aviation

Global air traffic will not return to pre-crisis levels before 2024, Iata says

July 29, 2020

Industry body cut its 5-year passenger traffic forecast and said recovery will take a year longer than it previously expected

Global air passenger traffic is unlikely to recover to pre-Covid-19 levels before 2024, a year later than previously expected, the International Air Transport Association (Iata) said in its revised five-year forecast.

Slower virus containment in the US and developed countries, weaker corporate travel and weaker consumer confidence amid rising unemployment are among the main factors behind the bleak outlook, Iata said.

As travel restarts, passenger demand is not growing as quickly as airlines are adding capacity, so operators are continuing to burn through their cash reserves, Iata's chief economist Brian Pearce told reporters at a virtual conference on Tuesday.

'Demand and revenue are not rising as quickly as expected so airlines are still burning cash,' he said. 'The situation is deteriorating relative to what we expected in the mid-year forecast.'

The industry body cut its 2020 passenger traffic forecast to a 55 per cent decline, worse than the 46 per cent decrease it predicted earlier.

'The second half of 2020 will see a slower recovery than we had hoped,' Mr Pearce said, citing an increase in Covid-19 cases in some countries and slower reopening of borders.

Passenger traffic will see some recovery in 2021 year-on-year but will remain 36 per cent below the pre-Covid-19 levels of 2019.

Last month, passenger numbers fell 86.5 per cent compared to June 2019, and only a slight improvement from the 91 per cent contraction in May.

The period of restarting travel is difficult for airlines as they shoulder higher costs when there are fewer passengers to generate profit.

'The financial challenge is that airlines can't get yields that near anywhere reflect those costs,' Mr Pearce said.

Airlines will continue to burn cash this year and will not return to positive cash flow until 2021, he said.

Business travel is also not recovering hand-in-hand with an improvement in business confidence.

'It remains to be seen whether we will see a recovery to pre-crisis level business travel patterns,' Mr Pearce said, pointing to reduced travel to company offices.

Overall business travel is taking a hit in the short-term as companies turn to video-conferencing technologies and cut costs during the coronavirus crisis.

This also has consequences for network airlines that rely on premium travellers to drive business on long-haul routes, Mr Pearce said.

Carriers in the Middle East, that have depended on premium travellers to fill first and business class seats, will adapt to the situation, he said.

But a prolonged need to 'meet and close the deal' is expected to eventually fuel business travel.

'Yes there is some impact, but it will not end the need for face-to-face meetings and business travel by air is still needed to do that.'

While the leisure travel market is faring better than corporate travel, it is unlikely to fully recover until consumer confidence is restored, Iata said.

Air cargo is recovering faster than passenger travel due to a capacity shortage from some aircraft still remaining grounded.

Airlines might rely more on cargo for the economic viability of their routes, especially in long-haul markets, because of lower passenger demand, Mr Pearce said.

Global air freight demand, measured in cargo tonne-kilometres, fell by 17.6 per cent in June year-on-year, and is a slight improvement from the 20.1 per cent drop recorded in May, Iata said.

Iata has also been lobbying authorities worldwide to extend a waiver on airport slot rules into the winter schedule that begins in November to help carriers deal with the impact of Covid-19 on travel demand.

Airport slot rules mean airlines need to operate at least 80 per cent of their scheduled slots at airports or lose their allocated capacity. The use-it-or-lose-it rule was temporarily suspended by various regulators during the summer season due to the extraordinary circumstances of the pandemic.

Now, Iata is 'optimistic' about getting those airport slot waivers from most countries around the world but is 'struggling' in Europe to get a decision by September, Alexandre de Juniac, Iata’s director general said.

Thenational



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