Chairman of the Board of Avia Solutions Group Gediminas Ziemelis: 2021 predictions - billions in losses, business growth opportunities and AI

2020 will go down in history as one of the worst years for aviation industry ever. The year ended with an estimated $118.5 billion in losses for the industry and countless bankruptcies of companies that were not ready for a disaster of this magnitude. And while we all look at 2021 with hope, the consequences of 2020 will be felt for years to come. So what can we expect from the aviation industry in 2021?

COVID-19 crisis was not the first one the aviation industry had to face over the years. From the oil crisis in the 1970s, to 9/11 terror attack, to world recession. And after each of these global crises, the aviation industry recovered successfully, proving its strength and ability to innovate in the face of adversity. These major crises in aviation had a number of common outcomes that allow us to predict what will happen next in aviation industry after we manage the pandemic.

When COVID-19 hit, the number of passengers‘ flights plummeted – people were unable or unwilling to fligh, even though it is proven that there is less of a change to catch a virus while travelling by air than while visiting a mall. Regardless, the decrease was staggering. On the other hand, the demand for cargo flights saw a rapid growth and cargo airlines were able to earn additional profits. Cargo aviation will continue to thrive in 2021 and beyond.

Now, every day, thousands of people are vaccinated from COVID-19 virus. Quick vaccine development and smooth supply will slowly open countries’ walls and allow the aviation industry to get back to business. It is expected that the industry will begin its revival in Q2 and the numbers of passengers will steadily grow during the second half of the year. Unfortunately, according to IATA (the International Air Transport Association), 2021 will still be difficult for airlines, as the expected average load factor for European airlines will be about 65%, meaning that airlines won’t even break even as to do so they have to run on average at 70%. IATA also predicts that the industry losses will reach $38.7 billion in 2021 and that the global passenger traffic will not return to pre-COVID-19 levels until 2022.

In 2020, many aviation companies ran into financial difficulties - some found themselves on the verge of bankruptcy, others have massively cut costs, and some have turned to investors to survive. As a result, there might be an increase in mergers and acquisitions and of small businesses will be joining large corporations in 2021. This year opens great prospects for business development through acquisitions and mergers. Additionally, due to the losses of the global airline industry, access to public financial market becomes difficult and much more expensive.

Issues with finances and reduced options in aircraft financing force airlines to reconsider their strategies. In 2016-2019 many growing airlines were able to profit by selling lease back new aircraft thanks to high capital in the market and favourable conditions by manufacturers. But now it becomes very difficult to sale lease back new aircraft. So it’s no wonder that many airlines choose to postpone the deliveries of new aircraft orders. Following that, aircraft production companies, Boeing and Airbus, are forced to decrease their production volumes. In the short-term this change might have an impact in lost jobs and revenue, but when the market recovers, the impact to the industry will be huge. Due to the reduction of the production of new aircraft, the industry will face a lack of aircraft capacity to serve the demand. As it takes around two years to rebuild the supply and production chain, ACMI market will have an opportunity to fill the demand.

Another consequence of the financial difficulties of companies is the increased supply of labour. Following many bankruptcies and cuts, a large number of different aviation professionals will enter the job market in 2021. Many of them will turn to specialised aviation job portals, so strong, stable and reliable companies will have the opportunity to hire high-quality specialists at attractive prices.

Probably the most positive outcome of the year will be massive advances in technology. 2021 will be a year of modern solutions for the aviation industry. In order to optimise processes, better manage costs, companies will invest in modern technologies, IT solutions that will save time, manpower and money in the long run. From smart solutions aiding day-to-day operations, to advanced self-service and biometrics in airports, to artificial intelligence and machine learning.

It seems that a couple of upcoming years will not yet be easy for aviation, but they’re winding up to be interesting and exciting.