The aviation industry has changed forever.
When governments all over the world bailed-out banks following the financial crisis, they didn’t do it unconditionally. All around the world, banks were forced to separate the ‘high street’ bank from the investment arms so that, if another financial crash happened, they could let the investment banks collapse and the economy would still keep moving.
There have been moves in the UK and other major economies to prop-up airlines and the aviation sector through the collapse in demand caused by coronavirus. But it would be foolish to expect that the industry can just carry on as it was. Banks are now forced to hold a certain level of reserves and cannot leverage to the nth degree like they did before the financial crisis. If governments are going to support airlines, it is reasonable for them to say “this can never happen again”.
What does this mean? As Samuel Goldwyn said - “Only a fool would make predictions - especially about the future”, but here goes anyway…….
In return for government support, airlines could be forced to hold a certain level of capital in reserve, meaning they will have to be absolutely ruthless in deciding which routes to operate and all other business decisions (which is probably why Air France KLM are resisting any suggestion of government assistance at this time, as Barclays did in the financial crisis).
The model of the ultra low-cost carrier will be under severe pressure. The idea that you can get anywhere in Europe for €40 will no longer seem appropriate in a world where a virus can shut down the whole world economy in a matter of weeks.
The near-instant improvements in air quality and reduction in emissions, plus the realisation that many people actually can work from home will give more power to the climate change lobby.
These three aspects could all combine to mean that cheap air travel is no longer seen as a ‘right’. It could return to being more of a luxury, or even an extravagance.
If this is the case, we will see storage and dismantling of a number of old aircraft not seen in peace time as airlines rush to modernise their fleets, getting rid of old, thirsty, maintenance-heavy aircraft.
For what we do in aviation recruitment, there is one main repercussion if this comes true. There has been a significant shortage of skilled people for several years and this was predicted to worsen. If air travel does not return to pre-virus levels, this will no longer be the case. There will be a peak of work in the next few years in aircraft end-of-life tasks, but this requires fewer highly-qualified people than the operation of aircraft. The retirement of Baby Boomers and the lack of people entering the sector has long been seen as a problem, but it may now be a blessing.
There will still be a need for Licensed Engineers as these jobs cannot be automated or done remotely, but we are likely to see an exodus of skilled people to industries that are more ‘future proof’ such as green energy and medical technology.