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Aviation Industry Poised for Change post-COVID-19

By Antonio Gozain | Wed, 04/13/2022 - 11:05

After the devastating effects the COVID-19 pandemic had over airlines, the aviation industry is set to undergo profound changes from digitalization to consumer behavior. Carriers are already responding to these new trends, aiming to adapt to the long-term realities of the pandemic.

The first reality is that leisure travel is fueling the industry’s recovery, according to McKinsey. Corporate travel will take longer to recover and will likely reach 80 percent of pre-pandemic levels by 2024, says the firm. Teleworking and more flexible working arrangements have remained in the post-pandemic world, reducing business travel.

In addition, business traffic has changed, said to MBN Félix Antelo, President and CEO, Viva Air Group: “Business travel is no longer exclusively first-class. Freelancers and people working in medium-sized companies look for low fares, punctuality and good service.”

Low-cost carriers have taken advantage of the leisure-led recovery of the industry. “The customers we targeted were mainly tourism-driven passengers,” said Antelo. When airlines lower fares, they promote traffic and boost the sector recovery, he added. “When Viva enters a new market with its low fares, it forces competitors to bring their prices down.”

Several airlines across the world had to borrow considerable sums of money to stay afloat during the pandemic. The global industry amassed over US$180 billion worth of debt in 2020, according to McKinsey, and these costs will need to be recouped through increases in ticket prices.

While in the EU the level of state ownership and influence over legacy carriers grew due to state aid, in Mexico the situation has been different. For instance, TAP Air Portugal, Lufthansa Group and Air Baltic received state aid and an increase of government shareholdings. Mexican airlines, on the other hand, did not see any aid from the government.

Aeroméxico, the country’s flagship carrier, which voluntarily entered Chapter 11 of the US Bankruptcy Act in June 2020, recently ended its financial restructuring process. “We cannot feel prouder of how stronger and more efficient we have become. Our controllable costs are being cut by 30 percent. Aeroméxico will invest US$5 billion to increase its fleet over the next five years,” said to MBN Giancarlo Mulinelli, Senior Vice President of Global Sales, Aeroméxico.

Besides health and safety protocols, airlines must invest more in IT and digitalization, says McKinsey. Before the pandemic, carriers spent about 5 percent of their revenue on IT, a low figure when compared with other sectors. Customer experience can also be improved, through self-service applications, which improve passenger experience, increase efficiency and lower costs for airlines.

The aviation industry’s evolution and future challenges will be some of the topics discussed in Mexico Aerospace Forum 2022, hosted by Mexico Business on April 27-29, 2022. The event will feature industry leaders who will discuss the latest trends impacting the aviation and aerospace sectors.

Join the conversation with José Ricardo Botelho from ALTA, Giancarlo Mulinelli from Aeroméxico, Félix Antelo from Viva Air Group and Ricardo Bastón from TAR Aerolíneas in the panel “One Way Ticket to the Future of Commercial Aviation.”

Do not miss the opportunity to get the insights of the Mexican aerospace industry directly from the leaders who are transforming the sector. Tickets for the forum are available here. Join the future of B2B conferences now!

The data used in this article was sourced from:  
MBN, McKinsey
Antonio Gozain Antonio Gozain Journalist and Industry Analyst