By Allianz
In the second part of the article, we will continue discussing about how the aviation sector is rebounding from the devastating pandemic and the challenges ahead.
Here are a some of the findings made from our studies so far:
New generation aircraft bring safety improvements but higher costs
A number of airlines have shrunk their fleets or retired aircraft over the past year, as the pandemic hastens a generational shift to smaller aircraft, given the anticipated reduced number of passengers on aircraft in the short-term future.
“Newer generation aircraft bring safety and efficiency benefits,” said AGCS Regional Head of Aviation Axel von Frowein. “However, new materials such as composites, titanium and alloys are more expensive to repair, resulting in higher claims costs.”
Robust performance by air cargo and trend will continue
Although passenger travel has been devastated by the pandemic, other aviation sectors have performed more robustly, such as cargo operators.
In April, Asia Pacific reported its best month for international air cargo since the pandemic began, thanks to rising business confidence, e-commerce and congestion at sea ports, while Latin America to North America freighter capacity grew by almost a third in May compared to the same two-week period in 2019. The report expects air cargo to continue to perform strongly.
A Singaporean low-cost airline, Scoot has re-configured their regular passenger cabins to allow aircrafts to carry extra cargo, while Singapore Airlines continues to capture more vaccination shipments as production ramps up and the demand for exports increase.
Business travel – boom or bust?
Pre-COVID-19 business travel traffic amounted to US$1.5 tril a year or around 1.7% of global gross domestic product (GDP). With many airlines dialing back expectations in the short-term, the report asks whether those days are over. New ways of collaboration, such as video calls, proved to be effective and more companies are aiming to reduce business travel to improve their carbon footprint.
Therefore, while there will be initial surge once lockdowns end, many airlines are preparing for a long-term paradigm shift in traveling, with business travel expected to be slow to pick up.
However, what speaks for a possible uptick is that some areas of business aviation have proven resilient during the pandemic. Companies that had aircraft continued to use them while many that had never purchased or chartered an aircraft before did so for the first time. Many charter companies thrived.
New routes multiply in Europe and Asia Pacific
Over 1,400 new air routes are scheduled for this year – more than double those added in 2016 – driven by Europe (over 600) and Asia Pacific (over 500), with regional airports set to be the main beneficiaries. Growth in China’s domestic market alone has seen over 200 new routes added – almost the same as the US.
China has one of the largest domestic tourism markets in the world. The Culture and Tourism Ministry estimated there will be more than four billion trips made across China this year, a market worth just over US$500 bil. The demand for domestic alternatives, possibly exceeding pre-pandemic levels is not surprising — especially as China is home to 55 UNESCO World Heritage Sites.
Insect infestations affecting instrument accuracy
There have been a number of reports of unreliable airspeed and altitude readings during the first flight(s) after some aircraft have left storage. In many cases, the problem was traced back to undetected insect nests inside the aircraft’s pitot tubes, pressure-sensitive sensors that feed data to an avionics computer. Such incidents have led to rejected takeoffs and turn back events. Contamination risk increases if storage procedures are not followed.
COVID-19 claims impact
The report also notes the aviation industry has seen relatively few claims directly related to the pandemic to date. In a small number of liability notifications, passengers have sued airlines for cancellations/disruptions.
However, the insurance sector was not immune to larger losses during the course of the pandemic, with different regions seeing tragic accidents, emergency landings and hull losses to name a few. As air travel begins to return to pre-pandemic levels, we expect claims volume to rise accordingly.
AGCS analysis of more than 46,000 aviation insurance claims from 2016 to year-end 2020 worth more than EUR 14.5 bil shows collision/crash incidents account for over half the value of all claims. Other expensive causes of loss include faulty workmanship/maintenance and machinery breakdown. – July 8, 2021.
The article above was written by Allianz.
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.
