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Air Travel May Not Recover Until 2024: IATA

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Geneva – The International Air Transport Association (IATA) released an updated global passenger forecast showing that the recovery in traffic has been slower than had been expected. In the base case scenario:

  • Global passenger traffic (revenue passenger kilometers or RPKs) will not return to pre-COVID-19 levels until 2024, a year later than previously projected. 
  • The recovery in short haul travel is still expected to happen faster than for long haul travel. As a result, passenger numbers will recover faster than traffic measured in RPKs. Recovery to pre-COVID-19 levels, however, will also slide by a year from 2022 to 2023. For 2020, global passenger numbers (enplanements) are expected to decline by 55% compared to 2019, worsened from the April forecast of 46%.

June 2020 passenger traffic foreshadowed the slower-than-expected recovery. Traffic, measures in RPK, fell 86.5% compared to the year-ago period. That is only slightly improved from a 91.0% contraction in May. This was driven by rising demand in domestic markets, particularly China. The June load factor set an all-time low for the month at 57.6%.

The more pessimistic recovery outlook is based on a number of recent trends:

  • 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 the recovery.
  • 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.
  • 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.

Owing to these factors, IATA’s revised baseline forecast is for global enplanements to fall 55% in 2020 compared to 2019 (the April forecast was for a 46% decline). Passenger numbers are expected to rise 62% in 2021 off the depressed 2020 base, but still will be down almost 30% compared to 2019. A full recovery to 2019 levels is not expected until 2023, one year later than previously forecast. 

Meanwhile, since domestic markets are opening ahead of international markets, and because passengers appear to prefer short haul travel in the current environment, RPKs will recover more slowly, with passenger traffic expected to return to 2019 levels in 2024, one year later than previously forecast. 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 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,” said Alexandre de Juniac, IATA’s Director General and CEO.

SourceIATA
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