| Beyond the Tarmac |
However, the optimism was short-lived as the expected recovery in travel demand got affected by the spread of new variants of Covid-19.
The new variants of Covid-19 were first reported in the UK, South Africa and Brazil in December last year and are confirmed to be more contagious.
Since the first appearance of these new variants, many countries have reported a higher rate of spread and responded by putting further restrictions on international travel.
This is the case particularly in Europe, where the majority of the EU countries have closed their borders to South Africa and Brazil to contain the spread of the new variants.
It will be hardly surprising if more countries choose to pursue a “Zero Covid” strategy until enough people have been vaccinated, given that tight borders may be the only way to keep the more infectious strains at bay. That, however, would be particularly bad for international air travel!
With such travel restrictions in place, International Air Transport Association now expects weaker demand in Q1, 2021, for both international and domestic travel worldwide.
According to the global trade body of airlines, the second half of 2021, and mainly the northern hemisphere summer period, will be critical for the recovery of passenger revenues when IATA expects airlines to get much of the bulk of this year’s cash flow.
Its forecast of cash burn ending by Q4, 2021, is entirely dependent on a second half travel recovery.
In 2020, international passenger demand was down by 75%, domestic demand by nearly half, IATA data reveal. Air cargo fared better with the decline limited to 10%. That is making it a revenue lifeline for many airlines and routes.
Air passenger traffic measured by revenue passenger-kilometres plunged by 66% in 2020, which was the biggest shock that the aviation industry has experienced. Following the initial unprecedented shock, air traffic recovered gradually from the low point in April.
However, the recovery has stagnated after new waves of Covid-19 cases started in October.
The emergence of new virus variants made governments to take a more risk-averse approach, indicating a more challenging year ahead.
Governments reacted strongly by imposing new travel restrictions, and forward travel bookings have been falling sharply since late-December.
With the Covid-19 vaccination programmes being rolled out in many major countries, industry captains now expect a steeper recovery of passenger demand to start in Q3, 2021.
That said, most analysts don’t see business travel – the bread and butter of air travel – returning anytime soon. Bank of America, in a research report cited by Business Insider, said industry revenues may not fully recover until “late 2023 or… 2024.”
However, for a swift recovery, effective international co-operation as well as the mutual recognition of vaccines between countries will be of key importance. Airlines will also need additional near-term support as it is clear that, as a result of the travel restrictions, cash burn will be more than expected in the next few months.
“Airlines remain in a struggle for survival,” lamented IATA chief Alexandre de Juniac at a virtual media briefing recently.
“In the last days we have seen thousands of airline staff in the US receive the difficult news that their jobs could disappear on April 1 when the current wage subsidy ends,” de Juniac noted.
Relief packages have been a vital lifeline for airlines around the world. Governments have stepped up with $200bn to help keep the industry viable. But even this staggering amount will not see the industry through if severe travel restrictions remain well into 2021. Obviously, more help will be needed.
“Eventually, we will be at a point where these and other measures give governments the reassurance that the risk of re-starting our lives – including travel – is tolerable, recognising also the significant social and economic benefits that are at stake. We are eager to work with governments as partners to understand what the benchmarks and conditions will be for a decision to give people back their freedom of movement,” de Juniac said.
There is no single formula for the aid that is needed. But what is critically important is that governments understand the specific situation of the airlines in their market and provide the appropriate support – support that does not increase already high debt levels.
And this message also goes out to regional funding mechanisms in the developing world. Where governments don’t have the resources, international funding organisations such as development banks may need to step in.
Obviously, none foresees a world free from Covid-19 anytime soon. “Certainly not in the next months or even in 2021,” as de Juniac put it.
But the industry’s ability to manage the risk increases as more people get vaccinated and testing capacity expands.
A functioning aviation industry will add vital momentum to the economic recovery. Indeed, without aviation, a recovery is likely not possible.
The new variants of Covid-19 were first reported in the UK, South Africa and Brazil in December last year and are confirmed to be more contagious.
Since the first appearance of these new variants, many countries have reported a higher rate of spread and responded by putting further restrictions on international travel.
This is the case particularly in Europe, where the majority of the EU countries have closed their borders to South Africa and Brazil to contain the spread of the new variants.
It will be hardly surprising if more countries choose to pursue a “Zero Covid” strategy until enough people have been vaccinated, given that tight borders may be the only way to keep the more infectious strains at bay. That, however, would be particularly bad for international air travel!
With such travel restrictions in place, International Air Transport Association now expects weaker demand in Q1, 2021, for both international and domestic travel worldwide.
According to the global trade body of airlines, the second half of 2021, and mainly the northern hemisphere summer period, will be critical for the recovery of passenger revenues when IATA expects airlines to get much of the bulk of this year’s cash flow.
Its forecast of cash burn ending by Q4, 2021, is entirely dependent on a second half travel recovery.
In 2020, international passenger demand was down by 75%, domestic demand by nearly half, IATA data reveal. Air cargo fared better with the decline limited to 10%. That is making it a revenue lifeline for many airlines and routes.
Air passenger traffic measured by revenue passenger-kilometres plunged by 66% in 2020, which was the biggest shock that the aviation industry has experienced. Following the initial unprecedented shock, air traffic recovered gradually from the low point in April.
However, the recovery has stagnated after new waves of Covid-19 cases started in October.
The emergence of new virus variants made governments to take a more risk-averse approach, indicating a more challenging year ahead.
Governments reacted strongly by imposing new travel restrictions, and forward travel bookings have been falling sharply since late-December.
With the Covid-19 vaccination programmes being rolled out in many major countries, industry captains now expect a steeper recovery of passenger demand to start in Q3, 2021.
That said, most analysts don’t see business travel – the bread and butter of air travel – returning anytime soon. Bank of America, in a research report cited by Business Insider, said industry revenues may not fully recover until “late 2023 or… 2024.”
However, for a swift recovery, effective international co-operation as well as the mutual recognition of vaccines between countries will be of key importance. Airlines will also need additional near-term support as it is clear that, as a result of the travel restrictions, cash burn will be more than expected in the next few months.
“Airlines remain in a struggle for survival,” lamented IATA chief Alexandre de Juniac at a virtual media briefing recently.
“In the last days we have seen thousands of airline staff in the US receive the difficult news that their jobs could disappear on April 1 when the current wage subsidy ends,” de Juniac noted.
Relief packages have been a vital lifeline for airlines around the world. Governments have stepped up with $200bn to help keep the industry viable. But even this staggering amount will not see the industry through if severe travel restrictions remain well into 2021. Obviously, more help will be needed.
“Eventually, we will be at a point where these and other measures give governments the reassurance that the risk of re-starting our lives – including travel – is tolerable, recognising also the significant social and economic benefits that are at stake. We are eager to work with governments as partners to understand what the benchmarks and conditions will be for a decision to give people back their freedom of movement,” de Juniac said.
There is no single formula for the aid that is needed. But what is critically important is that governments understand the specific situation of the airlines in their market and provide the appropriate support – support that does not increase already high debt levels.
And this message also goes out to regional funding mechanisms in the developing world. Where governments don’t have the resources, international funding organisations such as development banks may need to step in.
Obviously, none foresees a world free from Covid-19 anytime soon. “Certainly not in the next months or even in 2021,” as de Juniac put it.
But the industry’s ability to manage the risk increases as more people get vaccinated and testing capacity expands.
A functioning aviation industry will add vital momentum to the economic recovery. Indeed, without aviation, a recovery is likely not possible.
