Airlines will be able to sustain their rebound from the coronavirus crisis even with a global economic slowdown, according to the head of the industry’s main trade lobby.
A recovery in demand unleashed with the removal of travel curbs should continue regardless of financial pressures on consumers, International Air Transport Association director general Willie Walsh told Bloomberg Television.
“There are headwinds,” Walsh said Sunday in Doha on the eve of IATA’s annual meeting of airline chiefs. “I’m not going to ignore the fact that we’re facing some challenges. But actually the outlook remains very, very positive. All of the research we’re doing reaffirms that people want to get back flying.”
While most carriers worldwide are enjoying bumper sales as customers flood back, taking leisure trips and catching up with friends and family, there are doubts about how long the surge will continue as high fuel prices push airlines to hike fares and inflationary pressures weigh on household spending.
Walsh said previous slowdowns suggest the impact won’t be so great, pointing to the global financial collapse of 2008, after which passenger numbers held steady in 2009 and showed strong growth in 2010.
“We have faced these crises before,” he said. “We learn from them, we adapt and we do better next time. I think the industry knows what it needs to do in this environment.”
Walsh, a former chief executive officer of British Airways owner IAG SA, said he doesn’t expect the staffing shortages that have disrupted flights as airlines restore services to be a major issue for passengers as travel peaks in coming months, with carriers taking steps to rein in growth where necessary.
“They’re not able to build up as fast as they had expected, so they’re tapering their plans for growth,” he said. “Airlines want to take full advantage of the strong demand that exists but I think we will see capacity being trimmed because of external factors.”
While some issues are more structural, such as a pilot shortfall in the US, which Walsh said relates to regulatory requirements and could limit domestic capacity for some while, people “can book with confidence” knowing that those problems that have occurred are “isolated and it will be addressed.”
“The customer experience should be ok this summer,” Walsh said. “I look at the headlines and I see the images. A lot of these are isolated events. They’re not every day of the week. They’re not every week of the year. It would be wrong to say that every airline and every airport has a problem.”
Hours-long delays and a spate of last minute cancellations in the UK are largely down to delays in getting new air-side staff through background checks and are being addressed, he said.
Passengers can expect to see higher fares as a consequence of surging fuel prices, especially outside the US, where a lack of hedging led to a more immediate impact, Walsh said, while suggesting that the impact may be “marginal” with no massive hit to demand.
“It may be the case that some people can no longer afford to travel,” he said. “Airlines don’t have the ability to absorb this additional cost, particularly given the financial damage that has been done by two years of shutdown.”
On the positive side, higher jet fuel prices could encourage the switch to sustainable aviation fuel. Walsh said that the premium between the two has narrowed, with SAF now costing about 2.4 times as much as kerosene, down from four or five times.
Walsh said that he sees the war in Ukraine remaining a long-term challenge for airlines, though the impact on most carriers has been “pretty limited,” apart from a handful such as Finnair Oyj, whose eastbound network has been largely wiped out by the conflict.
That’s especially the case with Europe-Asia travel – still very low at only 20% of pre-pandemic levels, with China closed and long-haul business demand slow to revive, Walsh said. For the routes that have survived, newer, more-efficient wide-body planes are better able to make the required diversions around shuttered airspace.
China may begin to reopen in the third and fourth quarters, though there’ll be a much bigger impact next year, Walsh said. Airlines from other countries in the region still have plenty of other markets on which to focus capacity, he added.
The IATA chief said his biggest concern right now is that as airlines move beyond the Covid crisis and the last remaining travel restrictions are removed, the regulatory burden on the industry may be increased again.
“What I hope we don’t see is the governments who shut the industry down now try to regulate for what happened when they closed it down,” he said. “That would be grossly unfair."