The unprecedented year of 2020 plunged the aviation industry into the worst period of its history, bringing the first decade of steady airline profitability to a staggering halt. The Covid-19 pandemic upended airlines, airports, plane-makers, and leasing firms in a dramatic, unforeseen way.
The global outlook for aviation in the upcoming six months, March 1st to August 31st is extremely depressing
The pandemic wiped out 21 years of global passenger traffic growth in 2020, hurling airlines back to 1999 levels, according to aviation analytics firm Cirium. In 2020 alone, more than 40 commercial carriers stopped or suspended operations globally. The year ended with two-thirds of the world's passenger fleet grounded, with some jets never to take off again and those returned to service flying fewer hours.
Now, 2021 is set to become a transitional year with a long and bumpy road ahead to recovery. Meaningful progress on a travel rebound hinges on the speed of vaccine distribution, ability to restore passenger confidence, availability of state aid, access to financing, standardised government policies, economic recovery and containment of the unpredictable virus. Still, there will be some silver linings, including the introduction of digital health passports aimed at easing cross-border travel.
"We'll see a slow recovery with a nervous caution around spikes of Covid infection and the inconsistent actions of authorities weighing on airlines and their recoveries," John Grant, analyst at aviation data firm OAG, told The National. "We can expect to see very competitive fares and those normal fare rules being waived for some time."
The global industry is seeking to get back on its feet a year after the pandemic forced airlines to suspend flights, park planes, seek government aid and slash jobs.
Last-minute bookings
Air tickets issued worldwide for the next six months are 17 per cent of levels in the same period last year, according to travel analyst ForwardKeys.
"The global outlook for aviation in the upcoming six months, March 1st to August 31st is extremely depressing," Oliver Ponti, vice president of insights at ForwardKeys, told The National.
One year ago, the UAE's General Civil Aviation Authority announced on February 25 that jets bound for Iran, where the coronavirus was spreading rapidly, would be halted for at least one week. Now, the UAE is faring better than average, with March-August bookings currently 21 per cent of what they were in the prior-year period. Russia and Egypt were the best performing tourism-origin markets. Bookings from Russia to the UAE issued from the start of 2021 to February 9, the most recent data available, were up 2 per cent year-on-year.
Global travellers are booking their tickets at the last minute due to concerns about new and sudden government travel restrictions that could derail their plans - making network planning for airlines difficult and expensive.
Many are now booking flights within just six to eight weeks of their travel date, compared to pre-pandemic bookings of six to 12 months ahead, according to Cirium.
The outlook is highly uncertain for the summer, the main holiday season whose profits usually carry airlines through the winter, due to lockdowns and changing travel rules.
"Airlines are not holding out much hope for early summer performance ... people are looking but not booking," John Strickland, an independent aviation analyst, said. "Late summer will depend on governments easing quarantine measures ... with airlines exploiting one-off evidence of demand as and where it may be."
Fare wars
Passenger traffic is unlikely to rise significantly until enough populations are vaccinated to reduce infection rates. Even then, airlines must convince people to board planes again. Many have offered ultra-low ticket prices, deals for students, kids flying for free, free hotel stays and free travel insurance to lure people back into cabins. The main question is for how long fares will stay depressed. A recovery in leisure travel should begin in most regions by around August, but the more lucrative business travel market will lag behind.
"Ultimately when business travel begins to return to near normal levels then airlines will look to re-introduce those normal fare rules and create a bigger distinction in their prices to leisure and business segments," Mr Grant said. "But and this is a big but, there will be some airlines that will equally seek to secure competitive advantage by not imposing those rules so people shop around for a bargain."
Smart airlines will try to generate non-ticket income from ancillary revenue streams such as loyalty programmes, Peter Harbison, chairman of the Centre for Aviation (CAPA), said.
Digital health certificates
The pandemic will accelerate the digital travel experience with more touchless points at airports, implementation of AI technology, use of biometrics and the roll-out of digital health passports.
Travel is going to lose a lot of its sheen as health requirements are going to be with us indefinitely
"Think post-9/11 security inconvenience. Travel is going to lose a lot of its sheen as health requirements are going to be with us indefinitely," Mr Harbison said. The early days of digital health passports will be chaotic for a couple of years until industry bodies, governments and multilateral bodies gradually establish common standards. Earlier this month, Bahrain became the first Gulf state to adopt a digital vaccine passport that acts as proof of inoculation against Covid-19 for its carrier.
Narrow-body jets to lead recovery
Fuel-efficient new-generation narrow-body jets such as the Airbus A320 Neo will lead the post-Covid fleet recovery as airlines adjust to a smaller travel market. In contrast, larger aircraft such as the Airbus A380 will be retired sooner than projected as operators struggle to fill bigger aircraft while demand for long-haul travel remains weak. Smaller, more fuel-efficient wide-body aircraft such as the Airbus A350 and Boeing 787 will trickle back into service during the year, Mr Grant said.
Some aircraft in storage will be converted to cargo, with about 90 aircraft conversions expected this year, up from 70 in 2019, according to Cirium. This is driven by strong e-commerce growth as shoppers stuck at home make their purchases online. Over 150 commercial jets were used for cargo in 2020, without physical conversions, to replace the loss of belly-cargo as passenger jets were grounded.
A changing aviation landscape
The pandemic forced dozens of airlines to file for bankruptcy or disappear entirely. Others are surviving on government life-support or facing acquisitions by stronger rivals. There will be more failures this year as the market continues to shrink in terms of operators and fleet size, CAPA's Mr Harbison said.
As cash-strapped airlines struggle under the strain of financial pressures during the pandemic, plane leasing firms will play a bigger role. Lessors will own more than 50 per cent of the global fleet, according to Cirium. Deals with airlines to buy and lease back their jets, an immediate source of cash, will become more popular as airlines desperately need more liquidity.
The quest for capital
Airlines will need another $80 billion this year in aid to survive the crisis, on top of the nearly $200bn they received from governments last year, according to the International Air Transport Association (Iata). As they burn through their cash reserves, airlines will need to raise more money this year. Stock sales, bond issuances, new equity, long-term debt instruments and loan guarantees will become more important as viable carriers seek to buffer their balance sheets.
"Debt instruments need to be very long-term to provide airlines a realistic change to repay or convertible so that a reasonable, healthy debt-to-equity ratio can be maintained," Michael Wette, transportation and services partner at Oliver Wyman, said.
Survival of the fittest
There are tentative signs of recovery in domestic markets ahead of international ones while short-haul routes will recover faster than long-haul journeys. Airlines operating point-to-point services with the lowest cost base will be best placed to recover first, OAG's Mr Grant said. Carriers with mixed fleets, complex networks, a high reliance on connecting traffic and products geared towards business travellers will be the slowest to recover, especially if they operate a medium to long-haul network. Critical success factors will be maximum cash resources and access to liquidity when needed, combined with the ability to be flexible, agile and opportunistic, Mr Strickland said.
A cloudy outlook
Airlines could face a slower-than-expected recovery in travel demand this year as governments impose tighter travel restrictions to curb the spread of new Covid-19 virus strains.
Iata's baseline forecast sees a 50.4 per cent year-on-year improvement in air traffic in 2021, which would bring the industry to 50.6 per cent of pre-crisis levels. However, there is a "severe downside risk" if strict travel restrictions persist. In such a scenario, traffic may improve just 13 per cent this year, compared to 2020. This would leave the industry at 38 per cent of pre-crisis levels.
The Middle East's air traffic will rebound 43 per cent in 2021 if travel restrictions are not tightened further.
Silver linings
Despite the gloomy and uncertain outlook, there are some silver linings on the horizon for aviation. New airlines are being launched and, unencumbered by debt, they may be well placed to be successful in the coming years, analysts said. Domestic markets, such as in China and Russia, are nearing a full recovery, according to Iata.
I do believe this is the year where the vaccine will enable us to see growth again, what exactly that looks like and what timescale it's hard to say
The economic outlook is more positive, with the IMF raising its forecast for global economic growth in 2021 to 5.5 per cent in 2021, an increase of 0.3 percentage points from its October projections. The aviation industry has proven resilient after previous crises, indicating that once the virus is contained, pent-up demand will see globetrotters packing their suitcases again.
"We are seeing some significant positives, which is the rate of vaccinations in certain countries, ours being one, and as that comes into critical mass in some territories, we believe that will give opportunity for air corridors or some degree of air transport to grow again," Terry Daly, executive director of guest experience, brand and marketing at Etihad Airways, told The National. "I do believe this is the year where the vaccine will enable us to see growth again, what exactly that looks like and what timescale, it's hard to say."
Emergency phone numbers in the UAE
Estijaba – 8001717 – number to call to request coronavirus testing
Ministry of Health and Prevention – 80011111
Dubai Health Authority – 800342 – The number to book a free video or voice consultation with a doctor or connect to a local health centre
Emirates airline – 600555555
Etihad Airways – 600555666
Ambulance – 998
Knowledge and Human Development Authority – 8005432 ext. 4 for Covid-19 queries
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UEFA CHAMPIONS LEAGUE FIXTURES
All kick-off times 10.45pm UAE ( 4 GMT) unless stated
Tuesday
Sevilla v Maribor
Spartak Moscow v Liverpool
Manchester City v Shakhtar Donetsk
Napoli v Feyenoord
Besiktas v RB Leipzig
Monaco v Porto
Apoel Nicosia v Tottenham Hotspur
Borussia Dortmund v Real Madrid
Wednesday
Basel v Benfica
CSKA Moscow Manchester United
Paris Saint-Germain v Bayern Munich
Anderlecht v Celtic
Qarabag v Roma (8pm)
Atletico Madrid v Chelsea
Juventus v Olympiakos
Sporting Lisbon v Barcelona
ENGLAND SQUAD
Joe Root (c), Moeen Ali, Jimmy Anderson, Jonny Bairstow, Stuart Broad, Jos Buttler, Alastair Cook, Sam Curran, Keaton Jennings, Ollie Pope, Adil Rashid, Ben Stokes, James Vince, Chris Woakes
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Blonde
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Wicked: For Good
Director: Jon M Chu
Starring: Ariana Grande, Cynthia Erivo, Jonathan Bailey, Jeff Goldblum, Michelle Yeoh, Ethan Slater
Rating: 4/5
What vitamins do we know are beneficial for living in the UAE
Vitamin D: Highly relevant in the UAE due to limited sun exposure; supports bone health, immunity and mood.
Vitamin B12: Important for nerve health and energy production, especially for vegetarians, vegans and individuals with absorption issues.
Iron: Useful only when deficiency or anaemia is confirmed; helps reduce fatigue and support immunity.
Omega-3 (EPA/DHA): Supports heart health and reduces inflammation, especially for those who consume little fish.
Sri Lanka World Cup squad
Dimuth Karunaratne (c), Lasith Malinga, Angelo Mathews, Thisara Perera, Kusal Perera, Dhananjaya de Silva, Kusal Mendis, Isuru Udana, Milinda Siriwardana, Avishka Fernando, Jeevan Mendis, Lahiru Thirimanne, Jeffrey Vandersay, Nuwan Pradeep, Suranga Lakmal.
KILLING OF QASSEM SULEIMANI
Cricket World Cup League Two
Oman, UAE, Namibia
Al Amerat, Muscat
Results
Oman beat UAE by five wickets
UAE beat Namibia by eight runs
Fixtures
Wednesday January 8 –Oman v Namibia
Thursday January 9 – Oman v UAE
Saturday January 11 – UAE v Namibia
Sunday January 12 – Oman v Namibia
The%20specs
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The Perfect Couple
Starring: Nicole Kidman, Liev Schreiber, Jack Reynor
Creator: Jenna Lamia
Rating: 3/5
Specs
Engine: 51.5kW electric motor
Range: 400km
Power: 134bhp
Torque: 175Nm
Price: From Dh98,800
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At a glance
Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.
Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year
Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month
Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30
Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse
Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth
Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances
Company%20Profile
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Cricket World Cup League Two
Teams
Oman, UAE, Namibia
Al Amerat, Muscat
Results
Oman beat UAE by five wickets
UAE beat Namibia by eight runs
Namibia beat Oman by 52 runs
UAE beat Namibia by eight wickets
Fixtures
Saturday January 11 - UAE v Oman
Sunday January 12 – Oman v Namibia
VERSTAPPEN'S FIRSTS
Youngest F1 driver (17 years 3 days Japan 2014)
Youngest driver to start an F1 race (17 years 166 days – Australia 2015)
Youngest F1 driver to score points (17 years 180 days - Malaysia 2015)
Youngest driver to lead an F1 race (18 years 228 days – Spain 2016)
Youngest driver to set an F1 fastest lap (19 years 44 days – Brazil 2016)
Youngest on F1 podium finish (18 years 228 days – Spain 2016)
Youngest F1 winner (18 years 228 days – Spain 2016)
Youngest multiple F1 race winner (Mexico 2017/18)
Youngest F1 driver to win the same race (Mexico 2017/18)
SPECS
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Race card
6.30pm: Al Maktoum Challenge Round-3 Group 1 (PA) US$100,000 (Dirt) 2,000m
7.05pm: Meydan Classic Listed (TB) $175,000 (Turf) 1,600m
7.40pm: Handicap (TB) $135,000 (T) 2,000m
8.15pm: Handicap (TB) $135,000 (D) 1,600m
8.50pm: Nad Al Sheba Trophy Group 2 (TB) $300,000 (T) 2,810m
9.25pm: Curlin Stakes Listed (TB) $175,000 (D) 2,000m
10pm: Handicap (TB) $135,000 (T) 2,000m
10.35pm: Handicap (TB) $175,000 (T) 1,400m
The National selections
6.30pm: Shahm, 7.05pm: Well Of Wisdom, 7.40pm: Lucius Tiberius, 8.15pm: Captain Von Trapp, 8.50pm: Secret Advisor, 9.25pm: George Villiers, 10pm: American Graffiti, 10.35pm: On The Warpath
RESULTS
Bantamweight: Jalal Al Daaja (JOR) beat Hamza Bougamza (MAR)
Catchweight 67kg: Mohamed El Mesbahi (MAR) beat Fouad Mesdari (ALG)
Lightweight: Abdullah Mohammed Ali (UAE) beat Abdelhak Amhidra (MAR)
Catchweight 73kg: Mosatafa Ibrahim Radi (PAL) beat Yazid Chouchane (ALG)
Middleweight: Yousri Belgaroui (TUN) beat Badreddine Diani (MAR)
Catchweight 78KG: Rashed Dawood (UAE) beat Adnan Bushashy (ALG)
Middleweight: Sallah-Eddine Dekhissi (MAR) beat Abdel Enam (EGY)
Catchweight 65kg: Yanis Ghemmouri (ALG) beat Rachid Hazoume (MAR)
Lightweight: Mohammed Yahya (UAE) beat Azouz Anwar (EGY)
Catchweight 79kg: Souhil Tahiri (ALG) beat Omar Hussein (PAL)
Middleweight: Tarek Suleiman (SYR) beat Laid Zerhouni (ALG)
UAE currency: the story behind the money in your pockets
LA LIGA FIXTURES
Friday Athletic Bilbao v Celta Vigo (Kick-off midnight UAE)
Saturday Levante v Getafe (5pm), Sevilla v Real Madrid (7.15pm), Atletico Madrid v Real Valladolid (9.30pm), Cadiz v Barcelona (midnight)
Sunday Granada v Huesca (5pm), Osasuna v Real Betis (7.15pm), Villarreal v Elche (9.30pm), Alaves v Real Sociedad (midnight)
Monday Eibar v Valencia (midnight)
I Care A Lot
Directed by: J Blakeson
Starring: Rosamund Pike, Peter Dinklage
3/5 stars
RESULTS
Mumbai Indians 181-4 (20 ovs)
Kolkata Knight Riders 168-6 (20ovs)
Mumbai won by 13 runs
Rajasthan Royals 152-9 (20 ovs)
Kings XI Punjab 155-4 (18.4 ovs)
Kings XI Punjab won by 6 wickets
