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Global flight impact due to coronavirus

Ascend Consultancy, Industry outlook

Are travel bubbles the key to rebuilding confidence and passenger demand?

May 25, 2020

Certain air travel markets are beginning the road to recovery. New Zealand is an example many are looking to as […]

Certain air travel markets are beginning the road to recovery. New Zealand is an example many are looking to as a case study for insights.

In light of the news that a “trans-Tasman travel bubble” has been formally agreed between Australia and New Zealand, what are the vital requirements for successful bilateral agreements and to what extent could such initiatives effectively rebuild airline passenger demand?

Joanna Lu, Ascend by Cirium’s Head of Consultancy Asia, shares her expert views on the key challenges faced by airlines seeking to resume international services during the coronavirus crisis and the potential viability of “travel bubbles” to kick start flights. She discusses how re-establishing confidence in both air travel and destination markets holds the vital key to rebuilding passenger demand and airline recovery. 

Where and how should companies be looking to see air travel activity resume?

Airline passenger demand cannot recover until people are allowed by their governments to travel. Even when restrictions are relaxed, confidence in the safety of travel needs to be restored. Business and individuals must feel confident they will not be trapped abroad by new quarantine and lockdown rules. So, I think those city pairs with higher business travel demand may be the first to resume operations, pending the bilateral agreement between the two countries.  Those countries, notably some of those in Southeast Asia, that heavily rely on the inbound tourism market may suffer longer.

What are the common characteristics among those markets that are opening up first?

It seems clear that domestic demand will recover before international demand. In order to re-establish international capacity, it’s likely that bilateral agreements between two countries that have both contained COVID-19 will be needed. The recently introduced “Trans-Tasman travel bubble”  is the classic example of this concept.

The fundamental enabler of resuming air traffic is the two countries’ recognition of each other’s health system and standard, as well as their information sharing standard. Without this high degree of recognition and understanding, it would be hard to achieve any sort of air travel bilateral agreement as there is no real solution yet for dealing with the virus. Therefore, it would be too risky to rush re-opening the market without alignment in standard.

Based on this hypothesis, I do think more bilateral agreements will follow, albeit slowly. It will probably be countries that are geographically close to each other, or ideologically agreeable to each other and with similar health and information standard, that will be most able to establish travel bubble agreements.

What could be the long-term implications of these travel bubbles?

Firstly, it’s important to point out that such measures could result in global industry organizations (such as WHO, WTO, IATA, ICAO) having increasingly less influence in air travel trends and decision-making between countries.

There are two aspects to the cause and effect, and it’s tied to the traditional balance of Supply and Demand.

First, we have to assess how does a bubble support demand? Western markets may see the tourism sector rebound earlier than the business travel sector. Eastern markets may see a very fragmented picture in terms of the returning pattern of traffics.

Re-establishing consumer confidence in the safety of travel is more vital than anything else, as all actions taken on the journey to airline recovery depend upon it.  This can only follow on from success in reducing the number of COVID-19 cases and deaths. Key metrics are likely to be the rate of new cases and the number of days since the last new case.

These new bubbles could also create new challenges for how travelers book their travel. If they cannot find the information easily, or find it difficult to understand how to build a trip itinerary, they may give up on the effort without the right resources to help them.

We can also consider how a bubble supports supply.  Government changes and intra-bubble traveler interest might create new opportunities for airlines that have a leaner operations strategy.

On a domestic level, countries willing to resume international service might need to match their health and information system to a higher standard. In this environment, direct point-to-point routes are going to be more viable than connections via a transit hub. This also means airlines may need to be well prepared to restructure their network to some extent, including operating very different flight patterns and maybe generally shorter flight distance.

Travel Bubbles or other initiatives can be developed, but their impact will likely be limited. Major changes are still more dependent on traveler demand coming back, based on government and health care management of the virus, at both global and regional levels.

What is the reality of expecting airlines to support social distancing in the air?

I’d like to make it very clear that social distancing and commercial air travel are incompatible. The stimulation of growth we have seen through the last cycle was driven by continually reducing ticket prices which were enabled by increasing density.

In economy class, seats are typically 17-18 inches wide and pitch is typically 18-21 inches. This makes it impossible for passengers to maintain two metres social distance in most aircraft. And that’s before we even start to think about airport passenger processing at either end of the journey, where, in more normal times, flow rates of several thousands of passengers per hour was necessary to maintain efficient operation.

In this context, it will not be airlines (or governments) reinstating services either domestically or on international bilateral basis (via the travel bubbles) that will be key to traffic recovery, but rather a return of passenger confidence. It is precisely the reassurance that the flight will not result in high risk of infection of COVID-19 that must be widely achieved.

And this re-establishment of confidence can ultimately only be driven by widespread inoculation programs (when a vaccine is developed and available) or widespread antibody testing regimes. Until we have one or the other, I think that the impact of travel bubbles or other initiatives will be limited.


For latest data on passenger demand and more industry insights on the keys to airline recovery, visit our COVID-19 overview page, or register for our latest webinar.

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