In FY 2024–25, European airlines alone achieved record revenues of 744 billion USD, according to the International Air Transport Association (IATA).
The aviation industry has long been a cornerstone of efficient global transport and networking, driving economic growth. It is forecast to support 135.4 million jobs, adding to the already massive 86.5 million jobs it supports worldwide (including tourism and indirect employment) - and contribute $8.5 trillion to the global economy by 2043.
What’s striking is the condition of the very industry just three years prior. During the peak of the pandemic, there wasn’t a single airline that made a profit. When the world shut down, the aviation industry followed - major airlines either grounded their fleets indefinitely, facing billions in losses, while some like Air Italy, Virgin Australia and Flybe filed for bankruptcy, ceasing operations altogether.
So, what changed? Just how big was the pandemic’s impact in shaping the future of aviation, and did the lessons we learned from those years make the industry as a whole more resilient? Those are the questions this article aims to answer.
For most airlines, financial losses weren’t even the most alarming problem - they faced employee strikes, aircraft maintenance issues, and legal battles that if not addressed proactively, could bring about irreparable damage, or even total collapse. Many legacy carriers, particularly those of the US-origin, received government aid that helped them stay afloat - a key reason why a lot of the airlines that operate today, are still standing.
However, apart from those detrimental effects - Coronavirus shed light on some intimidating truths, quite literally serving as a “wake-up call” to global carriers. The immediate aftermath of the pandemic brought out a peculiar trend.
People were flocking to low-cost carriers - in fact, Europe’s three largest, Aegean, Ryanair and Pegasus reported an average profit margin of 16% in FY 2023-24. On the other hand, Europe’s largest full service carriers - Lufthansa, Air France and KLM reported an average of just 6%.
The data, month on month, consistently demonstrates that budget airlines exhibit greater resilience in times of crisis. During the pandemic, there were large-scale layoffs. During inflationary pressures, households experienced an erosion of purchasing power. During natural disasters, assets are destroyed and damaged - leaving firms and households to pick up the pieces. Each of these exogenous shocks triggered rapid shifts in consumer behavior, with individuals adopting markedly more conservative spending patterns. In such contexts, a significant portion of the population has little voice in their choice of carrier and is compelled to opt for low-cost airlines, regardless of personal preference.
Business travel historically served as the profit engine for legacy carriers. A single business-class seat could generate 3–4 times the revenue of an economy seat, which is why airlines configured their fleets with large premium cabins. COVID-19 destroyed that assumption. According to McKinsey, business travelers accounted for just 12% of passengers, yet contributed nearly three-quarters of 70% of global revenue in the hospitality sector. The study also estimated that by 2021, business travel had dropped by over 70% and as of 2025, it has not fully recovered to pre-pandemic levels.
Airlines soon realized that overreliance on these premium cabins - their traditional profit engines - was unsustainable; a single disruption was enough to destabilize the model entirely.
Lufthansa retired first class on several aircraft and scaled back premium offerings. Airlines like United, Emirates, Air New Zealand and dozens more began implementing premium economy classes. The shift was toward hybrid cabins that capture both leisure and corporate demand, with premium economy serving as a middle ground between premium travel and affordability, proving more resistant to crisis.
That wasn’t all.
Prior to the pandemic, global carriers thrived on the hub-and-spoke model – funneling passengers through mega hubs like Dubai and Singapore. COVID proved this system to be a double edged sword, while they optimized scale in normal times, they magnified fragility when restrictions struck. Travel restrictions varied wildly by country. If a hub got locked down, the entire model collapsed. Low-cost carriers like Southwest and Ryanair continued to maintain their high profit margins because of their more flexible point to point routes.
Airlines realized the need for route agility. Pure hub reliance was risky - a blend of hub and spoke with selective point to point routes was more crisis resilient and adaptable.
COVID-19 persuaded airlines that amplifying the use of technology for efficiency wasn’t optional - but mandatory to stay ahead and competitive in the market. Apart from cabin innovation, companies accelerated digital check-ins, biometrics at airports, touchless boarding. Airlines and airports invested heavily in self-service, which is both cost-cutting and a commercial play - creating a smoother experience, increasing the consumers’ willingness to pay.
It was the final warning for airlines to diversify; going from simply ticket sales and premium class reliance to diverse revenue streams - subscriptions, digital services and loyalty programmes.
Some carriers branched into cargo, an industry that blossomed despite COVID, while some even branched into lifestyle brands - like Singapore Airlines’ dining experience, ‘Restaurant A380,’ allowing people to eat in their grounded jumbo jet, the Airbus 380.
In essence, for legacy carriers, recovery meant adapting, molding their model to strike a balance between luxury and budget that made all the difference.
Budget airlines, despite their higher profit margins were still far smaller than their legacy counterparts on a revenue basis, their dilemma was simple - an all time high demand for travel meant that legacy carriers were on the road to recovery, and their spot in the limelight would soon come to an end. Budget carriers needed to remain competitive - while still capitalizing on their key advantage, lower costs. To accomplish this, most employed a psychological tactic that allowed them to make more revenue, without increasing ticket costs - at least, from the consumers perspective.
Budget carriers like Ryanair, Spirit and Wizz gain nearly 50% of their revenue this way - through Ancillary fees - the supercharges for checked bags, Wi-Fi, seat selection and the onboard purchases - what was once a marginal supplement has evolved into a core profit driver, a central revenue engine of their business models. The genius of this innovation lies in its psychology: the headline fare remains attractively low, preserving the consumer’s perception of affordability, while the true yield is quietly extracted through add-ons. Passengers leave with the satisfaction of having secured a “cheap” ticket; airlines leave with a far healthier revenue stream. In effect, ancillary monetization has transformed the cost structure of budget aviation, proving more durable and adaptable than traditional fare-based models.
From billions of dollars in losses to restructuring of operation models - to say the pandemic merely changed aviation would be a critical understatement. It shook the industry to its core, exposing structural fragilities long ignored. However, it did teach lessons; lessons that forced airlines and regulators alike to question aviation’s very fundamentals, and rebuild it from the ground up. No industry will ever be crisis proof, but aviation is now certainly a step closer - more resilient, more adaptive.