More bad news for airlines as IATA predicts slower post-Covid recovery

Airlines are in big trouble - much bigger than previously anticipated. The International Air Transport Association (IATA) says air travel will not go back to normal routines until at least 2024 as governments struggle to contain the coronavirus pandemic. 

It is certainly a concession: the IATA’s previous estimate predicted passenger traffic would return to pre-pandemic levels within the next three years. 

A resurgence of virus cases in countries such as Spain and Italy, partly blamed on the resumption of international tourism, further helps to dash the hopes of an aviation industry that is on its knees.

“Nothing...nothing of this scale has ever occurred to aviation. The drop-off in traffic is staggering; it's frightening and it’s going to cost literally hundreds of thousands of jobs,” says Geoffrey Thomas, an aviation expert and Chief Editor at Airline Ratings, speaking to TRT World. 

“It will send airlines bankrupt, and it will cause massive problems to Boeing and Airbus.” 

Global passenger traffic in 2020 is expected to be down 55 percent compared to the previous year, according to the IATA, revising its April forecast which said passenger traffic will be down by 46 percent. 

While the aviation industry has seen large disruptions before, such as after the September 11 attacks and the spread of the SARS virus in the early 2000s, the impact of those crises was confined to the United States and Hong Kong, Thomas says. 

Where did it go wrong? 

Airlines and airports have been under the spotlight since the pandemic began to take hold earlier this year. The contagious virus jumps easily among people in close proximity,  hence the need for strict social distancing protocols that have been put in place as advised by scientists.

Countries around the world have shut borders and this has led to the cancellation of flights. Passengers who fear contracting the virus have consequently postponed their travel plans. 

A rise in coronavirus cases in the United States, slower efforts to contain it in emerging markets, a reduction in business travel and depressed consumer confidence, are the key reasons behind the negative outlook, the IATA says. 

“...there is little sign of virus containment in many important emerging economies, which in combination with the US, represent around 40 percent of global air travel markets. Their continued closure, particularly to international travel, is a significant drag on recovery,” the industry body says.

Global traffic, as measured in Revenue Passenger Kilometres, an industry metric which takes into account the distance travelled, came down by 86.5 percent in June year-on-year, according to the IATA. 

Air France, Germany’s Lufthansa, and KLM, the Dutch flag carrier, have all received billions of dollars in state bailouts. 

A short-lived hope 

In the last few weeks, Europe had started to ease travel restrictions, on the assumption that it had beaten back the first wave of the virus. 

Recent reports suggest that news of a resurgence may mean it is at the start of a second wave of infections. The situation has raised alarm, with officials now warning that this all may have been a result of some becoming lax about following social distancing guidances. 

Spain, France, and Germany all saw an uptick in new cases in recent days. Tourist hotspots are in particular focus as officials are concerned that people visiting crowded places are taking the virus back to their home countries. 

The United Kingdom has enforced a 14-day quarantine requirement on people traveling back from Spain, while other countries have made Covid-19 tests mandatory at airports. 

“We have a blowout in Spain and in other places like Australia, where we thought we had it under control. The big issue is that a lot of people are not taking this seriously, not wearing masks, and are flouting quarantine rules,” says Thomas. 

“While we have these sorts of problems, it will be a very difficult time for tourism and airlines because we will keep getting these second, third waves of infections.” 

In the coming years, the IATA says more passengers will fly domestically than take international flights. Thomas says this will make things “extremely difficult” for long-haul carriers like Singapore Airlines. 

Aviation industry insiders say it was always profitable for an airline to fly high-paying customers longer distances, as this minimises fixed landing and airport costs.

The IATA notes that corporate travel has taken a hit as companies slash budgets, and it has already become obvious that many business travellers have switched to using private jets. This further cuts into airline revenues.

“While the (commercial) airline capacity is around 80 to 85 percent lower than the pre-Covid-19 level, business jet travel is almost the same as it was to pre-Covid-19,” Thomas says.  

“So business people are shunning airlines and traveling on corporate jets instead.”