Global passenger traffic (revenue passenger kilometres or RPKs) will only return to pre-Covid-19 levels in 2024, a year later than previously projected, according to the International Air Transport Association (IATA)’s recent forecast.
With short-haul recovery expected to happen faster than for long-haul, passenger numbers is expected to recover faster than traffic, although this will likely happen only in 2023 – also a year later than early estimates.
According to IATA, this is based on three trends, namely slow virus containment, reduced corporate travel and weak consumer confidence.
Outside of the US, while developed economies have largely been 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.
Corporate purse strings are expected to be tightened, reducing corporate travel 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.
While pent-up demand exists for visits and leisure travel, consumer confidence is weak in the face of concerns over job security and rising unemployment, as well as risks of catching the virus. Some 55% of respondents to IATA’s June passenger survey have no plans to travel in 2020.
Scientific advances in fighting Covid-19 including development of a successful vaccine, could allow a faster recovery. However, at present there appears to be more downside risk than upside to the baseline forecast.
“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 travellers 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,” said Alexandre de Juniac, IATA’s director general and CEO.
“For airlines, this is bad news that points to the need for governments to continue with relief measures – financial and otherwise… Airlines 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.