Reinsurance News

Near-term outlook on aviation industry “bleak”, says McGill and Partners

10th May 2021 - Author: Charlie Wood

Insurance broker McGill and Partners has described the aviation industry’s near-term outlook as bleak, noting the differing vaccination efforts by world’s governments and geographically varied return of passenger demand

In 2020 the industry reported losses of $118 billion, with demand down 65.9% against 2019.

Furthermore, McGill and Partners reports that nearly 17,000 airliners were idled at the peak downturn due to the COVID-19 pandemic.

Joe Trotti, Head of Aviation and Aerospace at McGill and Partners explains in the report how COVID-19 related difficulties within the aviation space are not over yet, as many airlines continue to exist in survival mode in 2021.

“This is despite recent news of increasing domestic passenger demand in some countries such as the US which might suggest a recovery is beginning to take place,” he said.

“However, restrictions and closed borders in many countries are making timeframes for a full recovery unclear.

Trotti notes how, from a market perspective, many insurers were already grappling with the ongoing lack of profitability of the airline class as well as significant manufacturers grounding losses over the past several years including the Boeing MAX loss.

“Given the magnitude of the loss it also had an impact on the aviation reinsurance market which began to implement price increases to the direct insurers creating further pressure.”

Lastly, McGill and Partners’ report notes how the restart of operations will also pose challenges to the airlines and insurers alike.

“The system was not built to accommodate the unprecedented number of aircraft grounded,” says Trotti.

“Airlines have worked hard to maintain their fleets in the various forms of storage. As they prepare to bring them back into service they are working hard to ensure that both their fleets are restored to airworthiness, and that crews are prepared to get back in the air. Underwriters are taking a keen interest in understanding these plans to return to service.”

“Despite challenges the market continues to provide solutions, with ample capacity available from insurers.

“While the market remains challenging, there are underwriters who understand the environment and are working with brokers to provide a tailored approach to address these challenges.”

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