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The air transport sector (passenger and freight) represents only a small share of OECD countries’ value-added (around 0.3 % on average, see Figure 1). Yet, strong inter-industry linkages with both upstream and downstream sectors make it an important part of the economy.First, air transport relies on several upstream sectors: support activities to air transportation (including the operation of airports); aircraft manufacturing; rental and leasing services; and refined petroleum manufacturing (including the blending of biofuels). In particular, the air transport sector and airports are inherently intertwined. Some airports depend heavily on one or a few companies that use it as a hub. Shared ownership is common, either by private actors (e.g. Lufthansa owning a minority share in Frankfurt’s airport) or by the public sector. The OECD Indicators on Product Market Regulation show that in 2018, the public sector was a shareholder of the largest domestic airport in three out of every four OECD countries and of the largest air carrier in one out of three countries. Moreover, aircraft manufacturers are highly dependent on demand from the air transport sector, directly or through leasing companies. Because both the activity level and the strategic decisions concerning air transport, airports and aircraft manufacturing are linked, this brief considers them jointly as the “aviation industry”.Industries based on ISIC classification (Air transport: Division 51; Manufacturing of air and spacecrafts: Group 303; Operation of airports: Class 5223). Value-added for the operation of airports not available in Australia, Canada, Japan and the United States.Second, air transport is a key input for downstream sectors, as it enables several economic activities by way of trade in goods and especially in services through the movement of natural persons (i.e. mode 4 services trade). Air cargo is essential for the smooth operations of global supply chains. Business travel is an important channel of international knowledge transfer. The availability of non-stop intercontinental flights is an important determinant of the location of large firms’ headquarters, even though the impact of airports on local economic activity is debated. The readiness of flights reaching a large number of destinations is also instrumental for tourism, in particular international tourism.Beyond inter-industry linkages, air transport is characterised by both complementarity and substitutability with other modes of transport, especially high-speed rail on short- and medium-haul routes. Under pre-COVID conditions, the International Energy Agency estimated that 14% of global flights could be competitively shifted to high-speed rail. Yet, air transport remains essential for territorial cohesion and development convergence as it is often the only viable way of connecting peripheral regions.When the COVID-19 crisis hit air transport, the whole aviation industry was affected. The change in the behaviour of passengers following the COVID-19 crisis, travel restrictions and the ensuing economic crisis have resulted in a dramatic drop in demand for airline services. According to IATA, passenger air transport measured as revenue passenger kilometre was down 90% year-on-year in April 2020 and still down 75% in August. The collapse in economic activity and trade affected freight, which was almost 30% lower year-on-year in April and still about 12% lower in August.The size of the shock has put the liquidity buffers of airline companies under pressure, even if a significant share of its costs are variable (around 50% according to IATA, notably fuel accounting for 25% of the total costs) and the recent drop in oil prices has decreased airlines’ operating costs.In the medium run, airline companies face two uncertainties:The cost of health-related measures. Operating costs are likely to increase in the short-run for both airlines and airports because of additional health and safety requirements (e.g. disinfection, PPE, temperature checks or viral tests) before they can be passed on to consumers. Moreover, if implemented for air transport, social distancing measures could force a reduction in the passenger load factor (i.e. the number of seats that can be occupied during a flight) by up to 50%.The shape of the recovery for commercial flights. International travel restrictions, the contraction of economic activity and changes in transport behaviour by cautious consumers may prevent a return to pre-crisis demand levels, even as lockdowns and domestic travel restrictions measures are loosened in many countries. Commercial air traffic is slow to recover: as of September 2020, the number of flights remains more than 40% below pre-crisis level globally (Figure 2). This hides differences across flight lengths: the drop is even more pronounced for long-haul flights. In the longer run, changes in consumer behaviour may result in structural changes in air transport demand. Even though the rebound of domestic flights in China suggests that traffic may revert to pre-crisis levels, a permanent drop in demand from pre-crisis levels cannot be excluded, either through modal shifts in services trade (e.g. video-conferencing instead of business travel) or, to a lesser extent, through substitution with other modes of transport (e.g. high-speed trains).The combination of negative demand and supply shocks and the uncertainty around the medium-run outlook create an uncertain perspective for airline companies. Through inter-industry linkages, this uncertainty affects the whole aviation industry. Moreover, the industry remains exposed to a possible resurgence of the pandemic, as governments may impose new air travel restrictions to tackle flare-ups or a potential second wave of infections. This may threaten the existence of some firms in the industry, as production and revenues are likely to remain inferior to pre-crisis levels for some time.7-day moving average of the number of commercial flights tracked by Flightradar24 per day (UCT time). Commercial air traffic includes commercial passenger flights, cargo flights, charter flights and some business jet flights; it does not include private flights, gliders, helicopter flights, ambulance flights, government flights, military flights or drones.Airline companies were in very different situations before the COVID-19 crisis began. In particular, air transport is one of the sectors with the highest dispersion in productivity across firms and, to a lesser extent, in profitability. Airline companies thus entered the crisis with strikingly different abilities to withstand such a shock and heterogeneous prospects for the future.Bankruptcies or mergers and acquisitions among large companies could have a negative effect on competition in air transport, with possible repercussions on prices. Even if 80% of passenger seats are on routes with several carriers, many of these routes rely on a small number of firms (36% of routes involve only two or three carriers).Aviation is often a target of policy intervention, and even more so with COVID-19Looking ahead, policy interventions should foster the resilience and sustainability of the aviation industryGovernments have to strike the balance between support to the aviation industry and the need to preserve competition, in particular when considering firm-specific measuresThe risk that government interventions negatively affect business dynamics and productivity may be particularly acute for air transport, given the high dispersion of profitability and productivity across firms in the sector. With demand likely to remain muted in the medium run, the sector has started to adapt and downsize. In this context, governments should enable downsizing rather than counter it, being particularly careful to foster restructuring or exit of the least efficient firms while continuing to target an efficient use of public resources.In the process of restructuring, government need to smoothen the transition for displaced workers. Besides mitigating costs for firms, job retention schemes protected aviation industry workers’ income at the height of the crisis. As uncertainty regarding the cost of health measures and the shape of recovery for commercial flights resolves, job retention schemes need to adjust to target jobs that are viable but at risk of being terminated. At the same time, governments need to focus on supporting aviation industry workers at risk of becoming unemployed, rather than supporting specific jobs.Policy interventions should encourage investment to improve the sustainability of the aviation industryAlthough significant, the reduction in emissions due to containment measures and the economic crisis is likely to be only temporary, and will be inconsequential in slowing down climate change. While the grounding of a significant part of the global fleet could result in the retirement of the least efficient aircraft, the COVID-19 crisis could also reduce or postpone the necessary low-carbon investments due to financial constraints and the recent drop in oil prices. The crisis has already dampened the ambitions of the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA).Mission-oriented strategies aimed at greening the aviation industry can be a useful tool in this respect, and industrial-policy responses to the COVID-19 crisis targeting the aviation industry should be part of the low-carbon transition strategies implemented or under discussion in many OECD countries. Such co-ordinated packages of policy measures can contribute to addressing societal challenges, in particular by co-ordinating all stakeholders and ensuring the consistency and complementarity of public and private investments.Here is what to expect from airports of the (near) future.A mad dash for “touchless” technologyIt’s widely anticipated that airports will transition to touchless technology at a much quicker rate as a result of the coronavirus pandemic.“We are seeing five years’ innovation in five months, and much of the impact will be permanent,” said Ibrahim Ibrahim, the managing director of Portland Design, a London-based design consultancy with a focus on transit hubs and airports. “We will see a turbo-charged uptake on tech-driven zero-touch check in, security and boarding.”To verify passenger identities, driver’s licenses and passports are being replaced with facial-recognition and iris-scanning biometrics. Facial recognition biometrics compare travelers’ faces with government passport databases.The first biometric terminal in the U.S. opened in Georgia’s Hartsfield-Jackson Atlanta International Airport in late 2018. Third-party research shows 72% of customers preferred biometric boarding over standard boarding, and less than 2% of customers opted out of the process, per Delta’s website.“Delta has expanded its facial recognition boarding practices to airports in Detroit, Minneapolis and Salt Lake City,” said design strategist Devin Liddell who works with aviation and travel clients. “United Airlines has pilot programs doing testing now in San Francisco, Washington Dulles and Houston.”The same pace of testing and deployment of biometrics is underway internationally at airports in Canada, Japan, Italy, Spain and Iceland.Mobile phones will play a critical role too, one that extends beyond mobile boarding passes (which were introduced over a decade ago).“Your mobile phone will become your remote control to manage your travel”. “Today, you can interact with a check-in or bag-drop kiosk through your phone, eliminating contact with surfaces. However, in the longer term we see your digital identity being stored on your mobile.”Airport experiences will be walking ones, where identities are verified in seconds and passengers are kept in constant motion. Its Smart Path technology is used at airports in Athens, Brisbane, Doha, Muscat, Orlando, Miami and Boston.Dubai International Airport has a “smart tunnel” that uses biometrics to speed up immigration control. With it, passengers can clear an immigration check in 15 seconds.A traveler passes through immigration control by walking through a "smart tunnel " at Dubai International Airport.Airport checkpoints may come in many forms, from tunnels and gardens to automated walkways. And they will be more important than ever in the wake of Covid-19 as “security queues are the antithesis of physical distancing.What about the pre-boarding pileup of people who hover around the gate agents before their rows or categories are called? Airlines may use mobile phone notifications to quietly call customers to board.“We bring people to the gate too soon,” said Liddell. “This happens because passengers can’t adequately predict how long it will take to maneuver security screening processes, and also because airlines communicate most reliably at the gate versus via digital means.”He predicts that in the post-Covid-19 era ahead, crowding everyone together at the gate will feel “more and more untenable,” forcing airports to find ways to bring passengers together just prior to boarding.Changing the security lineHow to streamline a process that requires passengers to stand shoulder-to-shoulder, while placing their shoes and outerwear in reusable bins alongside germ-laden handbags and laptop computers?Booking appointments to pass through security is one way to reduce crowds and long lines. At Montréal–Trudeau International Airport, passengers book their own screenings. But Tim Hudson, an aviation leader at the global architectural firm Gensler, said airports could assign spots similar to “easy-access passes offered by amusements parks.”“With the use of smart technology, the airport would assign passengers a dedicated time slot to enter the security checkpoint,” said Hudson. “This strategy will allow airports to anticipate and manage passenger loads, while helping passengers minimize contact with other passengers and contaminated surfaces.”Airport security is a trifecta of post-pandemic problems: crowding, passenger touch points and (occasionally) security agents touching your belongings.Airport security is a trifecta of post-pandemic problems: crowding, passenger touch points and (occasionally) security agents touching your belongings.Programs such as Global Entry rely on biometrics to zip enrollees past long immigration and security lines. The TSA PreCheck program in the United States — which deals exclusively with security lines — is testing biometric technology (it currently manually compares passengers to their photo IDs). But, passengers have to sign up and pay for these programs.“As travelers, we have to opt into the process and become more comfortable with sharing our private information,” said Hudson. “If travelers are willing to give up a little more data, the process from curb to gate will be much more streamlined.”“Biometrics work to confirm your identity and the validity of your travel documents, not what you’re carrying with you,”. “Other technologies, such as computed tomography, which applies algorithms and the creation of 3D images to detect explosives and other threats in baggage, as well as other computer vision systems, are emerging to innovate how airports and TSA address the prohibited items problem.”Cleaning everything from luggage to peopleSimpliflying, an airline marketing strategy firm, predicts luggage will be fogged and “sanitagged” on the check-in belt. Carry-on luggage (as well as the bins) will be disinfected by fogging, UV-light or another quick technique in the X-ray security machine.Your bags may not be the only thing that is sanitized. Hong Kong International Airport is testing a full-body disinfection booth made by CleanTech that disinfects from head to toe during a 40-second sterilization process.Airports will be cleaned more often with emphasis on touchless methods of disinfection. Singapore’s Changi Airport is doubling terminal cleanings and coating high-touch points — such as handrails, lift buttons and cart handles — with a disinfectant that reduces viral and bacterial transmission for up to six months. Hong Kong is using Intelligent Sterilisation Robots to kill up to 99.99% of bacteria and viruses in the air.Three Intelligent Sterilization Robots are deployed around-the-clock in Hong Kong International Airport.Kentucky’s Louisville Muhammad Ali International Airport has quadrupled the number of automated hand sanitizer stations throughout the terminal and replaced more than 100 manual bathroom soap dispensers with automated units. Only 5% of hand towel dispensers weren’t automated, and they are being replaced too.More relaxed and spacious terminalsSmoother check-in and security screenings will leave passengers happier, less stressed and more likely to spend money in departure lounges.“Digital payment systems will be introduced that will make tills, cashiers and conveyor belts increasingly redundant,” he said. “Queues will eventually be anathema in stores.”The virtual information booth at Kentucky's Louisville Muhammad Ali International Airport.The virtual information booth at Kentucky’s Louisville Muhammad Ali International Airport.Autonomous vehicles, robots and artificial intelligence will play bigger roles, especially in ways that eliminate lines and crowds. In the meantime, you can still speak to real people, even if they aren’t physically present. Louisville’s airport has installed a virtual information booth where passengers can speak to a representative through a live video feed.Dining and retail areas may eventually be separated, with virtual reality or holographic imagery to show buyers options and purchases delivered by a bot.A check on disease, rather than a conduitAs airports are adding cameras and sensors to combat Covid-19 infections, Liddell believes that air hubs could eventually become a place to detect and contain emerging health threats, rather than the unintentional vector of disease that they are today.Etihad Airways is testing kiosks in Abu Dhabi International Airport that monitor body temperatures and heart and respiratory rates. Other airlines are relying on symptom questionnaires and thermal cameras. Perhaps CT lung scanning will be implemented, as Simpliflying predicts, with results produced before passengers can fly.Staff at Doha’s Hamad International Airport are donning smart screening helmets that assess body temperatures using thermal imaging, artificial intelligence and augmented reality, the airport said.Staff at Hamad International Airport wear temperature-screening helmets.Those measures are not foolproof, however. As people infected with Covid-19 can be contagious while asymptomatic or before the onset of symptoms, airport screenings can feel more like a sieve, sifting out only the most obvious cases.Hong Kong International Airport was the first airport to announce mandatory testing for all arriving passengers. New arrivals take a shuttle bus to the Asia World-Expo to provide “deep throat saliva samples” and await results, a process which has been reported to take up to eight hours.Much ado was made when Emirates began trialing rapid finger-prick blood tests to a small subset of passengers last month. The tests were for antibodies though — not Covid-19 infections — and when accuracy rates were found to be around 30%, the Dubai Health Authority, who administered the tests, banned them altogether.Vienna International Airport announced on May 4 that incoming travelers without proof of a negative Covid-19 test within the previous four days could avoid a mandatory 14-day quarantine by taking a test at the airport for 190 euros (US$208). However, the testing is only available to passengers with a residence in Austria and a valid residence permit, hardly making it a viable option for business travelers and tourists.Airport testing may become more common when rapid-result Covid-19 kits are developed, which may not be too far away. Ichortec, a German-based biotech company, says it has developed a nasal swab test that can detect Covid-19 in under three minutes with no less than 95% accuracy. Patents for the test are pending in the U.S., Germany and the European Union.In the immediate future, air travel is expected to get worse before it gets better.The post-pandemic flying process may start 24 hours before you take off, with passengers checking in online, uploading health information, pre-purchasing a mask and pair of gloves and paying to sit next to an empty seat (though the latter option didn’t work out well for Frontier Airlines).Those predictions are part of a report issued last month by Simpliflying that predicts more than 70 areas in an air traveler’s day will change as a result of the global pandemic.The report states passengers can expect to arrive four hours prior to departure and pass through a disinfection tunnel and thermal body scanner before entering the airport. Those who are “fit to fly” will be allowed in; non-travelers and anyone deemed unfit will be strictly prohibited from entering.Passengers who check in via agents will do so behind a protective barrier. Miami International Airport has already installed them, as well as at TSA checkpoint podiums and boarding counters.An employee installs plexiglass shields on check-in counters at Sarajevo International Airport on May 19, 2020.On May 21, the TSA announced that customers will now scan their own boarding passes, rather than passing them to an agent. Food should be placed in a clear plastic bag and put into a bin, to reduce triggering alarms that require agent inspection. Up to 12 ounces of liquid sanitizer are now allowed in carry-on luggage too.“The greatest security issues will be the potential for disruptive behavior as longer wait times increase and decline in service offerings like food and drinks become the new norm,” said Timothy Williams, a vice chairman of Pinkerton, a security firm.VaccinesAs the Covid-19 vaccine becomes more widely available, it will become a ‘must-have’ for travelers.“I think for international travel, it will become a requirement, whether it's the airline that does it or some international authorities do it,".The travel tool kit will likely also include digital health passports displaying a traveler’s vaccine or negative test status and travel corridors between countries with low Covid-19 infection rates, said Fiona Ashley, vice president for travel marketing at SAP Concur travel and expense management service.While there are some great fare deals being offered right now, as demand returns, so will higher prices. And going forward, travelers will likely also need to factor in the added costs of Covid-19 tests and travel insurance.“Travel insurance may become non-negotiable as destinations continue to require medical insurance, and travel suppliers tighten their refund policies,” said Megan Moncrief, chief marketing officer at travel insurance comparison site Squaremouth.“The Covid-19 pandemic highlighted the vulnerability of the global travel industry. I think travelers will be more cautious about investing in expensive trips without insurance,” Moncrief said.