The destruction of both the demand and supply sides of most industries caused by the lockdowns has placed companies in all sectors under severe financial stress. However, the COVID-19 crisis is an opportunity for the Gulf aviation sector to renew its strategy, according to MEED, part of GlobalData.
Richard Thompson, Editorial Director at MEED, part of GlobalData, comments: “In most cases, the stress was already there. The COVID-19 crisis has simply heightened and exposed underlying problems to the point where taking painful measures to address difficult issues can no longer be avoided.
“Nowhere is this more apparent than in aviation. Driven by ambitious economic diversification strategies, the region’s aviation sector has soared for the past two decades. Massive expansion plans have seen the Gulf become home to some of the biggest and most modern aircraft fleets and airports in the world. However, as the market has slowed in recent years, it has become clear that the region’s aviation sector was oversupplied and bloated. Consolidation of carriers and routes was needed in order to remain competitive.”
Despite what national airlines say, flag carriers are as much about national prestige as they are about commercial operations and merging airline assets is not easy.
Thompson adds: “COVID-19 is forcing the issue. The collapse in passenger numbers has hit aviation economics hard and it is inevitable now that an industry restructuring is required to reduce costs and ensure sustainability.
“The global aviation industry can expect significant consolidation that will cause more airlines to go out of business, and carriers and networks to merge. Airport investment is likely to be deferred. Furthermore, depending on the outlook for future growth, long-stalled plans for the unbundling and privatization of national carriers could be refreshed.
“For Gulf aviation, the crisis is an opportunity to renew strategy and refresh its agenda in order to come back stronger.”