BMM 3103 � Project (Negotiated Assessment) | Impact of COVID-19 on UK's Aviation Industry

COVID-19's Early Impact on UK: A Project Plan Analysis

Introduction of Project Plan

The first case of COVID-19 in the UK was found on 31^st January in 2020 and by 30^th March 19,784 cases were reported in England (World Health Organization, 2022). The UK government then announced nation wide lock-down and people were locked inside their homes unless for essential needs. The government restricted travel to the risk countries which directly affected the aviation sector of the UK. The following plan will include impact of COVID-19 on UK’s aviation industry.

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Background and Rationale of the Study

In 2020, Corona Virus started to spread from Wuhan, China. In the UK, the Government restricted travelling both from and into the UK. Therefore, aviation sector faced huge loss. As per Praveen (2020), travelling by air was reduced by 97% in the UK due to COVID-19 safety protocol. UK’s economy was immensely affected as the aviation sector provides $86 billion of GDP in the United Kingdom. As per Davies (2021), more than 62,000 people lost their job and UK’s economy experience a sharp downfall. As per CENSUS (2021), the GDP fell by 19.4%. The pandemic has highly affected the aviation industry and a large number people as well as related industries were faced issues which makes it a serious concern. That is why this matter needs to be discussed and a thorough research is required. Hence, the study is rational.

Aim and Objectives

The aim of this project is to find out the impact of COVID-19 on the aviation industry of the United Kingdom and the objectives are:

• To analyse the impacts of COVID-19 on the aviation industry
• To identify problems that the industry faced due to the pandemic.
• To determine the loss of the UK economy as it is influenced by the pandemic’s impact on the aviation sector.

Problem Statement

The COVID-19 pandemic led to worldwide shutdown of travelling including travel by air. Aviation industry is directly linked to tourism industry and therefore, the airlines suffered great loss during this period. Following is the list of problems faced by the aviation industry.

• Passengers were confused regarding travel restrictions.
• Airlines had to reschedule and refund many passengers
• UK economy suffered massive loss.

Literature Review

The government restricted international travel both into and from the UK during the corona virus pandemic which significantly affected the number of travels. As per Stewar (2022), in 2019 there were 255.2 million international travelers which came down to 62.5 million in 2020. By the end of 2021, this figure came down to 49.8 million.

As per Davies (2021), 62,000 people in UK lost their jobs in aviation industry and aerospace jobs since the pandemic. Apart from that people were confused about newly applied traveling restrictions and protocols which include lots of paper work as well. People working in different airlines were overloaded with work pressure as they had to deal with huge flight cancellation, rescheduling, and refunding (Abdou, Seiam & Fayaz, 2020). Aviation sector has huge contribution to the UK economy. Every year it provided £22 billion to GDP and supported around half a million jobs across the UK.

Time of Study

Conclusion

It can be concluded that for UK economy the aviation industry matters a lot as they highly contribute to the country’s GDP. The aim is to analyse the impacts of COVID-19 on the aviation industry and objectives are to identify problems that the industry faced due to the pandemic, to determine the loss of the UK economy as it is influenced by the aviation sector. The problems are increased unemployment rate; passengers were confused regarding travel restrictions, airlines’ issue regarding refund and rescheduling and economic loss. The project plan also includes literature review and a timeframe of the work progress.

Project Report

Background

The aviation industry can be described as activities regarding the activities of mechanical flight and the aircraft industry. It is a huge industry with three main sectors into it. The three main sectors of the aviation industry are commercial, general and military aviation. The aim of this report is to identify and assess the impact of the novel coronavirus (COVID-19) on the aviation industry. According to Nižeti? (2020), the aviation industry noticed a substantial downward trend in their business because of COVID-19. According to a study conducted by Maneenop & Kotcharin (2020), it is seen that airline stock returns were much more significant as compared to the market returns after three COVID-19 announcements. According to Jones (2020), it is seen that UK airlines needed a multi-billion bailout for surviving the COVID-19 crisis.

The impact of the COVID-19 on the UK aviation industry was disastrous. The impact started with the British airline named Flybe, which crashed because of the coronavirus impact (Abdou, Seiam & Fayaz, 2020). Although the Europe aviation industry has now recovered almost 74% as of September 2022 (Unwto.org, 2022). The impact was largely seen within a few months. After the virus was identified in Wuhan, China at the end of 2019, the pandemic widened its horizons into 218 countries in a few months (Liu, Kim & O'Connell, 2021). The pandemic resulted in huge loses for commercial airline companies (Kumar & Nafi, 2020).

The main issue concerning the aviation industry because of the COVID-19 pandemic is the lockdown imposed by the countries which resulted in the industry suffering huge losses. It was not just the aviation industry that faced severe consequences of the pandemic but different tourism companies suffered as well. The airline stock became highly volatile and it resulted in the complete closing down of many airline companies like Flybe.

Project Aims, Research Questions and Problem Statement

The aim of this project is to find out the impact of COVID-19 on the aviation industry of the United Kingdom and the objectives are:

• To analyse the impacts of COVID-19 on the aviation industry
• To identify problems that the industry faced due to the pandemic.
• To determine the loss of the UK economy as it is influenced by the pandemic’s impact on the aviation sector.

The research questions are:

Q1. In what ways did the COVID-19 pandemic impact the aviation industry?

Q2. What factors are causing problem for the industry amidst the pandemic?

Q3. How the UK economy has faced loss due to the pandemic’s impact on the economy?

Literature Review

The impacts the COVID-19 highly impacted the aviation industry of UK. As per Davies (2021), the aviation sector has large contribution on the UK’s economy and thus, it is crucial to figure out how severely the COVID-19 has affected the airlines of UK. Tourists visiting UK and immigrants staying the UK faced many problems during the lockdown period of COVID-19. The government had introduced several rules and flying restrictions which were absolutely necessary to stop the spreading of the virus. Although these newly imposed rules were essential, people were confused and faced many issues. In the midst of people dying, emergency lockdown, etc people were both scared and confused with newly applied travelling restrictions. Following sections will elaborate the impacts of COVID-19 on the aviation industry.

Aviation industry is an important and strong contributor in the UK economy. Naturally, if the sector goes through some sort of issue the direct effect will be reflected in the economy in the form of GDP degradation. The worth of aviation industry in the United Kingdom is £22.7 billion and it supports the GDP worth $86 billion which clearly evidences its value. When the world was hit by COVID-19 pandemic government of different countries announced lockdown and travelling was totally shutdown. It was a shock to the aviation industry as well as other industries related to aviation like hotel and hospitality industry, travel agent companies, etc. As per Kollewe (2021), pre-pandemic period the number of passengers travelled by air were 297 million in 2019. In 2020, the number came down to 74 million which is significantly a sharp fall.

Fig 1: Changes in Global Airline from 2019 onwards

(Source: Rimmer, 2020)

Lockdown and travel restrictions have impacted the worldwide travelling pattern. In 2020, flights travelling through the UK airports dropped by 223 million which is an annual decline of 75%.

Passenger Traffic in UK Airports 2020 onwards

The Airport Operators Association (AOA) has launched its report called “Reconnecting the UK: recovering aviation connectivity”. According the report:

• Since March 2020 the airport in the UK lost 10 billion Euros in revenue and they additionally have taken loan of more than 4 billion Euros.
• UK airports received much less financial support from the Government. Airports in Germany, Ireland, the U.S and Italy received almost financial assistance eight times more than the UK airports.

As a result, all these countries are able to plan their pandemic recovery strategies in a better manner while Britain’s budget of 2022 to 2023 has no mention of such recovery plan. All these reasons are providing competitive disadvantage to the UK airports as they want airlines to fly through UK airports. Since the pandemic UK is operating small fleets. Along with pandemic UK economy had been simultaneously dealing with emerging inflation and Brexit complexities. All these factors contributed in higher fuel cost and increased living cost. UK’s economy seems to have never-ending challenges. UK’s largest airport is the Heathrow airport that experienced a sharp decline of 72.7% from passengers’ number 80.9 million in 2019 to 22.1 million in 2020. UK is among the most developed countries and such sharp drop totally disrupted the entire functionality of the country. Industries are closely interlinked. Every year on an average over 40 million tourists visit United Kingdom mostly by air. Tourism and hospitality industry faced loss of £22.2 billion. All these losses were reflected in the economic state of the country. A record-breaking drop was seen that is 19.4% GDP fall was witnessed in the UK economy.

The COVID-19 effected countries in every possible way. As the coronavirus is easily transmittable lockdown was the first resort that was followed by the Governments of all the countries. Offices, market, shopping malls, etc everything was closed and people remained indoors for safety reasons. Millions of people got infected and thousands were hospitalised with serious condition. As a result, the economy faced high rate of unemployment. According to Reuters (2021), UK’s unemployment rate increased to 5.1% in 2020 which was the highest in the last five years. In aviation sector and in related sectors more than 5,000 employees were losing their jobs in every month since February, 2020. European countries received better government assistance in aviation sector and other aerospace job than the UK. It was a very big disadvantage for Britain aviation industry’s employees.

British chancellor Rishi Sunak took a pledge to provide support package to the employees of the aviation sector and for that they prepared a report which states that more than 61,973 UK aviation and aerospace jobs were lost in total. The shock was even multiplied because in local communities where each aviation job supported 1.3 in the wider economy including hospitality and retail. Apart from firing employee’s airport authorities decided to cut the pay scale as an approach to balance out the losses. As per Airport Technology (2020), a spokesperson of Heathrow airport told that they wanted to keep their employees as much as possible along with a try to balance out the losses. For that they had to decrease the pay scale of their employees. After discussing the matter with the Union, it was unanimously decided that temporarily there would be 10% pay cut in salaries and additional allowances.

Chaotic Situation in the Aviation Industry

COVID-19 pandemic made such a messy situation that it created great confusion among citizens, Government authority, and other leaders in different industries. After months of lockdown, it was necessary to introduced new ways so that the country could start functioning as it was pre pandemic era. Just because the virus was out their whole nation cannot just stop its usual activities. Thus, travelling was again started but with many new restrictions and protocols as safety precaution was must. First of all, security checking was even longer due to social distancing, hygiene measures, temperature screening, long paper work and many more new rules. Number of flights was less and airlines could not take booking with its full capacity due to social distancing. It was difficult to get reservation. Passengers had carried vaccination report and RTPCR report for travelling. All these factors resulted in lot confusion and stress to the travellers. Also, airlines employees felt huge work pressure. They had to deal with passengers refunding and rescheduling of the flights. Nearly 4 million of refund had been issued by the British Airways during COVID-19.

Methodology

Primary research can be defined as the information gathered by the means of self-conducted methods of research (Jamroch, Barreda & Kageyama, 2020), like student thesis or market research or interviews. Secondary research, on the other hand, is the information that is collected through previously conducted studies. Although both methods of research are used extensively, they both have some advantages and limitations. The technique of primary research is very time-consuming (Putri et al., 2020) and can cost the researcher quite a lot at times. The secondary research technique is much softer on the pockets (Khan et al., 2019) and is very time-efficient. But, the method of secondary research can be inaccurate at times because the situation may change from when the study was conducted. In this aspect, the primary research method shines the brightest as it is based on the current scenario of the research. The primary and secondary research techniques are widely used according to the requirement of research.

The method used for this report is the secondary research technique. The secondary research technique not only enabled the researcher to assess the information properly with the help of other scholars but also allowed the researcher to research from the comfort of my room. Although the project is extensively researched, it does have certain limitations. The research is conducted based on past data and that can create conflict with recently updated information that people might feel. The research may also find a lack of accuracy as the sampling design and the samples may have changed their views on the subject matter. The data may also show a lack of agreement between various samples, as the information taken is based on majority agreement. Overall, it can be agreed that the secondary research method has certain limitations but it is still widely used and it is unlikely for the views to change within a short time span of five years and so the research can be considered valid.

Findings from the Research

The research conducted shows many issues that the aviation industry faces because of the implication of COVID-19. The main issues faced by the industry are lack of jobs which resulted in widespread chaos globally. The research also identified issues of various airline companies that resulted in eventually shutting down of them. The research also indicates how the global trends in the aviation industry noticed a severe downtrend and which resulted in the downsizing of many companies in thousands. The industry already had various challenges that they needed to address when the pandemic wave hit. The rate of energy consumption in the aviation industry is huge and it is a major environmental issue. Especially after the COVID-19 wave hit, people started noticing the betterment of the Air Quality Index (AQI). The people concerned with the environment started noticing the effect of using liquid fossil fuels and they started protesting for the use of a cleaner energy source. The industry also faces a huge problem regarding the ever-increasing price of fuel. The inflation in the current market is rising every day and this is a major issue for an expensive industry like aviation.

After some recovery from the pandemic wave, when things finally started going back to normal, the industry noticed a huge labor shortage and even the current staff were dissatisfied with the services provided to them. This unsatisfactory service provided to them made them lose interest in their jobs and when finally, the market started hiring new recruits, they switched jobs. The industry also received a bad review when they tried to recover their losses by increasing the prices of their tickets. After the gap was imposed because of the pandemic, the passengers also changed their habits. The passengers already had to face issues of the high cost of living and unemployment. This resulted in them reducing unnecessary travel which in the long run can change their habits of travel and cost the industry many clients. Lastly, the industry faces another severe problem of private flying. Private flying means a flight which is not a public transport flight or commercial air transport, like a charter flight. As the rate of private flights increases, the number of passengers boarding commercial flights decreases, which in turn causes huge losses to the aviation industry.

The aviation industry faces various problems because of the COVID-19. The industry is trying to cope with the changes and issues and trying to mitigate the risks as much as possible. Although the aviation industry has so many problems surrounding them in recent times, they can follow certain steps to mitigate the issues faced by them. The aviation industry can recognize the needs of the market and try to fulfil them. They need to conduct thorough primary research in order to have a general idea about the changes that are needed in the industry. They can start their process of change from there. Next, the communication gap that is created must be reduced.

Even in time before COVID-19, this was a huge annoyance to customers when they had to wait for hours because of a lack of proper communication. In this day and age communication is very important in building an efficient working system. The airport staff and the airline management should have proper communication with each other to ensure efficient working. This can help the airport staff give out advance notice to the clients and can reduce annoyance on a big scale. Like most businesses, the aviation industry is also based on human interactions and it becomes mandatory for the goods and services provided by the industry to be according to the customer’s liking. Following these steps can help the aviation industry recover rapidly from the crisis it is facing and can regain its previous glory.

Recommendation and Conclusion

The report has researched and made a list of the issues faced by the airline industry. After the research, it can be said for certain that the aviation industry is heavily affected by the COVID-19 pandemic. The industry lost its previous glory and suffered a lot because of this wave of the pandemic. But the report provides certain measures that the industry can use in order to come out of the ongoing crisis.

Firstly, the aviation industry can use experience and service plan upgradation. It is common knowledge that offering less price can help a business get a client to come back once or twice, but offering a satisfactory service can make the clients come back often.

Next, the industry should also keep in mind that offering good service for a high price is also quite useless. Initially, the industry should set prices that can be in relation to the current economic scenario. A price point where neither the industry faces loss nor the customers feel they are charged more.

Lastly, the industry should pay more attention to social media advertisements. According to a report from Schawbel (2015), it is found that 62% of millennials feel that social media advertising is much more likely to get their attention. With the help of these recommendations, the industry can make an attempt to mitigate the crisis and the industry can make a comeback on its way to glory.

References

Project Plan

Abdou, D., Seiam, D., & Fayaz, E. (2020). How can the aviation sector survive after COVID-19?. Salman, D., Seiam, D., & Fayaz, E.(2020). How Can the Aviation Sector Survive after COVID-19. Virtual Economics, 3(4), 91-105.

CENSUS, (2021). GDP and events in history: how the COVID-19 pandemic shocked the UK economy. Retrieved on: 2^nd Dec 2022. Retrieved from: https://www.ons.gov.uk/economy/grossdomesticproductgdp/articles/gdpandeventsinhistoryhowtheCOVID19pandemicshockedtheukeconomy/2022-05-24

Davies. P., (2021). ‘Almost 62,000 UK aviation jobs lost since start of pandemic’. Retrieved on: 2^nd Dec 2022. Retrieved from: https://travelweekly.co.uk/news/air/almost-62000-uk-aviation-jobs-lost-since-start-of-pandemic

Stewart. I., (2022). Disruption and delays at airports. Retrieved on: 2^nd Dec 2022. Retrieved from: https://commonslibrary.parliament.uk/disruption-and-delays-at-airports/

Praveen Duddu (2020). Coronavirus UK: COVID-19 outbreak, measures and impact. Retrieved on: 2^nd Dec 2022 from: https://www.pharmaceutical-technology.com/features/coronavirus-affected-uk-ncov-measures-impact/.

World Health Organization (2022). WHO Coronavirus Disease (COVID-19) Dashboard. Retreived on: 2^nd Dec 2022. Retrieved from: https://COVID19.who.int/region/euro/country/gb

Project Report

Abdou, D., Seiam, D., & Fayaz, E. (2020). How can the aviation sector survive after COVID-19?. Salman, D., Seiam, D., & Fayaz, E.(2020). How Can the Aviation Sector Survive after COVID-19. Virtual Economics, 3(4), 91-105.

‌Airport Technoloy, (2020). COVID-19: Heathrow Airport issues pay cuts. Retrieved on: 2^nd Dec 2022. Retrieved from: https://www.airport-technology.com/news/COVID-19-heathrow-airport-pay-cut/

Bouwer, J., Saxon, S., & Wittkamp, N. (2021). Back to the future? Airline sector poised for change post-COVID-19. McKinsey and Company.

Davis, P., (2021).‘Almost 62,000 UK aviation jobs lost since start of pandemic’ Retrieved on: 02.12.2022, from: https://travelweekly.co.uk/news/air/almost-62000-uk-aviation-jobs-lost-since-start-of-pandemic

Jamroch, G., Barreda, A. A., & Kageyama, Y. (2020). The Relationship between Organizational Self-Esteem, Commitment, Tipping and Organizational Citizenship Behaviors: A Case in the Foodservice Industry. Journal of Tourism Management Research, 7(1), 1-10.

Jones, R. (2020). UK airlines call for multibillion bailout to survive COVID-19 crisis. The Guardian, online, accessed Mar, 15, 2020.

Khan, Z. U., Ali, F., Khan, I. A., Hussain, Y., & Pi, D. (2019). iRSpot-SPI: Deep learning-based recombination spots prediction by incorporating secondary sequence information coupled with physio-chemical properties via Chou's 5-step rule and pseudo components. Chemometrics and Intelligent Laboratory Systems, 189, 169-180.

Kollewe, J. (2021). UK airport passenger numbers drop 75% to 74m in 2020. Retrieved on: 3rd Dec 2022. Retrieved from: https://www.theguardian.com/business/2021/jun/13/uk-airport-passenger-numbers-drop-75-to-74-million-in-2020

Kumar, S., & Nafi, S. M. (2020). Impact of COVID-19 pandemic on tourism: Perceptions from Bangladesh. Available at SSRN 3632798.

Liu, A., Kim, Y. R., & O'Connell, J. F. (2021). COVID-19 and the aviation industry: The interrelationship between the spread of the COVID-19 pandemic and the frequency of flights on the EU market. Annals of Tourism Research, 91, 103298.

Macilree, J., & Duval, D. T. (2020). Aeropolitics in a post-COVID-19 world. Journal of Air Transport Management, 88, 101864.

Maneenop, S., & Kotcharin, S. (2020). The impacts of COVID-19 on the global airline industry: An event study approach. Journal of air transport management, 89, 101920.

Nižeti?, S. (2020). Impact of coronavirus (COVID?19) pandemic on air transport mobility, energy, and environment: A case study. International Journal of Energy Research, 44(13), 10953-10961.

Putri, R. S., Purwanto, A., Pramono, R., Asbari, M., Wijayanti, L. M., & Hyun, C. C. (2020). Impact of the COVID-19 pandemic on online home learning: An explorative study of primary schools in Indonesia. International Journal of Advanced Science and Technology, 29(5), 4809-4818.

Reuters. (2021). UK’s unemployment rate reaches highest in 5 years at 5.1%. Retrieved on: 3r^d Dec 2022. Retrieved from: https://www.businesstoday.in/latest/world/story/uk-unemployment-rate-reaches-highest-in-5-years-at-51-289129-2021-02-23

Rimmer, P. J. (2020). Aviation and the COVID-19 Pandmic: Flying to the “Next Normal.” Journal of International Trade, Logistics and Law, 6(2), 119–136. Retrieved on: 2^nd Dec 2022. Retrieved from: http://jital.org/index.php/jital/article/view/203/pdf_105

Schawbel, D., (2015). 10 New Findings About The Millennial Consumer Retrieved on: 02.12.2022, from: https://www.forbes.com/sites/danschawbel/2015/01/20/10-new-findings-about-the-millennial-consumer/?sh=136eab106c8f

Unwto.org, (2022). IMPACT ASSESSMENT OF THE COVID-19 OUTBREAK ON INTERNATIONAL TOURISM. Retrieved on: 02.12.2022, from: https://www.unwto.org/impact-assessment-of-the-COVID-19-outbreak-on-international-tourism