The aviation industry is facing a serious challenge, but recent history shows evidence of resilience to sharp shocks.
But the two pandemics differ in a significant way: whereas in the case of SARS, outbreaks outside of China and Hong Kong were limited to under 1,500 cases, COVID-19 has become genuinely global with cases outside of China far exceeding those within.
Nevertheless, analysis of Hong Kong International airport reveals some interesting similarities. During the SARS pandemic, the airport experienced a staggering decrease in passenger volumes (between 70-80%) during the period of rapid increase in infections. By June, (Month 4), when the rate of new infections greatly reduced, traffic was still impacted significantly – perhaps due to a combination of lingering caution as well as the impact of infections elsewhere in the world. In the current pandemic, the airport registered a 12% decline in January 2020 (Month 1) and a 68% decline in February (Month 2), closely mirroring the SARS profile.
Unlike in SARS, however, the impact has not been limited to China and Hong Kong. The second chart shows the daily variation (versus the same day the year before) of air traffic movements in Europe, demonstrating similar levels of impact in Europe as seen in Hong Kong (60-70% declines). These are just two examples; a similar pattern is being played out across much of the world, indicative of a crisis which is likely to be as severe as it is global.
Despite the unprecedented scale and breadth of this shock, we can still learn from previous shock events in the aviation industry.
The 9/11 terrorist attacks had a striking impact on aviation, particularly in the U.S. They compounded the existing financial troubles that the airlines were experiencing beforehand, and resulted in a slew of airline bankruptcies. The federal government provided loan guarantees to the value of $10 billion USD and half that amount in short-term assistance. Despite this devastating blow, air traffic recovered just two years after the attack, rebounding to levels experienced at the start of the decade.
The global financial crisis, and the consequent global recession, resulted in a sustained weak performance in the UK aviation market. It took a good six years to reach pre-recession levels (one year after the economy reached its pre-recession level). In France, where the country was less exposed to the hard-hit financial sector, the recovery took just two years.
Sustained civil unrest and a number of high-profile terrorist attacks in Egypt caused traffic to fall by over 70% in Sharm el Sheikh. Just three years after the nadir, the airport had recovered to pre-shock levels.
All the above events had fundamental, albeit brief, impacts on demand for air travel, either through economic impacts (such as the GFC ), a fear of flying (9/11), or shift to safer destinations (Egypt terrorist attack). SARS, on the other hand, was unrelated to flying and did not have a lasting economic impact. The result was an extremely quick recovery to growth.
What could a recovery look like?
COVID-19 is still running its course. It is already demonstrating a very marked impact on air travel in 2020. It seems likely now that this could continue for some time. Domestic traffic is likely to recover first as individual countries contain their epidemics. International traffic will take longer and will likely be phased as countries open borders gradually and only to other countries that have contained the disease. The duration of the recovery will depend largely on whether there is a lasting economic impact, and whether airlines will be in a position to facilitate the growth required to recover. On the latter point, governments appear to be willing to provide the support required to keep (at least the major) airlines solvent during this crisis. Before the pandemic, aviation was set to maintain a strong increase in passenger demand. Once COVID-19 has receded, this growth is highly likely to return and we very much trust that it will.