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Overview: Lessons Learned from the COVID-19 Pandemic

The workshop’s first session was devoted to two keynote addresses that set the stage for the remainder of the workshop. The first keynote speaker was Carlos del Rio, a professor of medicine at the Emory University School of Medicine and a professor of public health and epidemiology at Emory’s Rollins School of Public Health. Del Rio provided an overview of the COVID pandemic and its effects on the global air travel industry. Additionally, he discussed various health policies that have been introduced to fight the pandemic and gave some predictions concerning air travel industry expectations over the next few years.

The second keynote speaker was Kevin Michaels, the managing director of AeroDynamic Advisory, a specialty consulting firm focused on the global aerospace and aviation industry. Michaels detailed how the COVID pandemic affected the global aviation industry. He also shared a number of forecasts concerning the industry experience over the next few years.

Each keynote talk was followed by a question and discussion session with committee members and audience participants.

COVID: A LOOK BACK AND A LOOK FORWARD

In the first keynote, del Rio offered an overview of the COVID pandemic around the world, its effects on the air travel industry, known countermeasures, and what to expect in the future.

Del Rio began with a timeline of COVID-19, beginning with the initial report of an outbreak in Wuhan, China, to the World Health Organization (WHO) on December 31, 2019. The virus’s first confirmed presence in the United States was a case in Washington State reported on January 20, 2020. On February 6, the United States had its first confirmed death from the virus. By March 11, WHO officially announced that COVID infections had become a pandemic, and by March 17 the virus had been reported in all 50 states of the United States. Just 3 months had passed, so the progression had been very rapid, del Rio commented. By April 24, there were 50,000 Americans dead of confirmed cases of COVID, a number that doubled in little less than a month. Meanwhile, the U.S. government officially launched Operation Warp Speed on May 15 to develop COVID vaccines as quickly as possible. The numbers of deaths continued to grow: 200,000 by September 22; 300,000 by December 14; 400,000 by January 19, 2021; and 500,000 by February 22.

At the time of the workshop, del Rio said, globally there had been more than 181 million cases and more than 3.9 million deaths. Of those, more than 34 million cases and more than 600,000 deaths were in the United

States. The U.S. totals were larger than those for any other country. At that point, however, the new case numbers dropped significantly in the United States, with only about 10,000–15,000 new cases per day. Much of the drop, he explained, was because of many people getting vaccinated; about 46 percent of the U.S. population had been fully vaccinated at the time of the workshop. The data showed that the number of cases fell as the number of vaccinations increased.

Globally, the numbers of cases were starting to come down, but not to the same degree as in the United States. The COVID experience differed in various countries, del Rio noted. India had a sharp peak in May 2021 and then dropped rapidly. While Brazil had not seen such a peak, it had a caseload that was staying at a high level from March through June. Indeed, he added, right now Latin America is the epicenter of the pandemic, with high caseloads in Brazil, Colombia, Argentina, Chile, and Peru. At the time of the workshop, approximately 46 percent of the world’s COVID-related deaths were in Latin America.

Switching to the effects of the COVID pandemic on the aviation industry, del Rio began by describing how the pandemic quickly shut down a large percentage of flights around the world: a 10 percent drop in early March 2020 compared with the same time in 2020, increasing to an 80 percent decrease by April. After May 2020, air travel began to increase, but it remained significantly below pre-pandemic levels throughout 2020 and into 2021. The impact varied by region, with North America being less affected than the rest of the world.¹

Next, del Rio talked about COVID-19 transmission during flight. Studies have found that there is indeed a risk of transmission from an infected passenger to others on the same flight. However, the risks are mainly to passengers who come in close contact with the infected passenger, such as other passengers located within a couple of seats or flight attendants serving them.

There are three basic ways to reduce the risk of passengers becoming infected with COVID during air travel, del Rio said. The first is simply to prevent infected passengers from boarding the plane. A modeling study showed, for instance, that routine testing of all passengers, even asymptomatic ones, before travel can be an effectively reduce the risk of infection during flight. In this case, the study assumed either polymerase chain reaction (PCR) testing 72 hours before boarding or a rapid antigen test on the day of travel.² A program operated by Delta Airlines for flights from the United States to London and Amsterdam used the PCR test 3 days ahead of the flight and the rapid antigen test on the day of the flight. They combined these tests with a post-flight rapid test to essentially prevent infected passengers from entering the two cities. The Centers for Disease Control and Prevention (CDC) is now insisting that all travelers into the United States must have tested negative for COVID in the 3 days prior to entering the country.

The second basic way to reduce COVID risk during flight is to keep the airplane free of viruses, del Rio continued. A major way to do this is via air circulation and filtration. Commercial airlines use an air circulation system that exchanges the entire volume of air in the cabin with outside air about 20 to 30 times an hour, with about half of the air being replaced with outside air during each cycle. The air is also filtered through high-efficiency filters. The result is airplane air systems that are exceptionally effective at preventing the spread of viruses and bacteria in a cabin during flight.

The third method for reducing COVID risk is minimizing transmission of the virus on the plane, del Rio said. Several studies have shown that an effective way to minimize transmission is to have passengers wear masks. On the other hand, blocking the middle seat on airplanes—a method that has been suggested for reducing COVID risk—has been shown to have relatively limited effectiveness in minimizing the transmission of the virus. Other health protocols, such as masking, are better choices.

Vaccines are another effective method of preventing COVID transmission, he continued. Unfortunately, vaccination rates are still relatively low in many countries around the world. Globally, del Rio said, the great majority of vaccination is happening in North America and Europe, while South America, Asia, Oceania, and Africa are lagging significantly behind. Vaccines are effective enough such that the CDC recommendations do not call for

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¹ International Civil Aviation Organization, “Operational Impact on Air Transport,” https://data.icao.int/coVID-19/operational.htm, accessed November 29, 2021.

² M.V. Kiang, E.T. Chin, B.Q. Huynh, L.A.C. Chapman, I. Rodríguez-Barraquer, B. Greenhouse, G.W. Rutherford, et al., 2021, Routine asymptomatic testing strategies for airline travel during the COVID-19 pandemic: A simulation study, Lancet Infectious Diseases 21(7):929–938.

fully vaccinated passengers to be tested before or after travel or to quarantine after travel. Instead, the recommendations are merely that vaccinated passengers wear masks and self-monitor for symptoms.

From there, del Rio pulled back to offer a broad-scale view of the current travel situation. “Travel is up, but not back to normal,” he said. The number of passengers reached a low point in April 2020 of less than 5 percent of April 2019 levels. That number grew by April 2021 to about 50 percent of the level from 2 years earlier. International travel remains seriously depressed, however, and there are few destinations around the world that the CDC would recommend traveling to.

Looking to the future, del Rio offered a number of predictions. Leisure trips will fuel the recovery. Business travel, on the other hand, will take longer to recover, and it is predicted to reach only about 80 percent of pre-pandemic levels by 2024. A significant amount of business travel will be replaced by remote meetings via Zoom and other applications. In the United States, domestic travel will recover more quickly than international travel. The significant debt accumulated by airlines during the pandemic will lead to significant increases in ticket prices. With the decrease in demand for air travel, aircraft markets are likely to be oversupplied for some time to come.³

Vaccine passports are another likely aspect of air travel in the future, del Rio predicted. Already, the European Union (EU) is making a distinction between vaccinated and unvaccinated passengers, allowing certain foreigner travelers who have been vaccinated to enter the EU. Another example: the German airline Lufthansa is using a vaccine certificate to simplify its check-in process.

For 2021, del Rio predicted that the number of seat offerings, the number of passengers flown, and revenue will all be down, although not as much as in 2020. Depending on the scenario one expects, U.S. airline capacity in 2021 will be down by 34–40 percent after being down by 50 percent in 2020. [Global] airlines are expected to lose between $282 billion and $343 billion in 2021, after losing $371 billion in 2020. The primary reason for the continuing struggles, he added, is that U.S. business travel has not been recovering nearly as quickly as leisure travel.

In concluding, del Rio stated that there is no significant risk for COVID transmission through surface contact, so the risk of infection from touching something on the plane is not significant. The highest risk is from droplet exposure followed by airborne exposure, which in minimized in air travel through air circulation, filtering, and masking. Additionally, PCR testing 72 hours before a flight or rapid testing at the time of boarding decreases the risk of in-flight transmission. “So, I think we’ve learned that air travel can actually be made secure,” he said, “and with vaccinations increasingly going up I think we will see travel return, but I think it will be more leisure travel than business travel for some time to come.”

KEYNOTE 1 DISCUSSION

In the discussion period, Clarke asked the first question: Where did del Rio get the prediction that business travel will be at only 80 percent of pre-pandemic levels by 2024? The prediction was from a study looking at the future of aviation, which was performed by the consulting group McKinsey & Company, del Rio answered. He added that he agrees with that figure. A number of industries, including his own, have seen significant savings with the sharp decline in business travel. In the future, it is likely that businesses will be more careful about what types of travel they pay for. “Companies have learned that you can do things in Zoom, and you’re going to save a lot of money by not having that business travel,” he said.

Clarke then passed along a question from the audience. What has been learned from the COVID pandemic that can be used in the future to limit the spread of other pandemics, both nationally and internationally? Clearly, there is a need for better global surveillance for emerging infectious diseases, del Rio answered. The experience with COVID indicates that cutting international travel after a disease has already started spreading is not going to make much difference. Furthermore, given how interconnected the world is, cutting international travel proved to have significant consequences, both economically and in terms of losing access to certain supplies. One example is face

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³ J. Bouwer, S. Saxon, and N. Wittkamp, “Back to the Future? Airline Sector Poised for Change Post-COVID-19,” McKinsey & Company, April 2, 2021, https://www.mckinsey.com/industries/travel-logistics-and-infrastructure/our-insights/back-to-the-future-airline-sector-poised-for-change-post-covid-19, accessed November 29, 2021.

masks, made predominantly in China. He added that future surveillance systems should include animals as well as humans, given that COVID and most other pandemics get their start in animals and then cross over to humans.

In a follow-up question, Clarke asked whether some of what has been learned in dealing with COVID might be applied to other infectious diseases such as the flu. It might make sense, del Rio said, to require proof of flu vaccine for certain types of travel, and the use of masking might also be expanded beyond COVID. In the future, he is likely to wear masks anytime he gets on a subway in a large city because there are many people crowded into a small space.

More generally, he continued, it would be valuable to do more research on nonpharmacological interventions, such as testing and mask wearing. It is now possible to do point-of-care testing for COVID. It is likely that such testing will eventually be available for other diseases, such as influenza. With the technological improvements in response to the COVID pandemic, the question becomes, “How do you put this technology to work against other diseases?” It is perhaps even more important, he added, to determine how this technology can be made widely available in low- and middle-income countries so that a truly global response to a pandemic becomes possible.

Following up on that line of thought, del Rio argued that globally coordinated responses to emerging diseases will be crucial in the future to stop them before they get a good start. One prerequisite for such coordinated responses is transparency so that everyone can learn as quickly as possible. He pointed to Chinese resistance to letting researchers from other countries explore the origins of COVID-19 as an example of how a lack of transparency can slow global response.

Planning committee member Andrew Lacher next asked about the importance of standards for vaccine or health passports. Lacher added that an increasing number of countries and even individual companies are now requiring proof of vaccination or proof of negative test for various activities, including air travel. Some type of standards for proof of both negative test and vaccination will almost certainly be needed, del Rio said. There are already a number of different, conflicting approaches being implemented. Ultimately, he predicted, a great deal of travel will require proof of either vaccination or negative test—or sometimes both—and standards will simplify everything, particularly for international travel.

How difficult will it be, Clarke asked, for airlines to implement requirements for such passports? It should not be that difficult, del Rio answered. For one thing, it is likely there will be apps to make the proof of negative test or vaccination relatively simple to provide and store. It is likely that such an app will be linked to the travel apps that individuals use, for instance, to book tickets and check in.

Following up on that, Clarke asked whether people who have had COVID and recovered should be treated differently from people who have been vaccinated. The evidence shows, del Rio responded, that people who have recovered from COVID have immunity that is similar to what is provided by a vaccine. Some suggest that they do not need a vaccine. So, while people who have recovered from COVID probably should get vaccinated, there is probably no rush. They are probably fine with just one dose of the Pfizer vaccine because studies have shown that such individuals have the same immune response as people who have received two doses of the Pfizer vaccine but have never been infected with COVID.

Clarke then asked about how the presence of variants affects this answer. The variants are—and are likely to remain—a major problem, del Rio replied. Ribonucleic acid (RNA) viruses such as COVID-19 mutate when they are reproducing, and they reproduce when they are transmitting. As such, the more ongoing transmission there is, the more variants will emerge. These variants can be more transmissible or more likely to evade a person’s immune response. He said, “The variants are the question mark in all this.” This makes it particularly important to get universal vaccination. With the variants, it is unlikely that the virus will ever be contained in one or a few sites, so as long as it remains anywhere in the world, the potential of it spreading remains.

Planning committee member Edward Crawley said that in the early days of the pandemic, he witnessed widespread mask use in China, while in the United States at the same time, the focus was on cleaning and disinfecting. It was not clear at the time whether the major avenue of spread was via aerosol particles carrying the virus through the air or virus particles being deposited on surfaces where people came in contact with them. Would it not make sense, he asked, to work to prevent both airborne transmission and surface transmission in the beginning, at least until more was known about the major modes of transmission? In hindsight, del Rio answered, it is clear that this approach would be best. Particularly because in the beginning Americans were being actively dissuaded

from wearing masks because of a concern that there would be a mask shortage and because healthcare workers lacked access to masks. In the future, he said, it would be best in the beginning to take a two-pronged approach to preventing transmission and target both airborne and surface transmission.

Planning committee member Parimal Kopardekar then asked del Rio whether there were any responses that airlines or other organizations should be taking in response to COVID that are not currently implemented. The airlines’ response has actually been quite good, del Rio answered. The combination of air circulation and filtration, masking, vaccination, and testing has proved effective. However, del Rio said that he is concerned about how long the federal mandate for masks during air travel will remain in effect. He would also like to see more on-site testing available in U.S. airports, noting that this is more common in other countries, and it is useful in minimizing the number of infectious people boarding a plane.

Next, Lacher asked del Rio whether he thought there might ever be something like a public health no-fly list for people who refused to be vaccinated or falsified test results. It is already happening, he replied. Several airlines have put passengers on no-fly lists because they refused to wear masks on a flight. Similarly, if people are discovered to have falsified health documents, airlines are likely to put them on a no-fly list as well.

Given that the U.S. federal government has thus far indicated that it will not mandate any sort of vaccine passports, Clarke asked, what should airlines do to encourage and check vaccinations? It has been unfortunate that the U.S. government has not created a standard approach to a vaccine certificate, del Rio answered. Now different organizations are creating their own, incompatible versions. “It’s a little bit of a wild, wild West out there,” he said. Eventually, however, in the absence of federal leadership, the air travel industry will likely develop a standard on its own.

In response to a question from Clarke about the value of sequencing the COVID virus quickly, del Rio said that the sequencing was valuable in two areas. It allowed the relatively fast development of vaccines, and it opened the door to the quick development of tests. However, he added, while tests were developed quickly in some countries, the process was much slower in others. He blamed this on the CDC, which took on the task of developing a test. In discouraging other groups in the United States from developing tests and then falling short, the CDC left the United States far behind other countries. Hopefully, del Rio added, in future pandemics, sequencing will lead to the rapid availability of both tests and vaccines.

Clarke then asked about the importance of the flight length in determining transmission risk. Clearly, del Rio responded, the longer a flight, the more chance for transmission there is. However, he is more concerned with transmission during boarding and deplaning when the aircraft’s air circulation system is turned off and people are crowded together. Journeys to and from the airport and through the airport hold their own risks, he added.

Responding to that, Clarke asked what might be done with the parts of the air travel journey that are not on the plane, such as a rideshare to the airport, a shuttle on the airport grounds, or the wait at the baggage claim area. The best protection, del Rio replied, is to have everyone involved wearing a mask.

Which is better, Clarke asked, testing of passengers 48–72 hours before a flight or rapid testing at the airport? A report in Lancet, del Rio answered, found both testing methods effective in keeping infectious people off planes.

Given the concerns about boarding and deplaning, Lacher asked, what would del Rio change about those processes to reduce the risk of transmission? Speeding up the processes is important, he replied. One thing that seems to be slowing them down is the way many people are bringing large carry-ons onto the plane and then spending time figuring out where to stow them. Limiting the number and size of carry-ons should speed up both the boarding and deplaning processes, del Rio said. “We need to make checking your bag easier and boarding your bag harder.”

In his final question, Clarke asked del Rio what directives he would issue concerning air travel safety if he were made “king for a day.” He would have people get vaccinated and continue to wear masks, del Rio answered. Making testing part of the standard routine would also help, he concluded.

THE EFFECTS OF THE COVID PANDEMIC ON THE AIR TRAVEL INDUSTRY

In the second keynote address, Michaels provided an in-depth analysis of the effects of the COVID pandemic on the global air travel industry along with a look at the industry’s likely future.

He began by summing up 2020 as an annus horribilis—“a year of disaster or misfortune”—for the aviation and aerospace industry. With the exception of the cruise industry and possibly one or two other industries, he said, no industry was hit harder by the COVID pandemic than the air travel industry.

As an example, global air travel capacity on June 23, 2021, was down by 42 percent compared to the same date in 2020, but the numbers varied quite a lot from country to country. Domestic travel in the United States and China were the two bright spots for the industry, as domestic air travel capacity in June 2021 was down just 17 percent and 19 percent, respectively, from June 2020. Things were much worse for the rest of the world, with international travel having been hit particularly hard.

Indeed, Michaels explained, it is valuable to think about the global air travel market as two separate markets, domestic and international. Domestic air travel represents about one-third of total air travel, and international air travel is about two-thirds. Much of the domestic air travel market consists of flights within a few large countries—the United States, China, Australia, and Canada, particularly—and air travel within individual countries faces far fewer restrictions than travel between countries. As such, this domestic air travel has been hit less hard than international travel. Countries like the United States, where a significant portion of air travel is domestic, have been affected less than smaller countries where a significant portion of pre-COVID air travel was international. Globally, domestic air travel in June 2021 was down 26 percent from June 2020, while international air travel was down by 72 percent from June 2020. Some international air hubs were hit extremely hard, such as Hong Kong (down 95 percent) and Singapore (down 86 percent). In Europe, where many flights are between countries and even between continents, total capacity was down 60 percent.

To offer a slightly different look at the effect of the COVID pandemic on the air travel industry, Michaels then provided data on the global number of daily flights, instead of capacity. In North America, for example, the number of flights offered dropped by about 70 percent from January 2020 to April 2020. However, in May 2021 the number had recovered to the point that it was just 9 percent below 2019 levels. The pattern in the Asia-Pacific region was similar, although the number took a dip in April 2021, as some countries reinstituted travel restrictions in response to a second wave of COVID cases. In Europe, by contrast, the number of flights started to recover after April 2020, but beginning in August 2020 they declined steadily to the point that the number of flights was about 60 percent of 2019 levels. Much of this pattern is due, Michaels explained, to the difference between domestic and international travel, with parts of the world with larger domestic air travel markets recovering more than other markets.

Not surprisingly, this sharp decrease in air travel resulted in economic carnage for the world’s airlines, Michaels said. Just 1.8 billion passengers flew in 2020, compared with 4.5 billion in 2019. The year would have looked far worse if not for the fact that the first 2 months of the year had normal numbers of passengers. As a result, in 2020 airlines around the world lost a staggering $370 billion. To put this in perspective, Michaels noted that the global airline industry is an $800 billion dollar per year industry—so the industry lost nearly half its expected revenue. In addition, airports around the world lost $115 billion and air navigation providers lost $13 billion.

Government support packages, which varied considerably from country to country, were a lifeline when they were available, Michaels continued. However, they were not offered in many countries, such as Mexico. As a result, those countries saw major airline failures.

So far, 48 airlines around the world have gone into bankruptcy, including some well-known names such as Virgin Atlantic, Avianca, Trans States Airlines, and LATAM Airlines, a low-cost carrier that is the largest airline in Latin America. The bankruptcies were concentrated in Latin America (22 bankruptcies) and Europe (16 bankruptcies). In Latin America, 24 percent of the airlines operating pre-COVID are now bankrupt.

How long will it take air travel to return to 2019 levels? It is varying greatly from country to country, Michaels said. Domestic air travel in China is predicted to reach 2019 levels this year, while domestic air travel in the United States should be back to 2019 levels by 2022. However, most of the rest of the world’s air travel industry is not expected to return to pre-COVID levels until 2023 or beyond. The divergence here may cause American travelers to be misled about the health of the air travel industry, Michaels said. When they fly out of airports in Atlanta, Los Angeles, or Dallas-Fort Worth, the crowds may make it seem as though things are almost back to normal, but that is deceptive. Outside the domestic U.S. and Chinese markets, the industry still has a long road ahead of it.

To provide more detail on how quickly global air traffic is expected to return to normal, Michaels referred to an analysis performed by his company, AeroDynamic Advisory. That analysis examined total revenue passenger-kilometers—the standard measure used for the commercial air travel—for four scenarios: what air travel would have looked like had the COVID pandemic never happened and three forecasts through 2025 that were pessimistic, nominal, and optimistic. Although the analysis was done by AeroDynamic, he said, it is representative of forecasts from a number of models. The nominal, or middle, forecast predicted that global air traffic will return to the same level as the fourth quarter of 2019 by the third quarter of 2023. Other forecasts predict the same level a few months earlier or later, but all predict that the airline industry will end up losing about 4 years of growth from the pandemic.

The analysis identifies five phases for the recovery. The first was the lockdown and containment phase. The second phase—which is where the U.S. airline industry currently stands—involves a growth in air traffic as an increasing number of people are vaccinated. As air travel comes back in certain regions, supply-side constraints will start to appear; this is the third phase. These constraints would include such things as difficulties in increasing staffing levels in response to growing demand for air travel, limitations in the infrastructure that supports air travel, and even shortages in certain manufactured goods. The fourth phase is a period when business travel grows and starts to approach its pre-COVID levels. The fifth phase is what Michaels called “the new normal.”

Turning to the issue of business travel, Michaels said it is a big source of debate. Some have predicted that once businesses get used to holding meetings remotely and see the cost savings, many of them will permanently change their business travel policies and fly less in the future. Others have argued that as convenient as Zoom is, face-to-face encounters have value that cannot be reproduced remotely. These people are much more optimistic about business travel eventually returning to near normal.

The future of business travel is best understood by looking at the various purposes of such travel, Michaels said. Michaels said that a company called IdeaWorks studied the proportion of business travel devoted to different purposes and produced the following estimates:

• Sales and the pursuit of new clients: 25 percent
• Conventions and trade shows: 20 percent
• Intracompany meetings: 20 percent
• Support of existing customers: 10 percent
• Technical support equipment and information technology: 10 percent
• Professional services for clients and research: 10 percent
• Commuting: 5 percent

Assuming that these numbers are correct, then about 55 percent of business travel has the potential to be affected by new technological approaches in the post-COVID world, according to both IdeaWorks and Michaels’s company. The types of travel that may be most affected include travel for intracompany meetings, conventions and trade shows, professional services, and commuting. The types of air travel that are not likely to be affected, he continued, are those that involve direct interaction with clients, such as sales meetings and customer support.

Michales said that a recent poll by the Global Business Travel Association questioned a number of companies about their expectations for travel budgets in the post-COVID era. The poll was weighted toward North American companies, which tend to feel more optimistic about future travel than, say, European companies. As such, the results may themselves be somewhat too optimistic about the future of business travel, Michaels warned. According to the poll, more than half of companies expect their travel budget to be less in the future than before the pandemic (17 percent said, “decrease significantly”; 34 percent answered “decrease slightly”). On the other hand, only 14 percent expected their travel budgets to increase, and the remainder either answered “about the same” or were not sure.

This is important for airlines, Michaels explained, because business travel is much more profitable than leisure travel. Before the COVID pandemic, about 30 percent of all trips taken on U.S. airlines were for business, but those trips accounted for 50 percent of the airlines’ total revenue. The precise numbers differ from airline to airline. Low-cost carriers, for instance, rely mainly on leisure travel and will be less affected by a drop in business

travel. However, the world’s major carriers—Delta, American, Lufthansa, and so on—will find their revenue and profitability seriously affected by any significant decrease in business travel.

In the midst of all of the air travel industry’s troubles during the pandemic, Michaels said, there has been one bright spot: air cargo. Although air cargo fell by about 25 percent in the first months of the pandemic, it recovered to its pre-COVID level by late 2020. The global air cargo fleet is now operating at usage levels that are 10–20 percent higher than before the pandemic. As a result, air cargo accounted for about 30 percent of airline revenue in 2020, up from about 12 percent in 2019, and it provided an important revenue stream for major airlines struggling with losses in passenger travel.

One reason for the increase in air cargo, Michaels said, is a move among e-commerce giants to have more frequent and smaller shipments. They are using air cargo to move some of their shipments that would have previously been carried over the ocean via container ships. The pandemic accelerated the growth of online shopping, he noted, as people increasingly chose to avoid contact with others in doing their shopping. Amazon and other e-commerce giants are rethinking their shipping and distribution network. At present, about 94 percent of the cargo that crosses the Pacific Ocean does so by container ship, and it can take several months for the goods in a container packed at a factory in China to make their way to consumers. On the other hand, goods on a pallet loaded at a Chinese factory and shipped via air cargo can get to consumers in a week. This is the model that e-commerce businesses are increasingly adopting. At this point, these shipments account for only about 6 percent of trans-Pacific shipping. Even a shift from 6 percent to 7 percent would result in a 16 percent increase in trans-Pacific air cargo. This has enormous potential implications for aviation, Michaels concluded. “This is genuinely good news.”

What do these patterns mean for how airlines will operate in the future? To answer that question, Michaels provided data on the economics of a Boeing 777-300 on a trans-Atlantic flight. Before COVID, with a full plane and typical amount of cargo, the total revenue from the flight would be $129,000, while the operating costs and overhead costs would be about $119,000, leaving a profit of $10,000 for that flight. During the pandemic, however, with many fewer passengers and more cargo, the total revenues would be $77,000 and the operating and overhead costs would be about $102,000, for a loss of $25,000. An airline cannot operate indefinitely with these losses, so it might cut the route altogether. Perhaps, if there were a number of flights every day on the same route, the airline might decrease the number of flights. A third option would use a smaller airplane on the route. Particularly if the smaller airplane is newer and more efficient than the one it is replacing, the airline could minimize its losses or even eke out a profit on the route. This is happening more and more in today’s air travel industry, he said.

From there, Michaels switched gears to discuss what aircraft manufacturers face in the COVID pandemic and what the future may bring. Not surprisingly, there was a big drop in the number of airliners being manufactured and delivered once the pandemic hit. According to a forecast by AeroDynamic Advisory, aircraft production will not return to its pre-COVID levels until 2025 or 2026. Furthermore, the mix of aircraft models being produced will change in response to several factors, including reductions in business and international travel. According to the forecast, single-aisle planes, which represented 65 percent of production in 2019, will grow to 76 percent of the market by 2025. At the same time, the percentage of double-aisle planes will drop from 23 percent in 2019 to 13 percent in 2025.

One factor in this expected shift is the coming availability of two new models of the single-aisle Airbus A321: the A321neo (with a new engine option) and the Xtra Long Range (XLR). These are more efficient planes, and the XLR will have a longer range that allows it to cross the Atlantic. This will open up a number of new options for airlines, such as new city pairings, Michaels predicted, “so twin-aisles are going to suffer as a result.”

This will also have repercussions for the competition between Airbus and Boeing, he said. To this point, the market for airliners has been a duopoly—a market dominated by two major players that are relatively evenly matched. However, AeroDynamic Advisory is forecasting that owing to the new A321 models, for which Boeing has no real competition, Airbus will take over a much larger share of single-aisle jetliners; 60 percent or more. Part of the issue, Michaels added, is the well-publicized problems with Boeing’s newest single-aisle plane, the 737 MAX. The main reason, however, is that Boeing has been reworking the 737 for decades and has “played its hand too long on the 737.” While Boeing will still compete on an even footing with Airbus on double-aisle jetliners, it is expected to fall significantly behind on the single-aisle planes just when the models will have increasingly larger roles in the fleets of the world’s airlines.

To compete with the Airbus A321neo and XLR, Michaels continued, Boeing will need to introduce a new single-aisle airliner with 200–250 seats.

Another factor influencing the future of aircraft manufacturers, he said, is China’s drive to become a major player in this market, in particular through the development of the C919, which is expected to enter service this year. Michaels believes that the new Chinese manufacturer, Comac, is unlikely to be a serious competitor anytime soon. The most important thing to airlines is a reliable plane that is available for service 24/7. This is something that aircraft manufacturers can accomplish only after years of learning. It is not enough to be able to build an airliner that can carry 200 passengers several thousand miles. That plane must be available to do it reliably over and over again. “I believe it will take Comac decades to master this,” he predicted.

The competition between Comac and Boeing/Airbus will take place against the background of increasingly tense relations between the United States and China, Michaels said. This potential “cold war” could conceivably return the aerospace industry to two different aerospace ecosystems, one in North America and Europe, the other in China. This situation is similar to when the Soviet Union manufactured its own jetliners because it could not buy from the West. Ultimately, he suggested, it would be in everyone’s interest if the differences can be overcome and the countries trade and compete with each other in a free market.

At the end of his presentation, Michaels briefly discussed the zero-emissions targets that the EU has established for aircraft as part of its efforts to address global climate change. A variety of strategies have been suggested, from greater fuel efficiency to the use of hydrogen or sustainable fuels in jetliners. Michaels suggested that the technical challenges facing hydrogen-fueled jets are great enough that it is likely to be several decades before those become available. Other options are limited in other ways, so ultimately, he said, direct carbon removal—with airlines paying companies to remove enough carbon from the atmosphere to zero out the carbon emissions from their planes—may be the best answer.

KEYNOTE 2 DISCUSSION

Clarke opened the brief question-and-answer period by asking Michaels what he thought the future might hold for combination aircraft. Such planes can be used for either passengers or cargo, or sometimes both at the same time. They can be easily switched back and forth between the two functions. Michaels answered that they will probably not play a big role. In the short term, as airlines are scrambling to increase their cargo capacity to meet increasing cargo demands, they may have a place. However, after 5 or 6 years, he predicted, combi aircraft will probably return to their present situation of being a niche technology.

Next, Kopardekar asked about maintaining resilience in the airliner manufacturing industry, with a focus on the United States. Michaels answered that when the COVID pandemic hit, European countries saw a major threat to the supply chain for Airbus and stepped in with major support. They got involved with planning to keep the companies in the supply chain healthy. There was a fear that if the companies became financially weak, Chinese or American companies might swoop in and buy them. Similarly, in the United States the Paycheck Protection Program made a major difference in keeping smaller suppliers afloat. Next year will be tougher, however, because as production ramps up, companies will need working capital. Many of them have used much of their capital to keep going during the pandemic. In terms of national strategies that could help these companies remain healthy in the long term, Michaels pointed to China’s flaunting of World Trade Organization rules regarding subsidies paid by national governments to their aviation industry. China is providing various sorts of subsidies to Comac in an effort to set up a Chinese counterpart to Boeing and Airbus. There should be a renewed focus on the rules and government guidance so that companies know what is acceptable and what is not and there is a level playing field. Michaels also predicted that there will be a shift to a more regional, less global supply chain in the aviation industry. This is already happening to a certain degree, but the future will see more focus on tightening up the supply chains. The tightening would decrease the amount of exposure to supply chain disruptions and decrease the carbon footprint associated with the supply chain.

Clarke then asked about the possibility of using electric- or hydrogen-powered planes in limited settings, such as for short distances. Michaels answered that that could be possible, especially with smaller aircraft—15-seaters, 30-seaters, maybe even 50-seaters. However, the large, double-aisle, long-range aircraft will be the last to move

away from fossil fuels for a basic physics reason. It takes a tremendous amount of energy to fly an aircraft that large for thousands of miles, and fossil fuels can store more energy in less weight than hydrogen or electric batteries. Thus, it will likely be decades before these large airlines can be fueled with either of those options. Over the next decade or two, he added, sustainable aviation fuel—fuel made from renewable sources and waste—has the most potential to replace today’s aviation fuel.

On a different topic, Michaels pointed out that airlines could increase their flexibility to respond to crises by having more variable costs and fewer fixed costs. One way for an airline to gain flexibility, he added, is by leasing rather than purchasing many of its planes. Some airlines may choose to buy fewer large, double-aisle aircraft because the need to regularly fill them with large numbers of passengers limits their flexibility.