The International Air Travel Association (IATA) now estimates that passenger demand levels will not recover to pre-pandemic levels of passenger demand for five years. Image: Gerald Friedrich from Pixabay.

The commercial aerospace industry has been one of the worst affected by the COVID-19 pandemic, with border closures and travel restrictions evaporating passenger demand, thus driving airlines to slash orders. However, despite travel restrictions beginning to be lifted, a full recovery for the industry remains uncertain.

Comparisons to previous crises such as 9/11 indicate that the effect on the commercial aerospace industry will be grave and lengthy. The International Air Travel Association (IATA) now estimates that passenger demand levels will not recover to pre-pandemic levels of passenger demand for five years. However, these comparisons are to a certain extent inaccurate as they are based on a single event. The COVID-19 crisis is unique in that it is ongoing, and recurrent waves are likely until an effective treatment or vaccine is developed.

The prospect of travel restrictions being reimposed overshadows any interim recovery in passenger demand in the absence of an effective treatment or vaccine. Recoveries in demand since the peak of the pandemic can be wiped out overnight as restrictions are re-imposed, and so it is unlikely that airlines will choose to invest in new aircraft in such an unstable environment. Additionally, the re-imposition of restrictions will undermine already tenuous passenger confidence, with quarantine requirements for travellers being imposed on short notice.

This perspective was also corroborated by the Sage of Omaha, Warren Buffet, who’s Berkshire Hathaway investment vehicle lost almost $10 billion against the value of its stake in Precision Castparts (PCC), which makes aircraft components. He told investors that in early August that a meaningful recovery in commercial aerospace was not possible in the absence of a vaccine or treatment. A vaccine or treatment is therefore not only crucial for commercial aerospace activity and recovery to begin but all economic activity that depends on the movement and interaction of peoples. It is easy to see why countries and companies around the world are placing such a high priority on the development of a safe and effective vaccine. Once developed, it is hoped to spur economic activity, increase hiring and reduce the ongoing burden on the exchequer.

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