The global pandemic has hit the aviation industry like no other. As vaccination rates increase, strict travel restrictions are being increasingly relaxed, and demand for air travel is rising again. At the invitation of ÖBAG, industry experts will discuss the long-term development of the industry in dialogue events with the industry. Against the backdrop of the site agreement between Austrian Airlines, Lufthansa, and the Republic of Austria, the following five hypotheses on the future of the industry can be formulated.
1. Annual growth rates as before the pandemic
Most forecasts assume that (as before the crisis) annual growth of 3 to 4 percent can be expected in passenger aviation and 2 to 3 percent in freight. Catch-up effects and increasing vaccination rates should largely offset fears of infection and income losses (caused by short-time work or other income restrictions). In addition, there is the realization that video conferencing is no substitute for private travel such as vacations, family visits, and city breaks. A catch-up effect or upswing is also evident in business travel – however, this is slowing down due to increasing digitalization and corporate cost-cutting programs.
2. Trend towards “seamless travel”
Depending on the travel purpose, up to 40 different apps and/or websites are used per flight from the initial need to the final destination, where customers are required to provide sometimes repetitive information about the passengers, the trip, and individual preferences. Coupled with increasing digitalization, individualization in travel and purchasing behavior, and a generational shift among customers, the pressure on all service providers to network along the value chain (agents, booking platforms, airlines, airports, ride-hailing services, hotels) is increasing. This will meet the ever-increasing desire for "seamless travel." Consequently, air travel will have to be integrated as a natural component of personal mobility and lifestyle needs.
3. Further consolidation of the aviation industry
Due to national interests in securing and maintaining a strong market presence, no significant market exits are expected, especially among traditional airlines. Overcapacity and price wars will therefore continue to be the result. Airlines with a clear focus or sufficient size will emerge as winners. Increasing regulations and the elimination of subsidies will further increase the pressure.
Shifts will also occur at airports. Two-tier airports in Europe will benefit in the future. The reason for this is that large hubs are increasingly reaching their capacity limits, and the increase in decentralized long-haul traffic from two-tier airports is being driven by single-pilot operations and more efficient aircraft. However, due to the decentralized structures in the DACH region, hubs will remain an important component of international air traffic. Increasing pressure to operate economically and exploit economies of scale will lead to hub consolidation and a shift of tourism and purely cargo-related traffic away from the hubs. Consequently, the relationship between hub and hub airline will become increasingly important, which could lead to a much closer strategic relationship, even to the point of capital integration or vertical integration. Low-cost airlines will continue to include hubs in their flight schedules and generate passengers through virtual hubbing, but only as long as direct flights are economically viable.
Sustainability and environmental protection are becoming increasingly important, driven by all relevant stakeholders. As a result, short-haul flights, among other things, will increasingly lose acceptance in Europe.
Gerald Wissel
4. Increasing importance of sustainability and environmental protection
Sustainability and environmental protection are becoming increasingly important, driven by all relevant stakeholders (politicians, companies, customers, employees, investors). For example, short-haul flights in Europe will increasingly lose acceptance, and political pressure for intermodality and a shift to rail will increase.
However, this approach is gradually being replaced by integrated or holistic mobility concepts that take a much more end-to-end approach. While there will be no real alternatives to jet fuel for long-haul flights in the next 20 to 30 years, regional and short-haul flights will gradually be electrified.
In addition, a certain proportion of synthetic kerosene will become mandatory for all airlines in the coming years and the taxation of kerosene will increasingly come to the fore.
Aircraft noise will continue to increase due to growth and the use of smaller aircraft with more frequencies, and will be perceived as increasingly more intense. Consequently, night flight restrictions will not be further relaxed, but rather tightened, which in the worst case could lead to a restriction of air traffic. Overall, the environmental impacts attributed to air traffic will be perceived and assessed with significantly greater sensitivity.
5. More frequent crises expected
Air transport will be characterized by a more rapid succession and overlap of crises (economic, pandemic, ecological) in the coming decades. A rapid, international response by the aviation industry to contain global spread will become increasingly important. Crisis resilience and responsiveness, as well as increasing flexibility of the business model, particularly with regard to flight schedules, pricing, and ticket conditions, will become a decisive competitive factor.
Gerald Wissel is an expert in aviation, mobility, and tourism. He holds a doctorate in business administration and is a specialist in innovation, management, and mobility. He supports companies in the tourism, travel, aviation, and mobility sectors, including Daimler, ThyssenKrupp, TUI, Lufthansa, and Emirates.
