History demonstrates the ability of the aviation and aerospace sectors to rise to the challenges posed by global economic events. While the sector may have been decimated by coronavirus, there is no doubt it will adapt and thrive once again. Paul Zalkin, a managing director in our insolvency and restructuring practice explains why.

During the 21st century, value within the aviation and aerospace sector will continue to be driven by military aerospace, space exploration, satellite technology, commercial airlines, airfreight operators and, to a lesser extent, private and general aviation. More than anything though, it will be driven by the unstoppable desire to move people and goods around the world quickly. Our research indicates that aviation will be one of the fastest-growing sectors in the next few years.
Understand the past, understand the future
In the past, the value drivers of the sector were less diverse. Between 1903 and the early 1970s, when Airbus launched the first twin-aisle, wide-body passenger jet, technological leaps in the aviation sector were largely a result of military requirements. Inevitably, the most rapid periods of growth in research and development coincided with the two world wars and the Cold War.
Until the 1960s, aircraft and associated technology serving the nascent passenger airline and airfreight industries relied on the adaptation of military hardware and know-how. Yet even in the 1960s – by which point long-range passenger flights had become feasible − flying across the Atlantic from the UK was the preserve of the well-off. The airline industry remained comparatively small until the latter part of the 20th century, and was dominated by national airlines, or ’flag carriers’, supported by significant state funding.
The modern aviation sector
Growth in the world’s airline industry exploded in the 1970s, with the development of long-range, twin-aisle passenger aircraft capable of carrying over 400 people on long-haul routes.
The improved economics of these aircraft coincided with rapid commercialisation and the ’democratisation’ of air travel. For the first time, long-haul travel was affordable for a much broader cross-section of society, although primarily for those living in the wealthiest, developed economies.
The airfreight industry also grew rapidly as the cost of the long-haul transportation of goods began to converge with that of more traditional transportation methods such as rail and sea freight.
By this point, technological developments in commercial aviation were no longer limited by the adaptation of military technology but were instead driven by market forces: the needs of airlines and airfreight companies.
By the end of the 1970s, the global airline industry was not only established as a major economic sector but, perhaps more importantly, as a major driver of global economic growth in general. In certain respects, during the latter part of the 20th century, the aviation sector was to the world’s economy what the digital and data sectors have become today.
By the 1990s, the concept of the low-cost/budget carrier was well-established, particularly within North America and Europe. In the UK alone, in just 10 years between 1995 and 2005, there was a twentyfold or so increase in passenger numbers carried by budget airlines. This truly astounding growth was, in certain respects, part of a ‘race to the bottom’ but also a development which revolutionised the industry.
Present day
The UK is home to some of the great names in the aviation sector, including Rolls Royce, with over 30% share of the global wide-body, jet-engine market. British Aerospace remains at the forefront of both civilian and military aviation. Airbus directly employs over 12,000 people in the UK and supports over 110,000 jobs nationally, delivering around £7bn gross value to UK GDP. Other household names, such as British Airways and EasyJet, are also major employers and net contributors to GDP.
Of course, one cannot ignore the devasting toll that the pandemic has taken on the sector and there is no doubt that the industry is currently on its knees. It is almost inevitable that significant, industry-wide restructuring will be required, in some cases using formal insolvency processes.
Ancillary-parts manufacturers, small freight and passenger carriers, regional airports, ground-handling providers and a host of support services are all suffering from a cataclysmic fall in airline passenger numbers. However, given the pace at which the sector has proven its ability to adapt, this is just one more blip.
Restructuring in the aviation sector
The insolvency tools available to assist in restructuring an aviation business are common to all sectors. However, the need to plan and develop a forensic understanding of the regulatory environment is key to success.
Everything in the aviation section − aircraft and parts design and manufacture, carrying passengers, operating airports, employing staff, training, the supply of consumables, maintenance and the movement of freight – is strictly controlled by national and international regulators. Without their authority, continuation of operations is simply not possible. The decision to place an aviation company into administration is not one to be taken lightly and it is essential to ensure the right team of experts is in place.
The future
The global aviation and aerospace sector will emerge from the coronavirus pandemic − as it did from the post-WWII period, the 1973 oil-price shock, the impact of 9/11 and from the Icelandic volcanic ash cloud in 2010.
The industry will adapt its commercial and technological strategies to meet the requirements of regulators, customers, national governments and the climate-change lobby, and it will thrive once again. And there is one reason for this: the unstoppable desire to move people and goods around the world quickly.
Building financial fortitude: more support for advisers and businesses
For more information, insight and support on the key issues businesses and professional advisers are facing please go to our Building financial fortitude hub at www.quantuma.com/fortitude. There you will find a series of video interviews, articles, and further support from experts across our firm.