The climate crisis was already forcing us to reconsider the way we travel for both business and pleasure. Now Covid-19 is leaving a lasting legacy of change, both up in the air and on terra firma.
There are lots of predictions of how the Covid-19 pandemic will change consumer behaviour. Most will, alas, turn out to be wishful thinking. The moment the weather gets bad, we’ll stop cycling to work. Try getting a teenager to give up buying cheap, fast fashion. But one area looks like it might change for good: travel.
“2019 will prove to be the year of peak travel,” says Simon Calder, Britain’s best-known travel journalist, referring to leisure travel. Airbnb CEO Brian Chesky goes further. “Covid-19 is a reset for everything and everyone,” he says.
Analysts certainly predict a dramatic slump across the sector in the short to medium term. The International Air Transport Association says seven years of air passenger traffic growth will be wiped out by the pandemic and lockdown-induced recession. Global aviation sector losses will total USD 314 billion in 2020, it adds. Morgan Stanley predicts it will be at least six years before hotel occupancy rates return to 2019 levels.
Both holidaymakers and big companies acknowledge that they and their employees have been travelling too much for the good of the planet and the corporate bottom line. The tipping point for many was the huge bush fires in Australia last winter and in the US this summer. They provided terrifying visual proof of the effects of global warming. The combination of Covid-19 and the climate emergency means our attitudes to travel will be different. But how?
The way international business is conducted will certainly change. ‘Fortune’ magazine quizzed the CEOs of 100 major US companies and asked when business travel would get back to 2019 levels. Their overwhelming answer was: never. We’re all ‘Zoombies’ now. Google, Microsoft, and Facebook have rushed to popularise their video streaming platforms. Many business leaders believe that these tools will drastically reduce the need to travel, or at least mean when they do travel they will be more efficient with their time. Whether video conferencing can replace the face-to-face meeting remains to be seen.
What is certain is companies and industries have realized they can function with fewer air miles. Productivity does not seem to have suffered while staff have been grounded – a recent Deloitte survey revealed 70 per cent of respondents to be as productive, if not more so, when working from home. Small wonder that companies are rushing to reduce their real estate footprints and overheads – BP is considering halving its property portfolio in some locations and Fujitsu will cut its office space in Japan by half.
Personal travel will change, too, with consumers taking the lead. Many people – both young and old – now say they will fly less often and buy electric cars. One long-haul family vacation a year could become the norm for many.
What do all these shifts mean for airlines, airports, companies, and investors? Some consequences are obvious. British Airways, Virgin Atlantic, and the Gulf super-connectors – Emirates, Qatar Airways, and Etihad – are facing such severe financial turbulence that they have cut a third of their workforce. That means there will be fewer routes and lower flight frequency around the world.
Some of the glamour and pioneering spirit of travel will be lost, too. Qantas has shelved its plans to start flying nonstop from London to Sydney next year. Travelling direct from Heathrow to Darling Harbour for lunch will have to wait. Expect fewer first and business class seats on jets in future, and larger economy and premium economy cabins.
Some major infrastructure plans will be scrapped, including most likely the long-planned third runway at Heathrow, Europe’s busiest international hub. Dubai has already canned its proposed new five-runway hub – its name, World Central, now an eerie echo of an earlier soaraway era.
All over the world, airport operators are revising their business models. With fewer flights, prices for take-off and landing slots at consolidated and, therefore, still busy hub airports, such as Heathrow, are likely to rise to meet airports’ fixed costs. That could mean higher ticket prices. The reverse could happen at secondary airports. Virgin Atlantic has already pulled out of London Gatwick and British Airways may follow.
As consumers cut spending and duty-free and other airport retailers suffer, some people predict airports will go back to being calm, pleasant hubs again, rather than the runways with shopping centres attached that they’ve become. (That would be progress.)
All short flights can be hybrid or all electric by 2040.
Dubai, a major business travel hub, overall will suffer. Its remaining airport, Dubai International, could shrink as passengers opt to fly direct, rather than transiting through potentially crowded Gulf airports, in order to limit risk of infection. Some analysts predict that Etihad and Emirates will merge to produce a single UAE flag carrier flying from dual hubs, one in Abu Dhabi and one in Dubai.
Hotels of the future
The hotel market will be transformed. Ask Ian Schrager, the most influential hotelier of the modern era, who created the ‘hip’ or boutique hotel. Mid-market hotel chains are finished, he predicts. In future, there will be four distinct kinds of accommodation: “extreme luxury at extreme prices” for the super-rich who want and are still prepared to pay for full-service hotels, such as Peninsula and Aman Resorts; boutique hotels “with a very distinctive identity” that attract the in-crowd, such as Edition and W; Airbnb, “which will grow quickly because, unlike traditional hotels, it doesn’t need capital”; and affordable properties that “can match Airbnb on price but also offer the things that Airbnb can’t easily do – really distinctive bars and restaurants, communal spaces to relax or work, gyms, and events”.
The environment will be an overall beneficiary as airlines reduce routes and trim fleets. BA has retired the last of its old gas-guzzling Boeing 747s and is moving to an all-new fuel-efficient twin-engine jet fleet. Airlines everywhere are racing to dump the four-engine Airbus A380 superjumbo. The first electric aircraft are being approved for commercial flight and could soon be taking passengers short distances, for instance from London to Amsterdam. Airbus is preparing to launch a new, greener aircraft as early as 2025, says Guillaume Faury, the firm’s Chief Executive.
The race is on to find greener aviation fuels. Etihad has partnered with aircraft manufacturer Boeing and engine maker GE to establish a sustainable aviation fuel research facility in Abu Dhabi, fuel from which has already been used in flight. Like many airlines, Etihad aims to achieve net zero emissions by 2050, starting by halving emissions by 2035. Synhelion, a Swiss company, is working on a completely green jet fuel that is made by using solar heat to recombine carbon dioxide and water vapour, effectively reversing the process caused by burning fossil fuels. Jeff Engler, CEO of Wright Electric, which is developing a 180-seat electric jet in collaboration with budget carrier Easyjet, predicts: “All short flights can be hybrid or all electric by 2040.”
Where will we be in 10 years’ time? Perhaps we’ll go back to driving – in electric cars, s’il vous plaît – to neighbouring countries for our holidays. A long overdue resurgence of rail, especially sleeper services that once crisscrossed Europe until cheap flights put paid to many routes, seems likely.
Indeed, it’s already beginning. You can now board a train in the North Sea German holiday island of Sylt and meander through the night to Salzburg with views of the Austrian Alps by way of Hamburg, Frankfurt, and Munich. Austria’s state railway, ÖBB, has won plaudits – and made profits – with its Nightjet trains. They travel across Europe, mostly through Germany, using rolling stock bought from Deutsche Bahn, the German national rail operator, which abandoned its own sleeper services three years ago.
Governments will drive the green rail boom. In return for a EUR 7 billion bailout, President Macron of France has barred Air France from flying domestic short-haul routes of less than 2.5 hours’ rail journey time. If you want to go from Paris to Lyon or Bordeaux, you’ll have to take le train.
We might see second-home property booms around easy-to-reach rail hubs on the continent. London St Pancras to Avignon is already the most stylish way to vacation. Book now with added carbon-neutral smug factor! Some cruise ships may go to the breaker’s yard. Private jets will boom – as will any travel product with ‘private’ in the title. The super-rich will be keen to put safety first. But private jets may also face higher taxation or a carbon or green levy.
Whichever way you look, it’s clear that Travel 2.0 has landed. Boarding now.
Download Vision 'Green'
The latest issue of Julius Baer’s ‘Vision’ magazine is dedicated to exploring the many interpretations of the word ‘Green’. From embracing more sustainable ways of living, how to build ‘greener’ economies, and the power of nature in urban environments, to how one billionaire is pursuing his ecological dream and how the gemstone industry is responding to shifting consumer attitudes.
Subscribe to newsletter
Thank you for your interest in our publication. Please also consider subscribing to our newsletter.
What is going on in the markets? Julius Baer’s experts share their views.