Some of the different global economic cycles and their impacts on the aviation industry
It is often said that the aviation industry is cyclical: Periods of high demand and business prosperity transition to periods of low demand, financial challenges, and many uncertainties ahead of the organizations. The last major period of low demand that still currently impacts the industry is the one linked to the Covid-19 pandemic – certainly not the first or last low period in aviation’s 100 years of history, or its future. . Due to some of its specific characteristics, the industry suffers direct and swift impacts related to downturns in both economic and/or social conditions. This characteristic of instability is one of the many challenges that leaders in the industry must face and overcome. However, not everything tied to a crisis is negative; many of the strategies and changes in business models fundamentally arise from the need to survive, bringing new perspectives to companies and serving as drivers of innovation, by putting companies’ resilience skills to the test.
During the 2008 financial crisis (GFC), primarily caused by the bursting of the housing bubble in the United States, companies in the aviation industry needed to innovate and demonstrate resilience to lessen the impacts of such a crisis. At that time, most companies began a race to actively reduce costs, as an attempt to offer lower prices for the services provided and thus attract greater demand. In 2008, the global economic downturn led organizations to reduce costs and increase efficiency in all possible areas of the aviation industry. Such a strategy has been carried on and is still highly applicable nowadays.
When we look at some of the strategies implemented during the Covid-19 pandemic, some of the new trends become clear within the aviation industry. Many of them have arisen due to the characteristics of the pandemic itself – increased social distance, lockdowns, etc. These characteristics have accelerated the development and implementation of “touchless” processes and procedures in which there is no need for physical contact with objects or other people. On one hand, such strategies helped reestablish the trust from users and customers. On the other hand, they have also represented improvements and better efficiency with the associated processes. Additionally, cargo transportation and integrated logistics businesses have also increased due to the characteristics of the pandemic. Several air transport companies expanded their business units focused on such activities and leveraged these type of businesses as one of their main sources of revenue during the pandemic. Now, integrated cargo/logistics transport is a fundamental part of the strategic planning for several organizations – even after the pandemic.
The aviation industry has suffered direct and abrupt impacts during the different economic crises along its history. Unfortunately, we often see some companies going under during such crises. However, it is important to point out that the industry usually demonstrates the ability to innovate in both strategies and processes, navigating crises with resilience. Of course, no one likes to go through a crisis, and the negative impacts far outweigh the positive ones, but it is worth looking at some of the positive outcomes and how they change businesses in a fundamental way.
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