As changing lifestyles and more restrictive borders are put in place as the world acknowledges that the pandemic is likely here to stay for some time, one sector that has been battered is the aviation sector. Despite efforts to revivify the industry, there is mounting evidence that revenue may not fully recover, risking the jobs of tens of millions.

The evidence

While reports have shown that there is demand recovery in the aviation sector, the lack of revenue recovery suggests a different story.

In the United States, passenger demand has returned to about 80% of 2019 levels, blowing even the most optimistic of forecasts. However, American carriers like Delta, United and American Airlines have only garnered between 40-60% of their pre-Covid operating revenue.

The reason for this is that, while leisure travel has indeed returned, business travel has not, due to remote working becoming the new norm. Pre-pandemic, even though business travellers accounted for about 12% of the seats, they provided about 60% of the flight revenue since their tickets have higher profit margins due to their booking closer to the departure date.

Singapore Airlines, a traditional flag carrier, relies more greatly on business travel than low-cost carriers (which rely more on leisure travel which has mostly recovered) and is thus one of the worst impacted by this effect. It has posted its worst financial year, recording $3.2b of losses, and suffers from a passenger traffic decline of 97.9%.

The ramifications

As working remotely is likely here to stay even post-pandemic, airline carriers have to contend with the fact that they need to slim their business model down or risk becoming financially unsustainable. An analysis by the Airports Council International has showed that up to 46 million jobs are at risk as airlines rush to cut their expenses and therefore lay off excess and expensive manpower. This affects not just the aviation sector, but the entire logistical supply chain.

The need for greater awareness and action

This paints a grim picture for the airline industry - the prized 12% of its demographic is unlikely to return anytime soon. Therefore, efforts to bolster the finances of the sector may prove futile if the recovery of business travel remains at its current sluggish trajectory.

I believe that it is imperative for the state to shift its approach in aiding workers at risk of losing their jobs in the aviation sector - instead of injecting money banking on a recovery a few years down the road, it may be time to bail these workers out.

Resources could be better spent on programmes to promote mid-career path changes, equipping workers with the necessary skills to thrive in a post-pandemic world. There are sectors like Tech, Healthcare and Entertainment that are rapidly growing and can make use of the additional manpower.

Concluding

As there is growing evidence suggesting that the aviation sector will emerge leaner post-pandemic, the government should shift its approach, from revitalising the industry to more towards preparing workers for an alternative career path.