When crude jumped in 2006 most airlines were charging a fuel surcharge to their passengers. Nowadays, the aviation world’s new challenge is COVID-19, coupled with global economic downturn … and the unthinkable, sub-zero oil prices!?
Source: The Visual Capitalist
Sanitization and health measures are now being put into practice in various sectors. In the case of aviation, airlines have been increasing crew protection measures, passenger temperature screening during at different phases of flight, increasing the routine cleaning and performing preventative disinfection of aircraft. Airports are also ramping up health screening of passengers and sanitizing of high-touch surfaces, public areas, staff facilities, etc. In parallel, airports are re-planning their facilities to maintain social distancing guidelines among passengers.
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Of course, these measures will translate into increased operational costs and additional processing time. In the world of business nothing is free – someone must pay these costs: whether it be passengers, airlines, airports or governments. Like enhanced security screening implemented post 9-11 and in response to the liquid explosive threat, we can expect new COVID passenger health screening and sanitization measures to exact a heavy toll on operational efficiency, on-time performance and, ultimately, profitability/viability. As these new screening measures are developed and improvised, state regulators and ICAO itself will be under increasing pressure/impulse to adopt them as the new standard which will be with us long after the crisis has passed – and its come with a steep cost, both in terms of dollars and time. As this active stage in the crisis, there are no credible estimates on the economic impact of new health and sanitization measures for airlines and airports – perhaps in a few months, we will have a clearer view, however rest assured the impacts will not be immaterial. If history tells us anything, the brutal reality is that the cost of these under this “new normal” scenario will most likely fall on the shoulders of passengers through airline surcharges and/or airport user fees and government taxes. We need look no further than the fuel and security surcharges that have become common place over the past decade. The challenge will be how to fairly apply and meter these user surcharges/tax. First and foremost, these charges must not be misused as a tool to manage or enrich airport, airline and government cashflows, as has been the case with many such user fees in the past. Secondly, there is the sensitive issue of equity, as not all passengers will require the same level of scrutiny, particularly those that have already contracted and recovered from the virus. Should these passengers be expected to pay users fee and be subjected to the same screening as those that have yet to be stricken? Will such recovered passengers be issued with so called “immunity passports” in order to expedite them through the system? Also, in contrast to fuel, this new surcharge is not distinguishable by fare class/cabin – the cost, and thereby the charge, should be applied per person, not by seat or levy on ticket price. Health screening and sanitization may also become a barrier to entry in international air transport as many governments will likely require enhanced screen/control (ex: vaccination for passengers, immunity passport, enhanced screening/sanitization requirements, etc.), akin to the multitude of varied security requirements in place around the world. Inevitably, these barriers to entry will have an immediate and lasting impact on almost all sectors of the global economy, however tourism is likely to be one of the hardest hit. The World Tourism Organization is projecting a drop in the range of 20-30% in 2020 international tourist arrivals. Although the aviation and tourism sectors are keen to ensure a speedy and full recovery, the health and sanitization issue will be a stiff headwind in the face of the global economic recovery. Only time with tell if government policy will provide lift or drag.