Challenges in Aviation Sector

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Challenges in Aviation Sector

Take Off Into the Future

One of the most obvious effects that the Covid-19 pandemic has had on our lives has been the reduction of individual travel. If until a year ago taking a plane seemed one of the simplest actions of our daily life, also by virtue of the extremely low prices that many companies could offer thanks to the high volumes of passengers transported and the reduction of ancillary costs, today the world in we live in today has changed profoundly: it is enough to look up to realize that our skies are essentially empty.

Obviously, the current situation is expected to be temporary and that, when the coronavirus has finally been defeated, air traffic can return to what it once was. However, the substantial collapse of the civil aviation sector between 2020 and 2021 is bound to have a financial impact on airlines that will also have consequences in the medium term. Furthermore, the sector will be subject – not unlike other sectors of the economy – to a radical technological transition which, in the long term, will have to make it possible to respond to the growing challenges posed by digitization and climate and environmental sustainability.

Aircraft on the Ground and a Sector in Crisis

According to the International Air Transport Association (IATA), 2020 was the worst year ever for civil aviation. The numbers, moreover, are decidedly eloquent: the net economic losses recorded by the entire sector globally in 2020 amounted to 118 billion dollars, while passenger demand fell by 65.9% compared to 2019. the contraction in demand mainly affected international flights, while for domestic flights the decline was smaller, albeit equally impressive (-48.8%). The flight offer has also adapted to the drastic reduction in mobility with a 68% downsizing of passenger transport capacity and a reduction in traffic which in December 2020 was 70% lower than in the same period of the previous year. According to estimates by the International Civil Aviation Association (ICAO), this translates into fewer passengers carried by 1.37 billion globally, which means a return to the levels of the early 2000s (just when air travel experienced a boom thanks to the liberalization of routes in the 1990s and the proliferation of low cost airlines ).

To the repercussions on the aviation sector must be added all the negative consequences on the related industries: ICAO shows that airports have suffered a loss of revenues of 112 billion dollars, while international tourism could have suffered a contraction of between 910 and 1,170 billions of dollars. Faced with these numbers, and in light of the continuing uncertainty linked to the uneven trend between countries and regions of the vaccination campaign, making estimates on the recovery of the sector is not easy: in any case, even the most optimistic forecasts of the ICAO do not contemplate the possibility that air travel will approach the levels of 2019, at least for the entire course of 2021.

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But the already serious consequences of the pandemic have recently been joined by other elements that could further slow down air traffic, at least in Europe. The United Kingdom’s exit from the European Union has in fact produced changes in this area: if on the one hand the agreement obtained in extremis on Christmas Eve allowed the connections between the British island and the rest of the continent to be maintained operational on the other hand, Brexit led to London’s abandonment of the Single Market, which among the four fundamental freedoms also includes freedom of movement. Thus, the new situation translate sin the impossibility for British carriers to be totally part of the liberalized market aviation within the EU, so that:

  • 1) companies can no longer operate direct flights between two destinations in the EU based on licenses that were issued by the United Kingdom;
  • 2) they can no longer operate routes with departure / arrival from the EU to / from non-EU destinations;
  • 3) can no longer contribute to the definition of safety standards decided by the European Union Agency for Aviation Safety (EASA).

While not a real revolution, these changes could be destined to slow down traffic to and from the United Kingdom, which before the pandemic – via London airports – had established itself as one of the main European and global hubs for flights.

Making the Transition to Take Off Again

The aviation sector must first of all be able to relaunch and recover from the extreme financial difficulties it has been experiencing for a year now. The public support (which is in the European Union is strictly governed by rules on state aid) has so far been decisive (IATA has estimated that up to November 2020 at the global level had been spent 178 billion dollars in public money to support companies aerial), it will not be the only answer to deal with a situation that will leave structural consequences.

From a long-term perspective, in fact, even aviation will not be able to escape the epochal challenge of the energy transition to ensure environmental sustainability and combat climate change. The aviation sector is responsible for around the 2.5% of global emissions total and 12% of the transport sector. However, this is a sector that is difficult to electrify, which therefore requires the identification of alternative fuels. The ICAO itself recognized in 2019 the need to develop alternative fuels that significantly reduce carbon emissions into the atmosphere.

Among the different projects, manufacturers Airbus and Boeing, as well as airlines such as KLM and Easyjet, airports such as Heathrow and fuel suppliers such as Shell will cooperate in the Clean Skies For Tomorrow (CST) initiative. Its main objectives are to speed up the transition to sustainable fuels (e.g. biofuels) and other green propulsion technologies, which could significantly reduce greenhouse gas emissions. The European Union itself, in the recent European Smart and Sustainable Mobility Strategy, has foreseen the placing on the market of the first zero-emission civil aviation airplanes for 2035, also providing that by 2050 all air transport as well as Union airports will have to be carbon neutral. In the Destination 2050 Report, the Airlines for Europe Association outlines ways to achieve zero emissions in 2050. In particular, improvements in aircraft and engine technologies should lead to a 37% reduction in emissions, Sustainable Aviation Fuels (SAF) will ensure a further decrease of 34% and, finally, improvements in air traffic management a further reduction of 6%.

Apart from civil transport, moreover, the sector will have to face new challenges of a regulatory nature that will be posed by constantly evolving technologies. For example, the drone segment has experienced a very rapid evolution and expansion, to the point that a clearer codification of the rules for their use (for both private and commercial purposes) no longer seems to be postponed.