IATA Economics Update
COVID-19 Special Edition
COVID-19 – where to from here for the airline industry?
The COVID-19 pandemic has massively affected the global air transport industry. Worldwide, the number of flights is still around 80% lower than at the start of the year. Across regions there is some variation. The number of Asia Pacific and North America flights is down 70-75% (supported by domestic travel in both China and the US). But in each of Europe, Latin America, Africa and the Middle East the industry has essentially shut down, with the number of flights down 85-95% compared with the start of the year.
Our latest estimate suggests that in 2020 global air passenger volumes (RPKs) will be around half their level of 2019, cargo volumes (CTKs) will be down around 15-20% and industry revenues will be reduced by more than $300 billion. Air transport is an industry accustomed to managing unforeseen shocks, but this pandemic and the related global economic recession is well beyond anything experienced previously.
Even as countries continue to grapple with containing the virus, a number are beginning to ease movement restrictions and think about how and when to restart economic activity. As always, airlines and the broader air transport industry will play an important role in this economic restart and recovery. Indeed, we have observed this already, with the vital role being played by air cargo to ship medical products all around the world and to help overcome the disruption in global supply chains.
The industry recovery is, however, likely to be more gradual than that which typically follows a ‘shock’. Domestic and short-haul markets are likely to re-open first, with long-haul travel more delayed. On current estimates, we do not expect passenger numbers to reach their 2019 level until 2022, with an even longer recovery for RPKs (2023). Along with consumer sentiment, the timing and nature of the relaxation of government travel restrictions will be an important driver of the industry recovery. Almost half of the travellers recently surveyed by IATA indicated that they would be likely to wait 1-2 months after restrictions were lifted before travelling, but 40% said they would not travel for six months or more.
Our twice-yearly financial forecast update is scheduled for release in early June, and will be our first attempt at quantifying the impact on profitability for the industry in 2020. One thing is for certain, our pre-Covid December estimates will be heavily revised. As usual we will be inviting all of our Airline Industry Economics’ Strategic Partners to a webinar to discuss our new forecasts and the outlook – stay tuned for that.
The industry will undoubtedly be changed as a consequence of this pandemic experience – both in terms of its operations and processes, but also perhaps in terms of consumer behaviour. Some of these impacts could be enduring, driving long-term structural changes to our industry and its outlook. Our annual Strategic Partners’ Workshop in November will investigate such questions, bringing together the diverse perspectives and healthy exchange of views that our Workshop has become known for. A placeholder will be sent shortly and we hope that you will be able to join us in Geneva for this event.
Finally, with the ongoing evolution of the pandemic and the related economic and industry developments, it is more important than ever to stay informed. The IATA Economics team is regularly releasing research and analysis on various issues on our website and our (100% free to download and use) mobile app to provide insight and to help guide your decision-making during this unusual time.
Deputy Chief Economist
Thales: Thermal Imaging – The Latest Biometric
Six months ago, dozens of airports around the world were confidently piloting some form of One-ID process based on IATA’s One-ID concept. Travel documents and traveller identities were being pre-authenticated remotely or at the first airport touchpoint, ready for passengers to enjoy a seamless non-stop journey through the airport using their face as a single token. However, the COVID-19 crisis interrupted this and brought some immediate new challenges for the travel industry to tackle. In order to ensure continued passenger safety and restore confidence in travel, the industry must respond with effective solutions which are to be universally adopted, medically grounded, and practical for airports to deliver. Face recognition of masked travellers is one such solution, and temperature testing has become the latest biometric to capture.
Temperature Screening – the new norm
Passenger safety is of paramount importance. Temperature screening for potential virus carriers as they enter the terminal and before they come in contact with other travellers may become the new norm. Similar testing may also be done when passengers land. Thermal imaging offers some answers since medical science accepts that a person’s core body temperature can be determined from a heat map of a face. On the other hand, there are issues with COVID-19 that medical science is still understanding, such as: are people infectious before they start to show a fever; what is the minimum temperature of a sick traveller; what is the maximum temperature of a healthy person? In biometrics terminology, what is the threshold we need to set in order to balance false positives (a healthy person being sent for further testing and potentially missing their flight) and false negatives (a sick person being allowed to travel and infecting others). What will the next steps look like, once the equipment has flagged an alert?
The need for greater accuracy
Most thermal imaging vendors today come from the fire detection or industrial processing sectors where a tolerance of +/-0.3 degrees Celsius is sufficient. For detection of fevers, this accuracy level is unlikely to be accurate enough, as it means the threshold for alerts must be set 0.3 degrees lower to account for the variability of the equipment. Doing that will increase false positives. There are also installation and servicing constraints with these existing systems, as they require an additional reference heat source device that emits a constant temperature to always be in the camera view. These devices need to be installed by a service engineer, left for some hours before use, require annual calibration and are sensitive to cleaning.
At Thales, we want to ensure our solution is medically grounded and practical to use. We have combined our high-grade thermal detection algorithms, our face recognition algorithms with medical data to perform machine learning to achieve a greater thermal accuracy without the need for an expensive and impractical heat source.
In parallel, we are tuning our face recognition algorithm to accurately verify passengers wearing face masks. The need is both to know when passengers are not wearing a face mask, but also to identify the person accurately, even when they are. As the saying goes, necessity is the mother of invention.
Solution Sales Manager
Thales Digital Identity & Security
MTU Aero Engines: #SmartNewNormal
During these challenging times, what our industry needs more than ever is solidarity. At MTU, we promise to be there for our customers and contribute to getting our industry back up on its feet.
As Germany’s largest engine manufacturer, a key supplier of high-tech modules in numerous engine programs and one of the top three engine MRO providers worldwide, we take our responsibility towards our community, employees and partners extremely seriously. Furthermore, during these unprecedented times, we also recognize our responsibility and role within this global industry.
Airlines are preserving cash flows and cutting costs in any way possible in their battle to survive. MTU supports these initiatives with its innovative and cost-effective engine solutions. In addition, we continue to invest in cost-reduction measures for operators including smart repairs and flexible leasing services as well as sourcing teardown engines and used serviceable material.
Furthermore, MTU helps with real time, engine fleet management scenarios through its intelligent maintenance costing and planning tool. Smart predictions and artificial intelligence enable customized, immediate and proactive MRO planning options and offer a second opinion or simply planning support for more informed decisions. These scenarios can be immediately and endlessly adapted as the financial, technical, operational, environmental, and market considerations continually change – as we are experiencing daily. Among other things, such methods help mitigate constraints in the supply chain, while ensuring critical flight safety and an effective industry restart.
For its part, MTU is now working according to what we call a #SmartNewNormal. Smart is the MTU way. We never give up until the optimal solution has been found – even in this new and ever evolving situation. We intend to flexibly adjust our MTU Maintenance shop capacities to meet demand going forward. As a result, we have already negotiated and reached agreements with the respective governments to remain working in our MRO facilities in Dallas, Vancouver and Zhuhai, as well as continue operations at our repair centers in Munich and Kuala Lumpur. Additionally, our facilities in Hannover and Berlin have ramped up to our #SmartNewNormal.
At MTU, we are confident that our industry fundamentals have not changed and that the desire for mobility and travel will return. We believe that the #SmartNewNormal is a chance to adapt, and we are confident it and our industry will succeed.
We would like to thank our customers for their patience and trust in us during this difficult time. We would like to reiterate that we are there as partners and look forward to participating in getting our industry up and running again.
Chief Program Officer
MTU Aero Engines
Argus Media: Crude and Jet Fuel Markets on the Runway for Price Recovery
It may seem remote right now, but despite the recent unparalleled loss of global oil demand, economic forces will sooner or later conspire to rebalance the market as demand recovery takes hold and crude production in high-cost regions falls. Price recovery is on the horizon and it seems likely that Atlantic basin benchmark North Sea Dated will be back to at least $30/bl by the end of this year and at $45/bl by the end of 2021. It could be even higher if the market recovers its confidence more quickly.
The recent Opec+ agreement to restrain oil production is impressive. It is the largest, most comprehensive oil market management agreement ever achieved. And it needed to be, given the loss of so much oil demand in such a short space of time. The Opec+ alliance agreed to cut production by 9.7mn b/d in May and June, by 7.8mn b/d in the second half of 2020, and by 5.9mn b/d for 2021 and the first quarter of 2022. We would make three observations — the May-June cut helps, but it is not enough; the reduction between July and December looks broadly in line with what is needed; and the extension of such deep cuts into 2021 will probably not be necessary.
In the near term, producers are fighting a lost cause and there is little chance that crude prices will strengthen. We project that global oil demand will fall by over 12mn b/d on the quarter in April-June, which means a cut of 9.7mn b/d for two months is just not enough. Output in other countries will also be lower in April-June, mostly because low prices or lack of offtake mean that producers are forced to shut in. But the combined loss will not prevent a large 7mn b/d global stock build in the second quarter.
The second quarter will not be pleasant for crude producers, but the market is likely to be at the bottom. Opec+ cuts, economically enforced reductions in other non-Opec supply, and demand recovery should help tighten the market. Assuming high Opec+ compliance with agreed cuts, the market may have effectively rebalanced by the start of 2021.
For refiners struggling with weak demand for transport fuels, miserable product crack spreads and low refinery utilisation, a recovery in crude prices will only make matters worse. Jet fuel crack spreads have recovered slightly in the US but remain deep in negative territory elsewhere. Prices will rise in the second half of this year as crude strengthens and as low refinery utilisation and refiners’ efforts to push surplus jet fuel into the diesel and gasoline pools reduce supply — refiners can often lose 5-8 pc of their jet fuel yield from crude in this way. This may improve the situation for refiners slightly, but it will represent an unwelcome higher expense for struggling airlines — although higher fuel costs may be irrelevant if there are no flights in the first place.
Head of Forecasting, Argus Consulting Services
WorldReach Software: The Urgent Need for Remote and Touchless Identity Services for Travel After the Pandemic
At the time of writing, in May 2020, many international flights are cancelled, and airports are mostly deserted. Soon, however, health restrictions will begin to lift and international travel will show the first green shoots of recovery. That recovery will depend on the industry’s ability to respond to the legitimate concerns of travellers.
High on the list of traveller concerns will be: am I required to wait in close proximity with other travellers, and am I required to use touch devices (such as kiosks, eGates and fingerprint readers) immediately after other travellers?
At WorldReach, we have been working for several years on an IDV service (identity and document verification) designed for the specific needs of travel and border control. Our platform – Know Your Traveller™ – combines the power of smartphones to read a passport chip (via NFC) with the latest in facial recognition technology.
Any organisation using this service can have confidence that a genuine document has been presented and that the traveller is a real, live person who is the rightful holder of the document. All this can be achieved remotely.
This IDV service is already in production at volume in the real world: it has been used since early 2019 in the UK as the first step in the innovative EU Settlement Scheme. More than 3 million EU nationals have already applied successfully to settle in the UK, and an overwhelming majority did so remotely with no in-person visit and no mailing of hard copy documents.
This remote, touchless approach has huge potential across the travel continuum.
Instead of requiring newly arrived travellers to stand in a queue with others and use a touch-screen kiosk or eGate, why not allow them to enrol before travel, on their own smartphone, and grant access based on a touchless facial match at the border?
Enrolling travellers in this way, via biometric matching at each airport touchpoint, is the seamless travel vision central to the IATA One ID concept.
Instead of expecting visa applicants to travel to an application centre and wait with others to enrol their biometrics, why not allow them to submit the information remotely, using a mobile device?
At WorldReach, we believe travel service providers can contribute to pandemic recovery globally by adopting new processes that support the remote and touchless use of biometrics. We in the industry have an obligation to work collaboratively with agencies and partners to make that happen.
Executive Director, Global Partnerships
Viasat: The Aviation Industry Impressively Steps Up During This Difficult Time
As a provider of in-flight connectivity solutions across both the commercial and business jet markets, Viasat is known to bring people together through high-speed internet at 30,000 – 40,000 feet. Our focus is connecting people and providing critical links—so that people can stay connected to friends, family and work—no matter where they are.
During the COVID-19 pandemic, the need for critical links was not just about internet, it was also about connecting people to the essential supplies, food, medical goods that they needed for survival. The ability to deliver these goods has been essential, and despite the aviation industry undergoing a massive economic emergency, airlines across the world rose to the challenge to use their fleets to help a global community in crisis.
In recent weeks, it has been inspiring to see how the aviation industry has used its flight capabilities to make critical connections across the world. Below are just a few examples:
- American Airlines, United Airlines and many others are leveraging their aircraft to help move medical supplies and other cargo where it is needed most.
- AerLingus made a tremendous effort to get €30m in protective equipment from Beijing to medical professionals in Ireland.
- SAS has helped send emergency teams to provide medical support to northern Italy. The airline has also flown donated medical supplies from Hong Kong to Sweden.
- JetBlue has been flying medical device cargo, donating cots and blankets to medical workers in New York and also providing tools for schools, teachers and students through the JetBlue Foundation and their Soar with Reading Initiative.
- Finnair Cargo is keeping its A350 aircraft in the sky to fly food and medical supplies between Asia and Europe.
- Qantas is operating its international freight service to fly vital goods to and from Australia.
These efforts represent just the beginning of a commitment from the aviation industry to help fight the coronavirus. The impressive, heroic measures undertaken by pilots, flight attendants, ground crew members and thousands of others in the sector are not surprising; it shows the generosity of a collective aviation industry around the world. We thank you for being part of it.
Director of Marketing, Global Mobile Solutions
CellPoint Digital: Adapting to Change Post-COVID
Rewriting the travel playbook in the aftermath of the pandemic will not be easy, but it is both essential and possible. This unprecedented crisis, which has affected so many families and businesses worldwide, will accelerate the deployment of new digital solutions as we work together to make travel safer.
Changes across the industry are needed if travellers and staff are to feel safe in the skies and start filling planes again. Every airline must be super-responsive to adapt their processes to the ‘new normal,’ which includes pre-flight temperature checks, expanded-distance seating, contactless methods, and other safety measures.
Airlines emerging from the crisis will also need to adapt to doing more with less. Creating digital efficiencies and streamlined operations were already underway at many airlines. COVID-19 has accelerated the need for new digital solutions that can be operated by few while impacting many.
The crisis has highlighted many vulnerabilities in airline practices. One example is voucher issuance. Offering customers future travel vouchers in the event of cancellation reduces the immediate impact on airline liquidities. Sometimes refunds are unavoidable, but airlines can incentivise travellers to accept vouchers over refunds with percentage increases and other creative offers that will keep them satisfied. They need a new generation payment platform that can offer refunds or vouchers seamlessly in all their channels.
There is no doubt that the financial fallout of the pandemic is acutely painful for airlines. However, in the coming months, as more flights resume and as the world “re-opens” and starts flying again, there will be an opportunity to make systemic changes that will make the entire industry more safe, resilient and efficient for the future. If there are lessons learned as airlines start their recovery, it is the even more urgent need to have agile digital commerce and payment solutions that can quickly and cost-effectively adapt to new processes, new norms and new markets.
Everis: How Bots Can Reshape a New Passenger Experience in a Post-COVID-19 Era
Airlines are facing a new era in which they must rethink the way they operate to be more cost-efficient, redefining a new passenger experience while bringing security and trust. To overcome these challenges, aviation is taking advantage of several digital enablers, among which bots are playing an important role.
A bot or chatbot is a conversational assistant, via voice or text, which enables a natural conversation between individuals and organizations. They can solve repetitive interactions that are time-consuming for employees and they learn fast, improving the day-to-day service they provide.
At everis, we are confident that chatbots can be a key lever for airlines that want to:
- Enhance customer experience: bots provide services and information instantly and with flexibility. The customer can choose the channel which best suits their needs at any moment (written or via voice).
- Connect with customers at a safe distance: substituting part of the physical human interaction with chatbots brings confidence to the customer and employees.
- Relief pressure on customer support centers: based on our experience, between 30% – 50% of all calls received by an airline call center can be automated using chatbots or cognitive call centers. The same would apply to 20%-40% of emails.
This technology is already implemented widely, however, it has not reached its full potential. It is commonly used to inform passengers about their flight status or to answer FAQs. Few airlines are adding other functionalities to these channels, such as search flights, bookings (with the payment redirected to the airline website), or check-in processes. Many functionalities and use cases have not yet been explored; some of them include new passenger experiences such as boarding queue management, the relation with airport and flight staff, disruptions management, voluntary changes, baggage and check-in handling, claims.
Based on our experience in developing and implementing these platforms, we recommend the following practices:
- Build MVPs bringing most of the value in the simplest cases and iterate covering more complexity from processes and new channels;
- Use a single platform to manage multiple channels (voice and text), current and future ones: it is important to fulfil the defined standards, cover the needed analytics and generate economies of scale;
- Consolidated training for all channels: not only it brings synergies, but also a sense of continuum for the user when changing from a channel to another;
- Customize Analytics: to be able to know immediately and precisely the use of your chatbots channels;
- Scale fast using SaaS solutions and cloud platforms: to avoid worrying about infrastructure and its escalation according to the use and the growth that the platform might have;
- Listen to the customer: chatbots provide a unique medium in which to understand your customer as they naturally express themselves, so ask for feedback in each interaction. This valuable information can be analyzed to prioritize the next developments and use cases to be covered.
Customer & Digital Transformation Strategist
UATP: Optimizing Payments
The abrupt cessation of air travel due to the global pandemic, has resulted in airlines looking for ways to address the vast number of unused tickets; particularly for corporate travelers. Airlines are turning to UATP for solutions to use once travel restrictions are lifted. These flexible solutions include providing credit vouchers to companies, that agree to accept them, for future travel. While UATP does not set refund or credit policies for airlines, UATP does have the best solution possible given the circumstances. Multiple companies, including Amazon, have found UATP to be the optimal way to receive travel credits and have requested airlines to issue them via UATP. Additionally, airlines are allowing name changes, class of service changes, and increased flexibility on timing for these future tickets which are easily managed by utilizing UATP’s creative solutions. Because UATP is wholly owned by airlines, its solutions have flexible modifications that other card brands cannot offer.
Utilizing UATP offers additional advantages, such as enabling companies to provide exceptional duty of care for their travelers – a benefit that is particularly important at a time when employee safety is at the forefront of every company’s thinking. UATP’s Level III or itinerary-level data on all transactions allows companies to know an employee’s exact travel status at all times. UATP’s comprehensive online transaction portal, DataMine®, allows corporate clients to utilize data to closely monitor travel and travel programs.
President and CEO
RESA Airport Data Systems: Imagination and Agility Are the Keys to Taking-Off Again
In order to deal with the new constraints impacting our industry and beyond, our sole ambition must be to restore confidence in transportation and infrastructure. Each crisis generates innovations that evolve to adapt to market expectations. At RESA, we have already developed various tools to help in the boarding “by sequence” process to make these boarding operations safer.
We also offer agile and innovative solutions to airports integrating the latest technologies within a chain of systems that involve numerous interactions with passengers such as: queue measurement, thermal cameras and other health control devices, contactless kiosks, biometric facial recognition to avoid touching various elements and furniture, and so on. RESA recommends the installation of gates with body temperature measurements for passengers, attendants or accompanying persons at airport entrances, where the key indices should be the absence of fever. Contactless CUSS kiosks integrated with our passenger tracking systems already exist and allow passengers to check-in safely via hand gestures and movements of the eye. Thermal cameras for temperature checks are also certified to be installed at our CUPPS check-in positions.
Self-drop-off technologies must also be reviewed as these were developed using touch screen functionality. RESA’s DCS solution is already designed in the passenger check-in process to support “web check-in”, “home tagging” and will find a new momentum with the relaxing of government acceptance.
With the introduction of biometrics, and following IATA’s ONE ID recommendations, RESA also makes self check-in kiosks, security check control, lounge access and automated boarding easier. Thanks to this agility and creativity, we will overcome this crisis together.
Sales, Marketing & Partnerships
RESA Airport Data Systems
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