News & Insights Aviation: no going back Jonathon Porritt, Founder Director of Forum for the Future, examines the COVID-19 shock to the aviation industry, and what that means not just for a sustainable future for airlines, but their survival. You can understand why airlines here in the UK are appalled at the prospect of people arriving in the UK having to go into quarantine for 14 days. ‘Quarantine would not only have a devastating impact on the UK aviation industry, but also on the wider economy’, was the immediate response from Karen Dee, Chief Executive of the Airport Operators Association. There are few if any sectors that have been as hard hit by COVID-19 as aviation. There are no scenarios that indicate a return to anything vaguely resembling normality within the next 18 months, and many believe it will take a great deal longer. Boeing believes it will take up to three years to get back to 2019 levels of activity; Airbus suggests it could be closer to five years. Many airlines will not be able to survive that long, and few investors will see aviation as a must-have sector in their recovery portfolios. COVID-19 has come as an utterly devastating shock to the industry, and one has to feel for the millions of people worldwide whose livelihoods depend on this critical economic sector – and in the wider tourism industry. In general, I’m becoming less and less enamoured of those who seek out spurious silver linings in the storm-clouds that now surround us. But if there is one sector that really needed a life-threatening shock to its business-as-usual assumptions, it has to be aviation. And that shock might just provide some kind of flight path for the industry’s sustainable future. As recently as January, at a regular meeting of the International Air Transport Association (the global trade body for airlines) in Geneva, there was still a marked reluctance to acknowledge the headwinds that they were already flying into. Alexandre de Juniac, IATA’s CEO, maintained his contemptuous dismissal of the ‘flygskam’ movement (with more and more people choosing to fly less or not at all because of their concerns about climate change). Projected growth rates of 6% or 7% per annum (9% or 10% in India and China) were enthusiastically celebrated; CORSIA (the global offsetting scheme stitched together by the International Civil Aviation Organisation) was endorsed as the best way of warding off more impactful interventions by governments to limit demand for aviation – even as the public affairs departments of many airlines were hard at work behind the scenes to make CORSIA as ineffective as possible. And then there was the usual high-octane blather about sustainable aviation fuels (currently providing just 0.01% of all aviation fuel used today) and electric planes – which everyone acknowledges cannot possibly make a substantive difference for at least another 15 years. By 2050, aviation is forecast to account for almost a quarter of emissions worldwide. But for IATA, ‘growth, growth, growth’ was still the order of the day. Post the worse of COVID, all airlines will be judged on the substance of their decarbonisation efforts. To be fair, there are around a dozen airlines around the world that absolutely do understand that accelerating climate change poses a massive challenge to their future prospects – and Forum for the Future works with one of them, Air New Zealand. There’s no complacency in these airlines – and no expectation of some kind of technology-driven get-out-of-jail-free card coming to their rescue. Post the worse of COVID, all airlines will be judged on the substance of their decarbonisation efforts. That pre-COVID world now feels like an age of relative innocence. Passenger flights are down by more than 90%, and it’s already clear that the struggle for survival will be bloody. Some airlines have already given up the fight – including Virgin Australia. Some cannot possibly survive without continuing government support, including all those ‘national carriers’ that have rarely made any genuine profit throughout their existence. Some, with strong balance sheets, will seek to tough it out rather than go cap-in-hand to their governments, but the economic dislocation involved in this will be intense. At the end of April, BA got in early by announcing plans to cut up to 12,000 jobs, almost 30% of its 42,000 workforce. But I do wonder if today’s airlines have fully bottomed out the post-COVID world that awaits them? For many, their business model depends on squeezing high margins out of their business/first class customers – making them very dependent on multinational companies which used to believe they couldn’t function without senior executives jumping on planes to transact often quite banal business meetings. I believe that’s now all gone – Zoomed or Teamed into ‘never coming back’ irrelevance. So just imagine most airlines with their business customers permanently halved – domestically, let alone internationally – and many airlines will have no residual business case. As for the vast majority of people who don’t fly business class, it too is going to be a very different story. Social distancing; having to wear masks and other PPE; stuck with people you don’t know in confined spaces; possible quarantining; more security and health checks; endless queues – the golden age of relatively cheap, incredibly convenient air travel is certainly gone for the time being, and one has to wonder whether it will ever come back again. ...the golden age of relatively cheap, incredibly convenient air travel is certainly gone for the time being, and one has to wonder whether it will ever come back again. I have mixed feelings about this. From a climate perspective, it’s good news. The continuing growth scenario being celebrated at the IATA meeting back in June, with very limited opportunities to reduce emissions through efficiency, alternative fuels or new technology, was turning into a complete disaster. Local impacts of noise and air pollution were a continuing nightmare for millions of people around airports. The hubristic arrogance of Heathrow and countless airport operators all around the world, endlessly arguing that new terminals, new facilities and new runways were entirely justified in terms of their contribution to economic growth, however suicidal such growth might have been, flew in the face of anything resembling reason. So will aviation still have a significant role to play in the global economy post-COVID-19? I sincerely hope so. For all its environmental challenges, international air travel has benefitted hundreds of millions of people, helped create huge numbers of jobs in the global tourism industry, and opened people’s eyes to other countries, cultures and environments. A world without aviation would be a poorer, shrunken, inward-looking world. But all of that now depends on each and every airline in our post-COVID world being able to demonstrate that it has a compelling case to survive – to go on earning its ‘social licence to operate’ in a carbon-constrained world. Part of Forum for the Future’s work with Air New Zealand has been focused on what that ‘social licence to operate’ looks like in practice – both locally in New Zealand and internationally. Like it or not, governments will be at the forefront of making that happen. The worst possible thing the politicians can do in the midst of the COVID crisis will be to bail out airlines and airports with no thought whatsoever for climate change or the wider environment. So the fact that EasyJet was able to access the UK Government’s new emergency coronavirus fund with a £600m loan in April, with no strings attached, sent out a strong warning signal that this is a government that still doesn’t understand that simply signing up to a net-zero economy by 2050 doesn’t mean much without starting to take action now. Just a couple of weeks before that, a consortium of 26 NGOs had written to the Chancellor of the Exchequer demanding that ‘stringent conditions’ should be put on any rescue package, in terms of compliance with low-carbon targets and the need to protect employees’ rights. As Rebecca Newsom, Head of Political Affairs of Greenpeace UK, put it: ‘Emergency funding must be used to tackle emergencies, not to support business-as-usual. Conditions are needed to protect workers’ rights, prevent public money being diverted into the pockets of shareholders, and reduce demand gradually over time through a frequent flyer levy, so that the sector operates within safe limits for the climate.’ The French Government has taken a very different line with its proposed bailout for Air France/KLM, setting conditions on future profits and requiring the airline ‘to become the most environment-friendly company on the planet’ (as yet, no further details available!) I suspect these are just the first shots in what is going to be an increasingly intense battleground. For airlines, that’s a massively uncomfortable place to find themselves, but everything will depend on the quality of leadership they bring to bear on their very own COVID crisis. Learn more insights from our work with Air New Zealand, or read other latest articles from Forum for the Future.