MARKET ANALYSIS I 40 T he travel and tourism sector, broadly encompassing aviation, was always going to bear the brunt of the impact from a virus pandemic. Dress rehearsals in the last 20 years, from SARS, H1N1 and MERS, illustrated the acute vulnerability of ever-more globalised traval networks as vectors for contagion. With COVID-19, it quickly became clear that the virus had spread globally well before air borders were closed, yet the grounding of airlines worldwide was still a traumatic reminder that we now faced a pandemic rather than an epidemic. Without a virus in sight, the gravity for the airlines sector was writ large; after 10 years of solid growth, the industry immediately anticipated at least a year of drastic retrenchment. By comparison, the business aviation sector came into this crisis on a much-weaker run, yet the prognosis for our industry may not be as bad. In terms of flight activity, the pandemic’s effect on different aviation sectors has been far from homogenous, as shown in Chart 1, below. Government virus-suppression policy has grounded international airline actiivty, and the majority of airlines have elected to park their fleets and furlough their staff. We saw more than 80% reductions in scheduled connections as early as mid-March in Europe, rippling out West by the end of the month. Since then, there has been almost no recovery showing up in the 7-day rolling average daily scheduled activity. Cargo activity, as reflected in dedicated cargo operators‘ footprint, has more resilience, without the need for passenger traffic. But business aviation clearly shows the most resilience of any sector.
Emergency Services At least so far in the evolution of this crisis, business aviation has been the last of the aviation sectors to get hit by the crisis, and appears to be the first one coming out. As government lockdowns escalated in Europe and North America in early March, business aviation activity surged in response for pent-up demand for repatriation. With travel locked down, many operators did then park their fleets, with some smaller airports closing, aircraft owners hangaring their jets, and many operators needing to furlough crews. But at least 30% of business aviation operators stayed operational, deploying their fleets to ongoing emergency services, whether ambulance, cargo or logistics. At the aggregate level, at the peak of the crisis in April, 70% declines in year-on-year bizav flights in April was still livelier than the near-flatline reduction in commercial aviation. By May, we are seeing recovery in busness aviation to half normal levels. By region, the changes in business aviation flight activity have broadly reflected the pandemic both in terms of timing and impact. The crisis phase in Asia, back in February, saw a standstill in flight activity in China, a big slowdown in intra-Asian activity, but resilience and even increase in some international travel, with the larger domestic markets in Europe and North America barely affected. From the second half of March through to the end of April we saw business aviation slow to its lowest ebb in Europe, rippling across to the US. There was little recovery in Asia, save Oceania, where viruscontainment in Australian and New Zealand has been successful. Then through May we’ve seen quite quick recovery from the trough in North America, slower pick-up in Europe and Africa. We’ve also seen some slowdown in South America, but not as abrupt as elsewhere. Quarantine impact Underlying the regional differences, there have been strong variations in flight activity from country to country, as shown in Chart 3 below. Broadly speaking, the more relaxed the suppression policy, the more resilient business aviation activity (the same does not apply to commercial aviation, which appears to have been much more exposed to regional travel suppression). In Sweden, where suppression has been controversially loose, flight activity has dipped no more than 25%. In Germany, where containment has allowed suppression to be loosened fairly quickly, activity is at 50%. In Italy, UK, France and Spain, where the public health impact was most severe, and lockdown prolonged, business aviation flight activity is still 60%-70% below normal. Over in the US, flight activity has been fairly resilient in Texas, Arizona and Florida, which have endured milder travel restrictions than California and most of the East Coast states. Ultimate Jet I 41