the pandemic still ravaging the world, the estimates for 2021 are almost as grim. As demand for air travel dwindled, and only essential workers were allowed to travel, the seats offered dwindled. From the previous year, seat capacity dropped 51% from the previous year.

For the first half of 2021, global airline revenues continue to slip, which is projected to lead to a loss of more than a 149 billion from January to June [2]. Although it’s still too early to know the full effect Covid-19 will have on the airline industry for 2021, it’s likely that this year will be another sparse year for the global airline industry.

2. International Travel Vs. Domestic Travel

As noted above, international air traffic has diminished during the pandemic, but domestic air travel has still been affected by the economic crisis. As borders closed, and each country entered quarantine, domestic trips were cancelled alongside international ones. In North America alone, international flights were down 63% from the previous year and domestic flights were down 41%.

As many companies switched to virtual meetings rather than in person, the airline industry was dealt an enormous blow. Many companies have continued to be remote access into 2021 and have halted all further business travel until the third quarter of 2021.

3. Overall Effect

It’s always important to look to the past to help interpret modern dilemmas. During the SARs pandemic, the Chinese airline industry lost 8 billion USD in three months and took nine months to recover from the crisis [3]. Covid-19 has proved a much longer-lived pandemic, and, therefore, will prove to take longer to recover from.

The global airline industry supports 65.5 million jobs globally [4]. In any normal year it provides economic growth, creates exponential job growth, and provides access to new markets for many local businesses. As the global airline industry begins to decline in the year and a half since the beginning of the pandemic, lots more jobs will be affected. Like an iceberg, only a small amount of the jobs created by the airline industry are directly from the airlines. Of the 65.5 million jobs created by the global airline industry, 50 million [5] are indirectly created by aviation–tourism related jobs. As the gatekeepers of world travel, the decline of the aviation industry will spell disaster for the tourism industry.

1 icao.int/sustainability/Pages/Economic-Impacts-of-COVID-19.aspx
2 icao.int/sustainability/Pages/Economic-Impacts-of-COVID-19.aspx
3 icao.int/sustainability/Documents/ICAO%20Coronavirus%202020%2002%2021%20Econ%20Impact.pdf
4 icao.int/sustainability/Pages/Economic-Impacts-of-COVID-19.aspx
5 icao.int/sustainability/Pages/Economic-Impacts-of-COVID-19.aspx