IATA sees slower than expected airline industry recovery due to lockdowns

The International Air Transport Association sees a slower-than-expected recovery of the global airline industry. The organization forecasts that global passenger traffic may not return to pre-covid levels until 2024, a year later than what was earlier forecasted.

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While short-haul or regional travels are expected to recover faster than long haul in terms of passenger traffic, pre-covid traffic levels are however expected to return in 2023 instead of 2022 as earlier forecasted.

According to the IATA, the slower-than-expected recovery is attributed to the following factors:
  1. Slow virus containment in the US and developing economies: Although developed economies outside of the US have been largely successful in containing the spread of the virus, renewed outbreaks have occurred in these economies, and in China. Furthermore there is little sign of virus containment in many important emerging economies, which in combination with the US, represent around 40% of global air travel markets. Their continued closure, particularly to international travel, is a significant drag on recovery.
  2. Reduced corporate travel: Corporate travel budgets are expected to be very constrained as companies continue to be under financial pressure even as the economy improves. In addition, while historically GDP growth and air travel have been highly correlated, surveys suggest this link has weakened, particularly with regard to business travel, as video conferencing appears to have made significant inroads as a substitute for in-person meetings.
  3. Weak consumer confidence: While pent-up demand exists for VFR (visiting friends and relatives) and leisure travel, consumer confidence is weak in the face of concerns over job security and rising unemployment, as well as risks of catching COVID-19. Some 55% of respondents to IATA’s June passenger survey don’t plan to travel in 2020.
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A full recovery to 2019 is not expected until 2023

The IATA sees global enplanements (process of boarding an aircraft) to fall by 55% this 2020 as compared to 2019. The good news however is passenger traffic is expected to rise by 62% in 2021 as lockdowns are eased and the industry gains more travel confidence. This is still lower than 2019 levels by 30%.

IATA Director General and CEO Alexandre de Juniac said, "Passenger traffic hit bottom in April, but the strength of the upturn has been very weak. What improvement we have seen has been domestic flying. International markets remain largely closed. Consumer confidence is depressed and not helped by the UK’s weekend decision to impose a blanket quarantine on all travelers returning from Spain. And in many parts of the world infections are still rising. All of this points to a longer recovery period and more pain for the industry and the global economy.

“For airlines, this is bad news that points to the need for governments to continue with relief measures—financial and otherwise. A full Northern Winter season waiver on the 80-20 use-it-or-lose it slot rule, for example, would provide critical relief to airlines in planning schedules amid unpredictable demand patterns. Airlines are planning their schedules. They need to keep sharply focused on meeting demand and not meeting slot rules that were never meant to accommodate the sharp fluctuations of a crisis. The earlier we know the slot rules the better, but we are still waiting for governments in key markets to confirm a waiver,” said de Juniac.

Domestic markets opening ahead

According to the IATA, domestic markets are opening ahead and faster than international as passengers prefer short travels for the time being as compared to long flights. As such, revenue per kilometre (RPK) will recover slower than expected as traffic is still expected to return to pre-pandemic levels in 2024.

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“Domestic traffic improvements notwithstanding, international traffic, which in normal times accounts for close to two-thirds of global air travel, remains virtually non-existent. Most countries are still closed to international arrivals or have imposed quarantines, that have the same effect as an outright lockdown. Summer — our industry’s busiest season — is passing by rapidly; with little chance for an upswing in international air travel unless governments move quickly and decisively to find alternatives to border closures, confidence-destroying stop-start re-openings and demand-killing quarantine,” said de Juniac.

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