17 April 2020

AINsight: Finding the Silver Lining in Covid-19 Crisis

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Source: AIN Online
 
About 30 days into the biggest spanner-in-the-spokes that the business aviation industry has yet faced, signs of hope that at least the worst of the deadly Covid-19 pandemic might be peaking are what many are looking for these days. Pressures to return to some semblance of a “new normal” life have been building, as we individually and collectively learn to adjust to a very different world of work and life.
 
Within the business aviation industry, flight operations in Europe and North America have reportedly dropped by 70 percent to 90 percent over the past 30 days, enough to take the tailwind out of anyone’s flight plan. Commercial air passenger enplanements through U.S. TSA checkpoints are down 95 percent in some cases, as workplace shutdowns, social distancing, and work-from-home/stay-at-home orders have become the rule rather than the exception.
 
Just-released 2020 GDP growth forecasts for the world’s key economies point to a sudden onset of economic recession unlike we have yet weathered in our generations’ lifetimes. Within the business aviation industry, the questions at the forefront of many people’s minds are: what happens next and when do things get better again?
 
First, the obvious: although we should be hopeful that scientific ingenuity and collaboration will yield an effective vaccine in due course, there is no known timeline for this to occur. Analyses of past pandemics highlight the dangers of second waves of infection when collective guards are lowered, the last thing that anyone wants in a prolonged battle against an invisible but deadly foe.
 
Unfortunately, the U.S. has rapidly emerged as the epicenter of the pandemic, with the number of cases surpassing China on March 27 and the death toll eclipsing all other nations on April 12. As of April 16, the European Center for Disease Prevention and Control reported that U.S. cumulative cases had already reached 640,000, equivalent to the population of Washington, D.C. To illustrate the severity and force at which the pandemic has hit, cumulative deaths in the U.S. have increased from zero to 31,000 in the last 45 days, with the slope of the line continuing to steepen.
 
With more than 22 million Americans applying for initial unemployment benefits in the last 30 days (representing almost 14 percent of the civilian workforce), official U.S. unemployment rates are set to soar in the weeks to come, approaching levels seen only during the Great Depression in 1933. With airplane factories, supply chains, and countless employees already furloughed, production has been disrupted at many of the OEMs, although some seem better positioned than others to weather the Covid-19 storms.
 
Is there a silver lining to all of this disruption? Absolutely! There is never a better time to reimagine, restructure, and retool an organization as there is right now. Capital remains cheap, and talent (an oh-so-tight resource up until very recently) is suddenly and widely available.
 
For those with a longer-term view of their business, now is an excellent time to innovate and to consider investments while others are either hunkered down or still trying to get through to their stockbrokers—think airplanes, competitors, technology startups, tooling, facilities, and airport property. For OEMs, it’s an opportunity to reassert discipline in cost, quality, production, and pricing to enhance product line profitability.
 
For aircraft owners and operators (including lenders and lessors), it’s a good time to have necessary maintenance performed and to consider upgrades to improve aircraft performance, in-flight connectivity, and the entire cabin experience. For brokers and dealers, inventory has increased and it’s always a good time to educate and build trust with prospective customers.
 
With sharply reduced airline schedules and concerns about crowded airports and flying elbow-to-elbow in aluminum tubes, now could be the optimal time to personally demonstrate the inherent value and safety, security, productivity, and comfort benefits of business aviation.
 
The Covid-19 storm has arrived on our shores, and it is an unprecedented challenge to our ways of life and to the health of our broader economy. This pandemic is already affecting air travel in profound and probably permanent ways.
 
As an industry, I am confident that business aviation will bend but not break—and come out the other end even stronger for the exercise. When? As a public health crisis, let’s defer to the medical experts on the front lines of searching for the blessed vaccine, which can’t come soon enough.

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