The new normal for global travel


But while the world’s major airlines may soon be back in the black, they also face new and re-emerging challenges. These include the surging cost of fuel (which is pushing up ticket prices), ongoing performance hiccups, acute staff shortages and escalating supply chain problems, all against the backdrop of mounting pressure to decarbonise.

The regions that adopted a hardline approach to COVID-19 restrictions have been slower to return to profit. North America, which bucked the hard border closure trend early, is expected to rake in nearly $US10 billion in profits this year while the Asia-Pacific region is not expected to be profitable until at least 2024 due to China’s COVID-zero approach.

With scientists warning the coronavirus will not be the last pandemic in our lifetime, the aviation sector is under immense pressure to ensure it becomes “future proof” to avoid another near-demise.

“We know aviation is important in responding to pandemics by enabling the shipments of vaccines and PPE. It’s important to keeping the global supply chain moving. In the future we need better treatment and better recognition of the role and importance of airlines,” IATA’s James Wiltshire said.

China’s importance

IATA did not mince words when it came to the importance of China’s return to the market. Chief economist Marie Owens-Thomsen said global recession could not be avoided if China did not return to international flying soon, but it was unlikely this would happen until the second half of next year.

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“Even as we approach the 2019 levels, we’re still below where we thought we’d be before the crisis. The longer the various forms of lockdown, the higher risk of global recession and the longer it takes for our industry to get back to where it needs to be,” Owens-Thomsen said on Tuesday.

The brunt of China’s hardline restrictions and continued absence from international flying is being worn by Hong Kong, which has been overtaken by Singapore as the region’s biggest hub.

While Singapore Airlines is targeting 80 per cent of its pre-COVID seat capacity by the end of this year, Hong Kong’s flag carrier Cathay Pacific hopes to achieve 30 per cent.

Walsh said he did not expect Hong Kong to return to its pre-pandemic metrics until 2028 at the earliest.

Airline employees in Australia and around the world have faced redundancies, pay cuts and deteriorating work conditions during COVID-19 as the industry tried to stay afloat.

Some airlines have fared better than others, with Cathay Pacific continuing to grapple with resignations following staff dissatisfaction. At one point, the carrier’s pilots’ union estimated 30 to 50 pilots were fleeing Cathay each month, but the airline maintains they have enough staff to crew current operations despite “short-term bottlenecks”.

China’s harsh COVID-zero policies have throttled its economy, with fallout hitting global aviation hard.

China’s harsh COVID-zero policies have throttled its economy, with fallout hitting global aviation hard.Credit:Getty Images

“We have sufficient pilots, cabin crew and operational employees to support our current operation and flight schedules. We are confident that our ongoing recruitment plans will ensure this remains the case throughout the recovery,” the airline said in a statement.

All up, the airline estimates its operations staff spent 73,000 nights – or 200 years – in quarantine over the pandemic.

Experienced pilots rarely change airlines as a switch generally means taking an entry-level position. This is beginning to change now, with some major carriers including Emirates, Qatar, DHL and Atlas offering direct captain transfers allowing senior pilots to jump ship and maintain their rank and conditions.

Qantas has offered 3 per cent annual pay rises to its workers after they accepted a two-year wage freeze when planes were grounded because of COVID-19. About 33 per cent of the carrier’s employees who are covered by an enterprise agreement – including its long haul pilots – have signed up to a post-COVID agreement. The pilots union alleged the airline threatened to outsource the flying if the agreement was not singed. Qantas denies this as they would have enlisted staff from another part of the group.

But the offer has failed to impress many union groups including the Flight Attendants Association of Australia, which announced the intention to take protected industrial action for the first time in the union’s history following the airline’s $150 million profit upgrade last month.

Supply chain issues

While the operational performance of Australia’s airlines have significantly improved in the past six months following woeful results in July, the same cannot be said for the rest of the world.

Local carriers were slammed earlier this year when the number of lost bags sharply increased, with Qantas’s mishandled bags rate peaking at 12 in every 1000 passengers, up from six before the pandemic. Although the airline’s rates have since stabilised to pre-pandemic levels, the reputation damage has lingered.

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But according to the association’s annual global passenger survey which canvasses more than 10,000 respondents across 222 countries, two in every five travellers reported a mishandled bag this year, indicating there’s a long way to go before the bulk of the industry is back to pre-covid operations.

“Baggage was the most difficult aspect to manage during COVID-19, and it was probably one of the issues least in our control,” said Nick Careen, IATA’s vice president for operations, safety and security. He was “100 per cent confident” the situation would worsen next year as capacity increased.

One of the main operational issues facing Australian and international carriers alike is the shortage of engine and other critical aviation parts. An aircraft problem as simple as a damaged windshield can now ground a plane for weeks due to a lack of parts, creating significant performance issues for airlines already struggling to fulfil rapid demand.

Walsh said he had been surprised by the extent of the supply chain issues plaguing the industry since flying has resumed post COVID-19 and said Boeing and Airbus seemed to be concentrating on completing their orders for new aircraft rather than supplying parts for existing models.

“Supply chain issues are impacting engine and aircraft manufacturers in terms of getting their parts to fulfil their obligations to build new aircraft. It’s taking up most of the supply of parts… There’s very few spare parts for replacements needed for existing aircraft,” Walsh said.

Energy squeeze

The war between Russia and Ukraine has led to the cost of jet fuel increasing by 54 per cent this year. IATA estimates airlines make roughly $1 per passenger on an international trip.

Walsh argued it was unreasonable to expect airlines to wear the cost of this year’s inflated fuel bill, which is expected to total $US229 billion. Airlines are reluctant to talk about it, but the cost of jet fuel has been steadily falling since May. Despite the slowly stabilising price, it’s unlikely airfares will fall in line until airlines return their flying capacity to pre-COVID levels.

Qantas expects its bill to reach $5 billion by the end of this financial year, a record for the country’s biggest carrier despite international capacity remaining about 30 per cent down on pre-pandemic levels.

Qantas expects its fuel bill to reach $5 billion this financial year.

Qantas expects its fuel bill to reach $5 billion this financial year.Credit:Chris Hopkins

The cheapest fares in Australia have more than doubled this year to a 15-year-high. So far, the Australian Competition and Consumer Commission has found no evidence of price gouging by Australian carriers but has warned capacity must be returned to the market soon to begin easing pressure on fares.

“We would be concerned if airlines withheld capacity to keep airfares high,” ACCC commissioner Anna Brakey said this week.

Carbon challenge

Walsh is also adamant consumers, governments, and other aviation partners including airports should chip in for the cost of the industry’s most expensive challenge: decarbonisation.

Aviation is responsible for 2.5 per cent of the world’s carbon emissions and the industry is a bigger emitter than Australia. The association’s 290 airlines agree the way to decarbonise the industry is replacing the bulk of jet fuel with sustainable aviation fuel, made from feedstocks and other household waste.

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The airline body estimates the aviation sector will need to invest $US4 trillion in offsets and sustainable fuel through to 2050 to achieve emissions reductions compatible with a 1.75 degree carbon cap, which works out to an annual investment of U $US192 billion. As it stands, there’s not even enough of the revolutionary fuel generated to support even one per cent of flying.

Walsh argued too much oxygen was given to the practicalities of whether airlines and airports will adopt the sustainable fuel and not enough attention paid to who should produce it.

“The industry has used every single drop of the available sustainable aviation fuel despite a significant premium. You don’t need to convince our industry to use it. You’ve got to consider others to produce it,” Walsh said.

Qantas chief Alan Joyce recently challenged the Albanese government to invest in local sustainable aviation fuel production. In a collaboration with Airbus, the airline has invested $307 million into developing the industry and has committed to transitioning to 10 per cent sustainable fuel by 2030.

With profits come waste

Decarbonisation is not the only sustainability issue plaguing the industry.

As airlines continue to rebound financially, so do their volumes of waste, which are predicted to reach 5.7 megatons in 2024.

More than 20 per cent of this waste is untouched food and drink, worth more than $US4 billion a year and the average passenger generates 1.43 kilograms of total cabin waste per flight.

Airlines are bound by the global international catering waste regulations which preclude the reuse, donation, recycling and bio-treatment of cabin waste. IATA’s assistant head of sustainability, Jon Godson, argues these regulations are unpractical and outdated and prevent airlines from ethical waste treatment.

“The regulations really hamper our ability to contribute to the circular economy. We’re the only sector in the world impacted by having different regulations in different parts of the world,” Godson said.

Walsh said airlines should not be daunted by the many challenges emerging as the industry returns to profitability because they “fall into our areas of expertise”.

“The industry has built a great capability to adjust to fluctuations in the economy, major cost items like fuel prices, and passenger preference. We see this demonstrated in the decade of strengthening profitability following the Global Financial Crisis of 2008 and ending with the pandemic.”

The reporter travelled to Geneva to cover this conference as a guest of IATA.

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Source: www.brisbanetimes.com.au

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