The fast-changing relationship between airlines and governments

COVID-19 is one of the greatest externalities ever to strike aviation, an industry that was seeing substantial growth before the pandemic. Airlines’ relationships with both their home governments and those in the countries they serve have been as fundamentally changed as the airlines themselves.

“Prior to this global health crisis, US airlines were transporting a record 2.5 million passengers and 58,000 tons of cargo each day,” says Katherine Estep, managing director of communications for airline trade group Airlines for America. “As travel restrictions and stay-at-home orders were implemented, demand for air travel declined sharply. At its lowest point in late April, passenger volumes were down 96% to a level not seen since before the dawn of the jet age.”

In Europe, says Thomas Reynaert, the managing director of airline grouping Airlines for Europe, analysts expect significant effects to be felt in 2021.

“Across the wider aviation industry,” including airports, Reynaert says, “it goes up to close to 200,000 job losses in Europe. If you then include the tourism sector — because we shouldn’t forget that air travel is a means for people to get somewhere, and the majority of those people are tourists or leisure travellers — the impact on the European tourism industry is huge. It’s about 7 million job losses.”

A local and a global issue

Many governments worldwide have been struggling to cope, both with the crisis and with the need to support their economies. Reynaert highlights the European Commission and EU member states’ approach to cargo green lanes as particularly positive approaches early on.

“What was also helpful, where the Commission played a pivotal role, was the emergency slot waivers in March and an extension in August,” Reynaert says, removing incentives for ‘ghost flights’ to maintain slot allocations. This has not, however, been universally popular: the CEOs of Ryanair and Wizz Air have recently called for the return of the use-it-or-lose-it 80-20 rules.

Substantial government help has been made available for many airlines by their respective governments. From the point of view of airlines, says A4E’s Reynaert, “it’s all about liquidity preservation. So any of that government help is really helpful, and also the fact that we can retain at least part of the operational talent to get started when we can.”

In terms of state aid, however, Reynaert is quick to note that there isn’t consensus among A4E’s member airlines here, which range from the three large conglomerates (Air France-KLM, IAG and the Lufthansa Group) to Ryanair, Tui and Jet2.

“From an A4E perspective it needs to be clearly stated that it’s fine as a temporary rescue measure. But we need to also recognise — and we were very clear to the European Commission — this should never distort competition amongst airlines, mid to long term,” he says.

Yet it’s clear that many governments have, in some cases belatedly, recognised the benefits of a strong aviation sector, especially in air cargo.

“Throughout this crisis,” Airlines for America’s Estep says, “airline employees have served as critical infrastructure and frontline workers, working tirelessly to provide essential services such as the transportation of medical supplies, equipment and personnel. Now our employees are again playing a crucial role in the safe and efficient transportation of lifesaving vaccines.”

Speeding recovery

With ongoing support to the airline industry needed, Estep notes, “we continue to work with the Biden administration to help speed the recovery of our industry, the nation and the world from the COVID-19 pandemic. And we are in in routine contact with policy makers, industry partners and medical experts to update policies to best support the traveling public through this health crisis.”

Beyond the thorny issue of state aid, A4E’s Reynaert points to challenges around consistency of public health measures, unilateral actions and a lack of commonality in some cases. He also highlights that the very necessary amount of effort into combatting COVID-19 has meant that existing problems have remained unaddressed, specifically the air navigation and air traffic management issues around the Single European Sky, as well as ongoing airline dissatisfaction with the EU261 Flight Compensation Regulation.

On the digital side of the equation, vaccine passports, Reynaert says, “are of course welcomed. But, ideally, you want to have a global — in our case, a European — standard. We have been asking for this for a long time. But only a very few countries have started coordinating that: I think three or four countries.”

This international focus and cooperation is crucial, he says. “Any digital EU verification system for test of vaccinations should be aligned with the international standards in any case, and IATA has done a lot of work on it.”

“IATA’s Travel Pass, I think, is really promising. It’s not there yet — I think they’ll probably get it out by March. But I think it’s good to show that the airlines are actually helping together with the government institutions, really to make it work,” Reynaert concludes.

There is no one-size-fits-all

There is, fundamentally, no one-size-fits-all approach to the situation in which the aviation industry finds itself. Declining to comment on best practices across individual governments, Reynaert highlights that the crux is for airlines to work with governments in their own particular contexts and dynamics in order to achieve the outcomes they need.

He concludes that, from the A4E perspective, there’s no global or even regional best practice in the recovery at this point either. “The reason is very simple. It’s because the measures and the instructions are national. The European Commission, they give all kinds of recommendations — think of the EASA-ECDC recommendations — but at the end of the day, they need to be implemented nationally.”

National implementations are clearly necessary. But unlike any other previous challenge to international air travel, in 2021 there are new digital opportunities — whether IATA’s Travel Pass, a competing system, or both in parallel — to ensure that they are as harmonised and synchronised as possible.

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We’re talking about this in our industry challenges area – With governments recognising the benefits of a strong aviation sector, how do we seed industry recovery without distorting competition amongst airlines?