Airline Industry - The good days are over
Airline industry is the one of the hardest hit by pandemic. Lockdowns across the world have restricted people to travel. Though the nations are opening up, but the losses for airline companies continue to accrue. No, the pandemic is not the culprit alone. There are other factors which are pulling the industry down. The industry is beginning to show the signs of downfall.
How deep the trouble is?
The fear of corona spread caused nations to enforce strict lockdowns. Even after the Airlines got the permission to open up, the industry witnessed 85% less commute in June 2020, compare to the same month last year. This is a huge decline. Airlines coming back to its normal state is a far distant dream. Vaccine will not be available before end of this year which means we still got 5 more months for the demand to continue at this rate. Will the industry be able to hold the losses by that time?
When 9/11 attack happened, all the flights were grounded for three complete days. US government ensured the sustainability of industry through a bailout package of $15 billion dollars, at that time. Hundreds of flights have been grounded during the covid-19 now, for more than 3 months. But the government support is far less this time. Till now the industry received only $50 billion dollars. This is not the rare occasion when airlines are looking helpless!
Airlines have been struggling since past few decades. More than 23 airlines have filed for bankruptcy since early 80s, under chapter 7 in United States. The single major problem of the industry is — “cost control”. With thin margins, industry is quick to get hurt with any economic downfall. Operating costs of bigger airlines are typically very high. And in the times of long lockdowns, their idle inventory and unused capacity is going to make a permanent dent in their sustainability. Even if we assume the bailout of $50 billion dollars is going to support the industry till end of 2020, we cannot expect the pre-pandemic level to come back soon.
Change in Social Behavior
Assuming vaccine trials go through successfully, it will further take months, for it to be available to common people. This includes the people from other parts of the world too. If all the world has equal accessibility of vaccine, then only we can expect the air traffic to come back to the pre-pandemic levels — domestic and international. This long gap of time(12+ months) is good enough to change the interaction patterns of our society.
Online meetings, collaborative platforms are already a norm now. Microsoft Teams, Google Meet, Zoom, Web-ex — the world is full of options now. Even though I am in another city, state or country, I can very well collaborate with my colleagues with the help of these tools. The lockdowns have forced the people to adopt new working style and the change in people behavior is going to stay longer.
For the remote working tools, its a blessing in disguise. With the tech-giants looking out, to en-cash this opportunity, the competition is looking cutting-edge. Artificial Intelligence and Machine Learning are going to enhance the user experience with near real collaborations. This will push down the need of physical presence in work areas. Be it banking, insurance, retail, IT or other sectors, the new model will ensure less people traveling for work. The drop in travels will not be absolute zero but significantly down to create a threat to the industry. The biggest threat to the industry is something else though!
The big blow
The big blow to this industry is going to come in the form of disruption. Its not the economy downfalls, but the advancements in aviation itself will be responsible to wipe out the current form. Technology companies like SpaceX, Virgin Galactic and Blue Origin are already looking out to make the dream of “point-to-point travel” true. Imagine the world where you will be traveling from Tokyo to NewYork in just 30 minutes. The theory is not only in the books now!
Virgin galactic has plans to send its first commercial space flight by end of 2020. Though the focus for the company is on space tourism but its promising technology can be applied to the business stream of “point to point” travel as well. Virgin Galactic has premiered a new jet design for high speed air travel. The super-fast jet has the ability to travel three times faster than the speed of sound. This makes it roughly ~ 2000 mph, almost 4 times faster than the current maximum speed of commercial planes. SpaceX and Blue Origin are experimenting with more performant engines.
SpaceX’s Starship is expected to use an engine variant to optimize specific impulse to approximately 8,300 mph. This speed is fast enough to reach anywhere over earth in less than an hour. Similar to Virgin Galactic they have plans to use their ship on space as well on earth. Company is planning to launch commercial payloads using Starship by 2021. Vertical launch and landing of the starships are getting fine tuned. Amazon backed Blue Origin is another player who is developing a variety of technologies in this area.
The impact
The current form of airline industry is in stress and the social, economical and technological changes are threatening it hard. Cost optimizations in the industry will not be able to help it beyond a point. Governments across the world will continue to support the weak economics of industry. At least, till the next generation technology is ready.
But the technology innovations will soon change the landscape of world travel. New kind of vehicles, new kind of ports will define the next generation travel ecosystem. By end of 2030 I am expecting the commercial flights, with 10 times higher speed, will have a decent infrastructure in place. It will be limited to few countries and cities though but will soon spread across, in next few decades. Performance and maturity of new system will mature as we progress in time.
The 100+ year old aviation industry has helped the people, across the world, in connecting together for business, tourism, political and other reasons. It has provided one of the strongest platform for the global economy to thrive. But as every entity has its life, this has it too. The countdown of the industry has started!
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