GENEVA 31 July 2020: 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 kilometres 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.

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 of 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 the 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 travellers 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 IATA’s director general and CEO
Alexandre de Juniac.

“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.

International
Passenger Markets

June international traffic shrank by 96.8% compared to June 2019, only
slightly improved over a 98.3% decline in May, year-over-year. Capacity fell
93.2%, and load factor contracted 44.7 percentage points to 38.9%.

Asia-Pacific
airlines’
June traffic plummeted 97.1% compared to the year-ago period, little
improved from the 98.1% decline in May. Capacity fell 93.4%, and load factor
shrank 45.8 percentage points to 35.6%.

European carriers saw demand
topple 96.7% in June versus a year ago, compared to a 98.7% decline in May.
Capacity dropped 94.4%, and load factor lessened 35.7 percentage points to
52.0%.

Middle Eastern
airlines
traffic collapsed 96.1% for June against June 2019, compared with a 97.7%
demand drop in May. Capacity contracted 91.1%, and load factor crumbled to
33.3%, down 43.1% percentage points compared to a year ago.

North American
carriers
had a 97.2% traffic decline in June, barely improved from a 98.3%
decline in May. Capacity fell 92.8%, and load factor dropped 53.8 percentage
points to 34.1%.

Latin American
airlines
suffered a 96.6% demand drop in June compared to the same month last
year, from a 98.1% drop in May. Capacity fell 95.7%, and load factor sagged
17.7 percentage points to 66.2%, which was the highest among the regions.

African airlines’
traffic
sank 98.1% in June, little changed from a 98.6% demand drop in May.
Capacity contracted 84.5%, and load factor dived 62.1 percentage points to just
8.9% of seats filled, lowest among regions.