There are serious economic, geo-political, social, and environmental turbulences ahead for the aviation industry.
Why this is important: not to sound repetitive, but most of us in the aviation industry seem to be living in La La Land. There is trouble brewing beneath the surface and serious shake-ups ahead, yet very few are aware of what’s about to happen. The war between Israel and Hamas in the Middle East is only the most recent manifestation of the challenges that are to come.
Airport safety is now a major concern as interest groups target each other at airports.
Aviation war insurance providers have been canceling insurance, making it difficult for airlines to acquire the required insurance to operate.
Facing reduced travel demand because of the war, some airlines will need to cut back on their operations and their staffing moving forward.
A polarized geo-political environment is not good for aviation.
One would expect that air travel conditions within the Middle East, particularly in the region of the current hostilities would be unsafe at worst and uncertain at best. What we were not expecting was for individual groups around the world to respond to the war as if they were there in the Middle East fighting. Recently we saw where a mob stormed an airport in Russia in response to the war in the Middle East, even going as far as looking for particular individuals on the airplanes and checking people for certain passports on the streets.
Travelers and airline operators prefer to have a stable, safe environment to operate as this creates a sense of safety for travelers and a predictable environment for airline operators. Without these conditions, it makes it very difficult to operate and creates much uncertainty for the airlines and travelers alike.
The wars have increased the cost of doing business for airlines.
Some insurers are canceling policies for airlines operating in the Middle East and other regions affected by war while others are increasing premiums to account for the extra risk of insurance at this time. One can expect that the costs of operating airlines within these regions will increase.
An increase in the cost of operating an airline in the region will undoubtedly lead to an increase in the cost of travel for individuals. This in turn will lead to reduced revenues for airlines and start a downward cycle for the affected airlines.
On Aviation™ Note: it is worth remembering that airlines operate on razor-thin margins, and shocks such as increased cost of operating or reduced number of customers can be devastating for an airline. Particularly those who might not have the level of scale economies to disperse the loss across larger operations.
Reduced demand for air travel in the regions of war will be a major challenge for airlines.
Not all airlines will be operating in regions of conflict and even some who are operating there will have the level of scale to compensate for the inevitable disruption brought on by these conflicts.
Notwithstanding the above, some airlines are not at the scale and diversity in operation to be able to cope with the shocks that are being created by these conflicts. Therefore, we might expect to see some airlines downsizing, canceling lease agreements, reducing staff levels, going out of business, or merging in the future.
On Aviation™ Note: While it is very unfortunate, we do not see an end to these disruptions within the aviation space in the near future. We expect geo-political conflicts, economic challenges, and environmental challenges to continue into the foreseeable future.
There’s a way to prepare for what is to come in the aviation space. That is for individuals and businesses to understand what is ahead and find ways of fortifying themselves to meet those challenges. We expect that these challenges will continue well into the future and only those individuals and businesses within the aviation industry that are prepared will survive and thrive, once these challenging times are over. No doubt, these specific challenges will subside sometime in the future.
Thank you for reading this week’s On Aviation™ full article. What is your understanding of the current geo-political tensions around the world and their effect on the aviation industry? Please share your thoughts in the comments below. Remember to check out our On Aviation™ Podcast and continue the conversation on our Twitter and Instagram.
Orlando – On Aviation™