Comment: Industry resilience under pressure
By Paul Goodfellow, senior advisor, risk and Camille Pousseur, executive vice president airline marketing, Stratos
Over the past quarter-century, the aviation industry has endured a series of seismic shocks. Asides from its initial impact of hammering passenger demand, the events of 9/11 brought new and enduring security complexities that fundamentally altered airline operations and passenger processes. Soon after, the Global Financial Crisis of 2008 triggered severe traffic contraction, while a string of oil price spikes drastically inflated costs for carriers operating on tight margins. The 2010 Icelandic volcanic ash cloud crippled European airspace, leading to massive operational and financial losses in just days.
Each of these crises tested airlines, but positively paled in comparison – in terms of the scale of operational shutdown, sustained traffic collapse, and existential financial threat – to the COVID-19 pandemic. This ‘century event’ brought air transport to a near-standstill globally and forced deep, painful and above all else more structural industry changes than anything previously encountered.
In response to the devastation wrought by COVID-19, airlines set out almost overnight to enact sweeping cost reductions with a speed and decisiveness that underscored their determination to survive. With passenger demand dropping up to 90% in the early months of the pandemic, and severe traffic weakness persisting in many geographies until well into 2023, the industry moved quickly to ground fleets, cut non-essential spending and lay off or furlough vast numbers of staff; the latter proving essential for liquidity preservation but which would subsequently inflict havoc when operators and maintenance providers later needed to hire back quickly to meet returning demand.
At the depth of the crisis, many airlines had permanently retired large numbers of older jets and sought to restructure both their networks and cost bases in anticipation of a long and uncertain future. This emergency-style cost-cutting proved critical for stemming cash burn as airlines sought new ways to survive – including for a time expanding their cargo operations to compensate for lost passenger revenue – actions which all-in-all proved critical at ensuring the absolute number of outright airline failures were ultimately kept to a minimum.
As the dust began to settle by early 2022 onwards, the path forward towards operational normality following a gradual return in passenger demand was dealt one further, major complication. Fleet management challenges, as airlines and lessors were forced to endure significant disruption owing to reliability problems with new-generation engines, played havoc not only with capacity and network planning, but also with capital commitments and allocations for the financing and leasing industry. These issues with the in-service fleet, which was largely confined to engines powering the Boeing 737 MAX and Airbus A320neo aircraft families, were juxtaposed with sustained low OEM output levels. This resulted in airlines needing to either park or defer deliveries of aircraft beset by delayed or defective components.
Aircraft lessors, who had been so essential to industry liquidity during the lowest points COVID-19 via issuing deferrals and in many instances stepping in to finance sale-leasebacks, suddenly faced unprecedented volatility in management of their asset portfolios amidst extended aircraft groundings, delayed transitions owing to MRO constraints and very low (and ever shifting) levels of visibility vis-a-vis new aircraft delivery timing – not to mention many further aspects of asset and capital planning more generally.
Yet, despite these compound challenges, the industry displayed remarkable adaptability. As borders reopened and pent-up travel demand returned, airlines were able to ramp up capacity proactively, successfully and sustainably raising passenger yields to recoup pandemic-induced losses, repay crisis-era debt and fund future growth. With fewer aircraft in service and a leaner workforce, many routes returned with higher load factors, allowing airlines to push up not only fares, but also ancillary revenue. This ability to increase capacity while extracting more value per seat was achieved even as airlines managed with reduced resources and a narrowed operational footprint – an outcome borne not of choice but thanks to this industry’s long-mastered arts of creativity, adaptability, survival and endurance.
It is worth recalling that many of the foregoing achievements occurred despite airlines having very limited access to new equity capital in the public and private markets, with much of the life-giving funding coming in debt form and either in the shape of government lending (for those operators fortunate enough to access this) or via high-cost bonds/loans (double digit coupons were not uncommon even during a pandemic era that witnessed interest rates slashed to levels close to zero). By the end of the crisis, levels of airline indebtedness had soared to record levels. A third source of very welcome funding had meantime also come from the lessor community: these parties played an outsized role, providing critical flexibility – by restructuring lease terms, accepting returned aircraft and in many cases entering into sale-leaseback and other transactions – that prevented wider-scale bankruptcies.
New headwinds
From today’s vantage point of mid-2025, a glance ahead reveals that our industry now again faces again a formidable constellation of new headwinds that will further test its resilience in the months and years ahead. Persistent engine reliability problems on the aircraft – which today account for an ever-increasing portion of the global fleet – continue to disrupt fleet planning and airline schedules (although granted there is now some improvement visible on the horizon). At the same time, the advent of artificial intelligence (AI) is expected to further transform this (and every) industry.
Whilst it may afford uses and opportunities, the accelerating digital disruption it entails is set to ring in a new and permanently-evolving era of how airlines interact with end-clients and intermediaries – as well as how they manage wide-ranging impacts on processes and cost management alongside potentially deepening (cyber) security risks and widening regulatory and legal considerations.
Moreover, with supply chain constraints persisting and expanding environmental regulations looming, the new ‘normal’ for aviation may continue to be one of continual adaptation rather than predictability. The requirement to pivot, innovate and preserve financial agility will again need to be met by the sector’s famed and characteristic resilience – if it is again to thrive in yet another fresh era of uncertainty.
Article written on August 20, 2025
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