Can ‘CommonPass’ save aviation?

An airline digital health pass started undergoing tests this week. With track and trace on the ground, it is timely for an app that can get people back up in the air.

The Commons Project, a Swiss non-profit, has created the ‘CommonPass’, a digital health pass (a mobile app), backed by the WHO.

  • Passengers get tested before they are due to travel and then upload their results onto their mobile phone, along with any other documentation required by their country of arrival.
  • Commons Project CEO Paul Meyer believes that this app will establish a common approach to the future of air travel. Gone are the days of paper certificates in multiple languages. The project may even cut down on fraud.
  • The use of the airline track and trace pass will hopefully boost consumer, health authority and government confidence. If successful, Paul Meyer’s project can reopen borders and allow people to travel again between countries.
  • The airline track and trace pass should also permit a reduction in the quarantine period.

The aviation industry is facing its hardest financial period in its history as a result of the Covid-19 pandemic. The future of the airline industry as we know it, is in jeopardy.

According to the International Air Transport Association (IATA), in 2019 the number of scheduled passengers boarded by the global airline industry reached over 4.54bn people, an average increase of 6.3% from 2010-2019.

Post-Covid scheduled passenger numbers have fallen 49% to 2.25bn, down from 4.72bn pre-Covid). By 2022 airlines are expected to have posted total losses of ~US$ 100bn.

In one scary scenario we forecast that the number of airline passengers will only rise to pre-Covid levels by 2033 (4.79bn, a CAGR of 6%) see Exhibit 1.

The CAGR is still some 200% above our real GDP growth assumption in this scenario, but we confess it is still doom laden.  In other scenarios we have run, the return to pre-Covid airline passenger numbers is much faster – less than 12 months from the first effective vaccines passing regulatory approval.

 

Exhibit 1: Global air traffic – scheduled passengers, 2018-2025E

Exhibit 1 Global air traffic - scheduled passengers 2018-2025ESources: ACF Equity Research; IATA

 

Thankfully, irrespective of some of our more ‘dooms-day’ scenario modelling, some carriers (e.g. United Airlines and Delta), are trying out different approaches in order to attract travellers and survive the C-19 economic demise.

Leisure passengers are becoming the new priority class where airlines are offering discounted fares, eliminating change fess and adding more holiday destinations.

Other airlines are burning through their cash, making thousands of job cuts and grounding a large part of their aircraft fleet.

Currently there are 4.8m jobs in the aviation industry that have been lost or are about to be lost. It is also estimated that furloughs may be extended for several years following the pandemic, an effect that enters into our modelling.

In one of our ACF scenarios passenger demand bounces back very quickly, but capacity cannot – the industry cannot attract back employees and investors run a mile.

In this scenario, employee costs sky rocket, capacity cannot be rebuilt, balance sheets are destroyed and ticket prices go through the roof. Which in turn, leads to the price clearing mechanism pushing passenger miles demand back down.

In the above ACF scenario the airline industry takes over a decade to rebuild to pre-2020 passenger numbers.

In our view, in order to save the aviation industry, implementing the CommonPass if not the most appropriate action, is at least an action.  Even so, as with any Covid initiative, the airline CommonPass global launch could take some time. If the CommonPass is not a global solution, it is nothing.

As we hope we have indicated above, even with the CommonPass initiative, there remains a great opportunity for further R&D in the delivery of fast but accurate test results. Fast test results also need a plumbing system – the ability to monitor and manage passenger data…reliably.

It maybe that with a CommonPass or similar our 12 month rebound outlook will become more likely than our 10-15 year recovery scenario. We look on with hope as well as interest.

 

 

Author: Anda Onu – Anda is part of ACF’s Sales & Strategy team. See Anda’s profile

 

 

 

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