Middle Eastern airlines traffic collapsed 96.1 per cent for June against June 2019, compared with a 97.7 per cent demand drop in May, said a report which forecast that global passenger traffic will not return to pre-Covid-19 levels until 2024.
According to figures released by the International Air Transport Association (IATA), capacity contracted 91.1 per cent, and load factor crumbled to 33.3 per cent, down 43.1 per cent percentage points compared to a year ago.
International traffic for the month of June shrank by 96.8 per cent compared to June 2019, only slightly improved over a 98.3 per cent decline in May, year-over-year. Capacity fell 93.2 per cent and load factor contracted 44.7 percentage points to 38.9 per cent. African airlines and North American airlines recorded the steepest traffic declines, -98.1 per cent and -97.2 per cent, respectively.
Domestic traffic demand also fell 67.6 per cent in June, improved from a 78.4 per cent decline in May. Capacity fell 55.9 per cent and load factor dropped 22.8 percentage points to 62.9 per cent.
Global passenger traffic data for June showed 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 per cent compared to 2019, worsened from the April forecast of 46 per cent.
June 2020 passenger traffic foreshadowed the slower-than-expected recovery. Traffic, measures in RPK, fell 86.5 per cent compared to the year-ago period. That is only slightly improved from a 91.0 per cent 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 per cent.
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 per cent of global air travel markets. Their continued closure, particularly to international travel, is a significant drag on 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 per cent 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 per cent in 2020 compared to 2019 (the April forecast was for a 46 per cent decline). Passenger numbers are expected to rise 62 per cent in 2021 off the depressed 2020 base, but still will be down almost 30 per cent 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.
“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,” said de Juniac. - TradeArabia News Service
