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Aviation and the Pandemic

Feb 10, 2021   •   by   •   Source: Proshare   •   eye-icon 1321 views

Wednesday, February 10, 2021 / 01:37PM / by FBNQuestResearch / Header Image Credit: The Strait Times


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Aviationis one of the industries that has suffered severely due to the consequences ofthe pandemic outbreak. The expected behavioural change of passengers followingthe COVID-19 crisis, travel restrictions and the ensuing economic crisis haveresulted in a dramatic decline in demand for airline services. According to theInternational Air Transport Association (IATA), passenger traffic via airtransport declined by 75% y/y in August '20. In addition, the collapse ineconomic activity and trade affected freight, which was lower by about 12% y/yin the same month.

 

At thebeginning of the pandemic, some airports closed temporarily, but othersremained partially open to maintain some connection between communities,repatriate citizens and allow for the continuity of vital services.

 

Thedramatic decrease in the number of air passengers had a severe impact onindustry revenues.According to Airports Council International (ACI) forecasts, the industry islikely to lose more than USD97bn in revenue in 2020. Furthermore, airports havehigh fixed costs, such as security, maintenance of airfields and terminals, andpre-existing contracts that must be paid regardless of the current situation.

 

Based onIATA data, GDP supported by aviation in Africa could decline by as high asUSD35bn. IATA previously estimated a USD28bn decline.

 

Thetravel and tourism segment would be the hardest hit by the domino effect of theaviation crisis. The World Travel & Tourism Council (WTTC) projects joblosses of c.197 million globally for 2020, of which 17 million jobs (9%) wouldbe lost in Africa. To alleviate the losses, several governments have allocatedspecific budget lines from their COVID-19 aid plans to refloat the travel andtourism industry. In addition, a few others have found it more convenient toexempt and/or reduce tourism related taxes.

 

RegardingNigeria, the Nigerian Civil Aviation Authority estimates that the pandemic hascost the country's airline industry c. USD1bn. Meanwhile, IATA estimates thatthe pandemic puts at least 124,000 Nigerian jobs at risk.

 

Based onthe national accounts, Nigeria's air transport segment contracted by -39% y/yin Q3 compared with -57% in the previous quarter. The reopening of airports andthe reinstatement of flights, following the ease in movement restrictions inQ3, came as a relief for many. However, this was accompanied by flightcancellations which have also had a negative impact on the industry.

 

Duringthe end-year festivities, we noticed that the price of flights from Lagos andAbuja to locations in the Eastern region were double the regular cost. Ourchannel checks showed that some airlines were booked to capacity,notwithstanding.


We assumethat demand was high, partly due to customers' ability to save on their travelexpenses during the year. Therefore, the end-year travel expense wasmanageable, despite the general squeeze on consumer pockets due to the economicdownturn triggered by the pandemic.

 

Ingeneral, the full recovery of the aviation industry will depend on governments' progress in controlling the pandemic, the efficiency in distributing vaccinesand targeted measures taken to keep the aviation and tourism industries afloat.


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Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

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