IMPACT OF COVID-19 ON AVIATION INDUSTRY AND ASSOCIATED LAWS

- By Hrishikesh Pandey

1. INTRODUCTION

The high magnitude of COVID-19 pandemic has adversely affected the Industrial sector but the outbreak significantly influenced Global Aviation Industry (GAI). Adoption of COVID-19 declaration by ICAO on 9 March 2020 which specifies a joint ICAO-WHO statement that urges stakeholders to follow SARPs contained in Annex 91further it implemented Article14, Article44 and Annex 11 of the Chicago Convention 1944 .Consequentlythe GAI witnessed impacts as consequence of implementation of the rules of the convention of 1944 and COVID-19 declaration. The impacts does not only includes economic depreciation factor but also involve interplay between various factors which altogether establishes the factual situation of economic depreciation factor. These incorporates th decline in world total passenger traffic, decline in Air cargo, decline in revenues collected by airport authority and cancellation of flights. According to Financial report for Global Air Transport (GAT) executed by International Air Transport Association (IATA) the airlines are expected to lose $84.3 billion in 2020 for a net margin of -20.1%2. According to the report the revenue will fall by 50% to $419 billion from $838 billion in 20193 . The financial impacts generally establishes a connection with other impacts which includes High Mortality rates of airline company, affect to leasing and manufacturing company & lay off procedures for employers in aviation industry. In order to have clear understanding of impacts of COVID-19 on GAI and to accommodate the measures to curb the menace it is essential to analyse the different rules implemented which are root cause of the impacts accrued.

2. ANALYSIS OF THE RULES IMPLEMENTED

The adverse impacts on GAI are hyperlinked with the implementation of certain rules globally contained therein COVID-19 declaration as these impacts are consequence of the implemented rules. Here are some of the rules & their analysis in view of COVID-19 impact.

I. DECLARATION OF COVID-19

The declaration of COVID-19 contains the joint ICAO-WHO statement which is adopted on 9th March 2020 by ICAO in its 219th session whereby in part 2nd of the declaration contains Article 14&Article 44 of Chicago convention the phraseology mentioned in part 8th in clause (a)urges the contracting states adher to SARPs contained in Annex 94& Annex 115 of the convention is implemented and acts as a root cause of the existing impacts.

A. PREVENTION OF SPREAD OF DISEASE (Article 14)6

“Each contracting states agrees to take effective measures to prevent the spread by means of air navigation of cholera, typhus, smallpox& such other communicable diseases as the contracting states shall from time to time decide to designate & to that end contacting states will keep in close consultation with the agencies concerned with international regulation relating to sanitary measures applicable to aircraft. Such consultation shall be without prejudice to the application of any existing international convention on this subject to which contracting states may be parties”.

· ANALYSIS

The inter-textual interpretation of the Article 14 elucidates that contracting states in their extended sovereignty should take strict measure to prevent the outbreak of any communicable disease through air navigation & this include states effective juris-action furtherthe states would be in close consultation with international agencies in terms of sanitary measures .The term ‘designate’ in the second part of the first paragraph implies the flexibility in relation to disease without any relevancy to time frame.

· RECOMMENDATION

From the analysis of the above Article 14 and considering the higher magnitude of COVID-19 outbreak itcould be adopted that thatthe term “international agency” should be substituted by “Pandemic Control aviation association”& the same should be established under ICAO. In addition to the previously mentioned the power of the agency should not be limited up to sanitary facilitation but should be extended up to powers to take financial action where financial action means to execute a financialreports and enforcing the steps or measure tointegrate the economic curve.

B. AIMS & OBJECTIVES OF INTERNATIONAL CIVIL AVIATION ORGANIZATION (ARTICLE 44)7

In this Article clause (a), (d) & (h) are implemented which elucidates that

(a) Insure safe & orderly growth of international civil aviation throughout the world.

(d) Meet the needs of people of the world for safe, regular, efficient and economical air transport.

(h) Promote safety of flight in international air navigation.

· ANALYSIS

From the technical bifurcation of Article 44 and the clauses (a),(d) & (h) contained therein we can state that ICAO being the sole agency under the convention is concentrated with the power of dealing with situations of pandemic to regulate the safety of operational flights including regular working of economical air transport.

· RECOMMENDATION

From the above analysis &ascertaining the risks of happening the same situation in future we can assume that separation of powers of ICAO to sub agencies accountable to perform task of finance auditing, safe operation of flight, and other additional function consecutively by different agencies will make it hassle free for ICAO being the sole agency for GAI at the time of pandemic.

C. FACILITATION (SARPsCONTAINED IN ANNEX 9)8

Part one of the Annex is invoked & it contains the SARPs of “facilitation for clearance of aircraft and commercial traffic through the requirements of public health authorities.”

· ANALYSIS

From the above it can be conclude that it is mandatory Standard & Recommended practice for all the contracting states to the convention in the situation of pandemic. Considering the high magnitude of COVID-19 it can presumed that the procedurefor the clearance of aircraft should be done through online aircraft remote follow-up where the aircrafts are followed through drone & clearance would be executed online. The same should be done through specific sub-committee working under sole authority so that the clearance of aircraft should be doneeffectively& in a less flexibility of time.

D. AIR TRAFFIC SERVICE ( ANNEX 11)9

This Annex states about the “contingency arrangements concerning the development, promulgation, and implementation of contingency plans. The States have been encouraged to review all the restrictions to flight operations, existing or planned, to ensure they are appropriate, taking into account the need to facilitate certain operation to the extent possible and inform about the same to ICAO. These include:

a. Aircraft in state of emergency and over flights

b. Operation related to humanitarian aid, medical and relief flights

c. Alternative aerodromes identified in the flight plan (including those being used for extended diversion time operations.

d. Technical landings where passengers do not disembark.

e. And cargo flights”.

· ANALYSIS

From the above we can interpret that the Annex provide provision for every contracting state to extend during the pandemic subject to operation of flights which in their purview is necessary to extend and specifies five type of operations in its criteria. But all the contracting state should inform the ICAO about the same.

· RECOMMENDATION

From the aboveit could be deducted that the bifurcation of the power of ICAO to an agency able to be accountable forthe task of operational flights is very much necessary to make the work of ICAO in an effective manner significantly at the time of pandemic. Further if the sub-committees specified in the analysis of the rules contained in COVID-19 declaration are established it will be effective in a view of future implementation as the reports executed by them would be used- to pre-estimate the depreciation curve on the basis of which measures can be set to bear a less loss. And at the same time a regular Annex dealing with the situation of pandemic should be incorporated in the convention instead of specification of the same in different Annexes.

The above four rules enshrined in COVID-19 declaration acts as grundnorm for the implication on Global Aviation Industry not only financially but includes non-financial aspects also. As now we analyzed the rules it will support us to draw impacts of COVID-19 on Global Aviation Industry in a chronological manner.

3. IMPACTS OF COVID-19 ON GLOBAL AVIATION INDUSTRY.

Whenever there is implementation of rules there is existing core pattern which consecutively consequences in impacts. So basically the impacts are the desired happening of certain implementation of rules in a certain pattern which is common to all societies. With the application of Article 14, Article 44, SARPs in Annex 9 &Annex 11 the impacts follows due to pattern of travel restriction in different countries and these impacts includes financial and non financial impact hyperlinked with financial one.

I. FINANCIAL IMPACTS

§ ECONOMIC DEPRECIATION FACTOR

A sudden fall of the economic curve of any sector is said to have an economic depreciation factor in that specific sector. Generally it’s a term used to denote the overall reductions in revenues and involve interplay of otherfactors which altogether caused the economic depreciation factor & in relation to Aviation sector it includes:

a. REDUCTION IN OPERATIONAL FLIGHTS

Due to act of sealing the borders by multiple countries and adhering to the implemented rules there is reduction in operational flights. As per the data collected by rating agency Moody’s the global capacity would fall by 25-35% this year assuming the downfall by June 202010. With evaporation in demand on March 2020 the cancellation of scheduled flight is reduced by 12% globally whereby the flight data provider OAG said more airlines announced further cuts to come11.

b. REDUCTION IN PASSENGER TRAFFIC

The factor of reduction in operational flights has proportionally impacted the passenger traffic. According to the report of ICAO the world passenger traffic is reduced by 56-60% in 2020 which is overall reduction of 2,713 to 2,884 million passengers. It is estimated loss of $366-$389 billion on the gross passenger operating revenues12. Other factors for reduction in passenger traffic are no refund by airlines company on the cancellation of flights and dispersal of travel coupons to passenger with validity by end of the year. Now with the interruption of the Supreme Court in the casePravasi Legal Cell & Ors vs Union of India & Ors held that “the airline company should disperse the refund amount in the meantime”

c. REDUCTION IN REVENUES COLLECTED BY AIRPORTS AUTHORITY

The consequence of reduction in passenger traffic consecutively affected the revenues collected by Airport Authority as a means of service tax for the rendered services provided at airports. According to report of ICAO an audited analysis of Airport Council International states reduction of 61% of the revenue collected by Airport Authority & it estimates 104.5 billion USD in 202013

d. DEPRECIATION FACTOR IN THE DEMAND OF AIR CARGO

As passenger traffic is collapsed the cost of sending cargo by air transformed rapidly. The adjusted cargo facility fell by 4.4% while air cargo demand also fell by 9.1% and in consequence Air freight rates rose from $0.80 to $2.50-$4 per kg.14

II. OTHER IMPACTS

A. HIGH MORTALITY RATE OF AIRLINE COMPANIES

It simply means the Airline companies cannot survive for long period due to high magnitude of COVID-19. The high mortality rate exists as airline companies are either not able to buy air planes or not able to accommodate market entry costs. Being an airline company the company has to pay lease charges & a sudden factor of depreciation in revenue may lead to bankruptcy of the company& permanent extinguishment of the company from the market.

B. IMPACT ON LEASING &MANUFRACTURING COMPANY

Due to depreciation factor in demand between January & May 2020 the values of old aircraft fell by 2%-22% and proportionally affected lease rates by 4% to 26%. By august values fell further by 9% to 25% and lease rates by 12%-45%.15

C. NEW LAY OFF GUIDELINES FOR THE EMPLOYEES

The impacts of financial instability proportionally impacted the community of employees as Bloomberg calculation estimated 400,000 airline workers globally are being layoff, furloughed or told that they might lose their job due to COVID-19 pandemic16.

CONCLUSION

Due to pattern of travel restriction in different countries the COVID -19 had severely affected the aviation industry. The rules contained therein COVID-19 declaration implemented and consequences into action of certain factor which considered as important root cause for the financial collapse of GAI. According to IATA the GAI is expected to lose $84.3 billion in financial year 2020 of GAI further it projected -4.9% to -5.2% in the world GDP17. As mentioned in the Article some of the clauses should be replaced in rules implemented in the factual situation of COVID-19 so as to make the procedure for both passengers and airline companies (manufacturing or leasing or airline) much more hassle free as the magnitude of the crisis is far greater than the crisis of 2008.

1. Global Legal Monitor, Loc.gov (2020), https://www.loc.gov/law/foreign-news/article/international-international-civil-aviation-organisation-adopts-covid-19-declaration/ (last visited Sep 9, 2020).

2. Industry Losses to Top $84 Billion in 2020, Iata.org (2020), https://www.iata.org/en/pressroom/pr/2020-06-09-01/ (last visited Sep 9, 2020).

3. Ibid.

4. Declaration adopted by the ICAO Council at the Fourth Meeting of the 219th Session on 9 March 2020 relating to the outbreak of novel coronavirus (COVID-19), Icao.int (2020), https://www.icao.int/Security/COVID-19/Pages/Declaration.aspx (last visited Sep 9, 2020).

5. Information sharing the mid state measures & guidelines, www.icao.net (2020), https://www.icao.int/mid/Page/COVID19.ASPX (last visited Sep 9, 2020).

6. Convention on International Civil Aviation - Doc 7300, Icao.int (2020), https://www.icao.int/publications/pages/doc7300.aspx(last visited Sep 9, 2020).

7. Ibid

8. Ibid

9. Information sharing the mid state measures & guidelines, www.icao.net (2020), https://www.icao.int/mid/Page/COVID19.ASPX (last visited Sep 9, 2020) Convention on International Civil Aviation - Doc 7300, Icao.int (2020), https://www.icao.int/publications/pages/doc7300.aspx (last visited Sep 9, 2020).

10. Rhik Kundu Biman Mukherjee, Covid-19: Moody's says global airlines may more than halve capacity in Q2 2020 mint (2020), https://www.livemint.com/news/india/coronavirus-moody-s-says-global-airlines-may-more-than-halve-capacity-in-q2-11584944806790.html (last visited Sep 9, 2020).

11. Ibid

12. Economic Impacts of COVID-19 on Civil Aviation, Icao.int (2020), https://www.icao.int/sustainability/Pages/Economic-Impacts-of-COVID19.aspx#:~:text=Analysis%20of%20Economic%20Impacts%20of%20COVID%2D19&text=The%20actual%20path%20will%20eventually,consumers'%20confidence%20and%20economic%20conditions. (last visited Sep 9, 2020).

13. Economic Impacts of COVID-19 on Civil Aviation, Icao.int (2020), https://www.icao.int/sustainability/Pages/Economic-Impacts-of-COVID-19.aspx#:~:text=Analysis%20of%20Economic%20Impacts%20of%20COVID%2D19&text=The%20actual%20path%20will%20eventually,consumers'%20confidence%20and%20economic%20conditions. (last visited Sep 9, 2020).

14. Impact of the COVID-19 pandemic on aviation, En.wikipedia.org (2020), https://en.wikipedia.org/wiki/Impact_of_the_COVID-19_pandemic_on_aviation (last visited Sep 9, 2020).

15. Ibid

16. Bloomberg - Are you a robot?, Bloomberg.com (2020), https://www.bloomberg.com/news/articles/2020-07-23/400-000-jobs-lost-at-airlines-during-coronavirus-pandemic (last visited Sep 9, 2020).

17. Economic Impacts of COVID-19 on Civil Aviation, Icao.int (2020), https://www.icao.int/sustainability/Pages/Economic-Impacts-of-COVID-19.aspx#:~:text=Analysis%20of%20Economic%20Impacts%20of%20COVID%2D19&text=The%20actual%20path%20will%20eventually,consumers'%20confidence%20and%20economic%20conditions. (last visited Sep 9, 2020).

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