Global passenger traffic won’t recover until 2024, a year slower than expected, because of continued travel restrictions and weak consumers’ confidence.
Hence, the International Air Transport Association (IATA) amended its forecast the other night.
IATA’s revised forecast shows global passenger numbers will fall 55% in 2020 compared to 2019, much higher than its April forecast of a 46% decline.
Passenger numbers are expected to rise 62% in 2021 off the depressed 2020 base, but still will be down almost 30% compared to 2019.
Global passenger traffic, measured in revenue passenger kilometers or RPKs will not return to pre-COVID-19 levels until four years from now, instead of 2023.
However, 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.
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.
First is the 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.
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 recovery.
Reduced corporate travel is also a factor.
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.
Worse, consumer confidence remains weak.
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
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,” according to Alexandre de Juniac, IATA’s Director General and CEO. “What improvement we have seen has been domestic flying. International markets remain largely closed. Consumer confidence is depressed. 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.”