Facing headwinds

The past two years has been a period of intense turbulence for the aviation sector, with a number of bankruptcies, bailouts and collapsing revenues brought about by the coronavirus pandemic. The impact on airline receipts has been challenging. Indeed, the gap between projected and actual receipts suggests that airlines have lost passenger revenues worth nearly US$1 trillion as a result of the pandemic.

Rebuilding balance sheets and restoring passenger confidence is going to take time. Uncertainties lie ahead, and (as the rapid spread of COVID-19 variants remind us) there is no room for complacency.

Yet as this survey shows, there are also tentative grounds for optimism.

First, airlines and lessors now have access to a wider range of funding opportunities than ever before. Innovative financing is the order of the day: In addition to traditional sources, such as banks, capital markets and export credit agencies, the aviation sector is increasingly tapping into funding from alternative capital providers, including private equity and hedge funds. High- net-worth individuals and family offices are now part of the mix as well, along with new capital market products, such as green bonds.

Second—and closely linked to the evolving financing environment—is the rising awareness of environmental, social and governance (ESG) considerations within aviation. Airlines and lessors—and the investors who back them—are making the first steps towards decarbonizing aviation with initiatives that span everything from the development of sustainable aviation fuel (SAF) to the first, albeit short-range, electric aircraft.

This matters, because the future of aviation is as much a battle for hearts and minds as it is about technology. COVID-19 has turned many of us into teleworkers, while the rise of the "staycation" has reminded travelers of the good times they can have close to home. Winning back passengers—business travelers in particular—may not be easy. Against this background, travelers of all types are increasingly aware of the environmental impact of their journeys. Seen in this light, even small steps toward boosting the green credentials of airlines could make all the difference.

The aviation sector that emerges from the pandemic is likely to look very different from the one that went into it two years ago.

But it is also a sector that is likely to be more flexible, leaner, a little greener and—above all—better adapted to whatever the future has in store.