A change is coming in air travel
What will it mean for the Caribbean?
IN EVERY corner of the world, adjustments to a COVID-19 new normal are under way. Countries, not least of which include our small island tourismdependent states, are triaging decisions about public health safety and reviving their now-frail economies.
For a region still so dependent on tourism, the fact that COVID19 is serving to be one of the worst occurrences in the history of aviation and tourism is a call to deploy all of our intellectual and professional battalions.
The International Civil Aviation Organization, ICAO, so far estimates that revenue losses could range anywhere between US$151 billion and US$269 billion for airlines globally.
Aviation is an industry with razorthin profit margins. On average, industry profits in 2019 were around US$30 billion – or US$5.70 per passenger – with total revenues of over US$838 billion. On this basis, the projected losses from this year as a result of COVID represent 20 per cent to 30 per cent of the total revenues posted in 2019. Financially, this is beyond a tenuous situation which should draw our attention for many reasons.
First, the rebound in air travel will initially be witnessed domestically, as obtained in the instances of previous crises. Leisure travel is also discretionary, which could encourage vacations to be put off, deferred or indeed reconfigured towards domestic or other perceived safer options.
The IATA (International Air
Transport Association) director general recently announced estimates that even by the end of 2020, only 50 per cent of travellers from the same period last year will likely take to the sky. Even if travel confidence re-emerges sooner, border closures and travel advisories will also continue to serve as deterrents in the immediate future.
Consequently, there are naturally a lot of queries about what shape the travel environment is likely to take going forward.
NEW PROCEDURES, MORE STRESS
Just as 9/11 brought the advent of new security measures, the uncertainty surrounding COVID19 will likely subject travel to similar provisions. One of the more extreme in-flight changes so far can be found in rules established by the European low-cost airline Ryanair, preventing passengers from queuing to access the lavatory, with flight attendant instead managing access.
I suspect changes will ultimately be seamlessly interwoven into daily operations and will be a far less invasive new normal.
Travellers may also fancy thoughts of enjoying more elbow room with empty middle seats. Barring low demand, government stipulations, or an initial strategy to stabilise travel confidence, it is highly unlikely that airlines will actively move to block capacity in order to keep middle seats unoccupied. This will place load factors – a measure of the flight’s ‘occupancy’ level – under threat and would be highly unsustainable.
Some airlines such as United, however, propose informing passengers when bookings exceed a certain level. Masks are also making an influx into the cabin with Jetblue, for example, mandating its use for both passengers and crew.
Within terminals, airports are employing temperature checks for arriving and departing passengers, cordoning off some boarding areas to enforce social distancing, and there are considerations under way about the sanitisation of luggage during baggage handling with mechanisms such as UV lighting.
Variances in experiences are more likely to occur in relation to border-control and humanbiosecurity measures as individual countries seek to contain the further importation of cases. In some instances, travellers are being subjected to advanced health declarations through questionnaires about symptoms. Measures at both the destination and point of departure will therefore impact travel decisions.
Border-control variances and any globally accepted principles that increase carrier operating costs – which could include increased sanitisation between flights – will ultimately increase the cost and hassles of travel. Most of the routes into the Caribbean are also monopolies, so there is insufficient competition to apply pressure to prices.
ECONOMIC IMPLICATIONS
Generally, sales are likely across the industry in attempts to spur demand initially, but for international travel into the Caribbean in particular, mediumterm travel costs could escalate, conflated by the oft-quoted higher taxes and fees.
Considering the majority of arrivals into the Caribbean generally are from the United States, and about a quarter of those are from New York specifically, which is a
COVID hotspot, the region now has a fine balancing act to employ to ensure overly aggressive measures are not implemented which aggravate the airlines and suppress demand, while also containing further spread.
What does this all mean for travel to and from the Caribbean, and for our tourism industries?
Over 75 per cent of airlift capacity into the Caribbean region from the US is generally provided by American Airlines, Jetblue and Delta out of key gateway cities, namely, Miami, New York, Fort Lauderdale, and Atlanta. Over the past three years, the American low-cost carrier Southwest has also been increasing its presence in Jamaica, The Bahamas, Dominican Republic and Cuba.
The United Kingdom is of particular importance as a source market for Barbados, and it is noteworthy that arduous efforts are now afoot to safeguard the future of Virgin Atlantic, part of which involved the carrier ending its service from Gatwick and releasing almost 30 per cent of its staff complement. Suffice it to say though, the carrier’s summer schedule for 2021 indicates this service for Barbados and other islands will be maintained, but will instead originate out of Heathrow.
While the travel experience among the various airlines bringing tourists into the region will likely be tenable, the key shock to the aviation industry will come in relation to its prolonged recovery and the pressure for airlines to remain viable.
A period of further consolidation now seems absolute, and the region is not likely to be insulated from the consequences of this macro structural reset. Already, the ripple effect has been permeating throughout the industry as airlines burn through cash.
Without government support, the thin profit margins have left the industry in a precarious position. We have witnessed major bankruptcy announcements globally, including from Avianca, which once connected Barbados and Colombia. In the case of the four key US carriers serving the region – the Chapter 11 bankruptcy protection, government aid to slow cash burn due to minimum service requirements on some domestic routes, and their relatively stable financial positions – offers some semblance of comfort about any potential complete demise.
However, because the aviation industry of the future is on track to be structurally leaner, we will likely face reduced enthusiasm from airlines to develop new routes, implicating destination sourcemarket diversification strategies.
Destinations will likely have to be more active and coordinated in any plan to establish new services and, more importantly, will have to take concerted efforts to ensure capacity out of their existing gateways remains stable. Ultimately, foreign airlines will likely have a lot more power, which will require destinations to be more strategic.
Some available options may include: generating traffic from surrounding communities or catchments; developing more resilient markets, particularly to fill seats at the front of the cabin; bringing stakeholders together domestically to develop coordinated, targeted segmentation campaigns intended to sustain capacity; and supporting airlines with data and coordinating strategies which could be used to incentivise travellers.
For the individual, the adjustments to the new constraints will be manageable, barring the peculiarities of the cost of travel into the Caribbean.