The International Air Transport Association (IATA), which is the largest trade organization representing major airlines, has released an updated global passenger forecast, showing that recovery in air travel is slower than had been expected.
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Air travel recovery delayed by a year
IATA has released its updated forecast regarding a travel recovery, which is bad news for airlines. According to IATA:
- The recovery in long haul travel is expected to happen in 2024 (this is passenger traffic measured in revenue passenger kilometers, or RPKs); this is a year later than expected
- The recovery in short haul travel is expected to happen in 2023, faster than the recovery we’ll see for long haul travel; this is still later than expected, as previous IATA projections said this recovery would happen in 2022
- For 2020, total global passenger traffic is expected to decline by 55% compared to 2019; this is worse than the April 2019 forecast of a 46% drop
- The global load factor in June 2020 was just 57.6%, representing an all-time low for the industry
While these updated forecasts are worth being aware of, ultimately even an organization with as much data and resources as IATA is really just throwing darts at a board here.
When the pandemic started we saw the airline industry give very specific timelines for a travel recovery, when in reality it seems like there were far too many unknowns to give any sort of a useful prediction.
I realize airlines have to plan best they can, and need to give employees and shareholders a sense of where things stand. But there are just so many variables, not the least of which is if/when we’ll see a vaccine, and how useful it would be.
Short haul travel is expected to recover before long haul travel
Why the renewed pessimism?
Why is IATA expecting global travel recovery to take a year longer than was expected just a couple of months ago? It comes down to a few trends:
- Slow virus containment in the US and developing economies: while developed economies outside of the US have largely been successful in containing the virus, that hasn’t been the case in the US and many developing economies, which represent 40% of global air travel markets
- Reduced corporate travel: corporate travel budgets are expected to be highly constrained, not to mention the safety and logistical challenges associated with traveling right now
- Weak consumer confidence: While there’s demand for visiting friends and relatives as well as leisure travel, consumer confidence is weak over concerns of job security and rising unemployment
As Alexandre de Juniac, IATA’s Director General and CEO, describes the 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.
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.”
IATA is pessimistic due to the US response to coronavirus
IATA is now predicting that short haul travel won’t recover until 2023, and long haul travel won’t recover until 2024, which represents a one year delay compared to predictions shared a couple of months ago.
This worse forecast is due to slow virus containment in the US and in developing countries, reduced corporate travel, and weak consumer confidence.
While it’s worth being aware of IATA’s projections, I think it’s safe to say that there are so many variables here, and it’s hard to view this as anything more than an educated guess.
What do you make of IATA’s projections for a travel industry recovery?