Very high

Civil Aviation

The sector has experienced significant challenge through the COVID-19 pandemic with market consolidation possible if balance sheets don’t recover.

Sector trends & challenges

  • Maintaining liquidity

    A key priority is reducing cash burn whilst demand is suppressed and managing costs as travel reopens. New sources of funding might be required and divestment into core activities could be a necessity over the short-term.

  • Strategic pivot

    As business travel remains low, some carriers will need to make significant modifications to their business model. In a sector of low margins and strong price competition, restructuring activity could spike.

  • Identifying opportunities

    For the more resilient operators, there will be long-term opportunities to increase market share and deals flow across the sector may increase. Most businesses should consider consolidating operations and identifying efficiencies.

Sector rating profile

The Civil Aviation sector and its wider supply chain has been under fairly significant economic stress for several years now, faced with low margins and over-capacity across both short and long-haul.

 

COVID-19 has placed further financial challenges on the sector and international leisure-travel looks set to be very minimal through 2021 again. It also remains to be seen whether the technology-led change to working models permanently damages the lucrative business travel market.

 

That being said, key market players can capitalise on a difficult trading environment by realigning their strategy and making acquisitions, ensuring their long-term prosperity.

Civil Aviation

COVID-19 caused a huge demand shock during 2020 and early 2021 as lockdowns and other travel restrictions severely dampened demand for global travel. Although airline travel has started to pick up again as we moved towards 2022, footfall is still significant below pre-pandemic levels as consumer confidence remains fragile in addition to ongoing quarantine rules. Airlines and tour operators will feel the impact for years to come as travel restrictions, economic headwinds and changing travel patterns necessitate a strategic pivot.

As we emerge into the ‘new normal’, the whole sector will have a number of immediate and long-term considerations.

Managing costs as demand gradually returns. Desire to travel will vary greatly by location, demographic, and purpose. This may require a strategic pivot by some operators to regions or markets where demand recovers more strongly.

Consolidation and integration throughout the supply chain. The continued focus on cost efficiency will likely lead to continued market consolidation and integration across the sector – not just with airlines. The driver of consolidation will be short/medium term losses driven by inefficiency of fleets, disrupted booking patterns and to get cost efficiencies to be competitive, as well as a need to attract investment to grow again.

Environmental agenda. As national governments develop plans to reach net zero CO2 emissions over the coming decades, the response by the sector into new technologies will be critical.

Airport business model. Airport business models will need to adjust to reflect the changing traveller profile and travel preferences (‘point-to-point’ rather than ‘hub-and-spoke’).

Monarch Airlines

We were appointed Joint Administrators to most of the Monarch group, which operated as a UK scheduled airline. Our team had a critical role supporting the CAA and Air Travel Trust repatriate over 100,000 customers and reimburse those with ATOL protection. This complex case demonstrated our innovative approach and ability to operate at pace.

Find Your Expert

David Pike is Interpath Lead for the Transport & Logistics sector, which includes Civil Aviation as one of four core segments. Mike Pink leads our approach to Civil Aviation nationally for Interpath. For a full list of our senior people with experience in the sector use the button below.

Our senior team