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Passenger trust to suffer double whammy post-Covid: Iata

Issac John /Dubai Filed on May 2, 2020


Global air passengers are unlikely to leap back onto planes once the pandemic subsides, according to a survey by the International Air Transport Association (Iata) that shows that 40 per cent of people would wait six months or longer to travel after the virus is contained, while 47 per cent would wait up to two months to travel and only 14 per cent would travel immediately.

Nearly 70 per cent said they could delay travelling until their personal financial situation stabilizes. According to an April survey by Iata that queried people in the US and 10 other 11 countries, significant number of people, 40 per cent of respondents, said they will not take to the skies again for at least six months once restrictions are lifted.

Iata has predicted that global airlines are expected to lose $314 billion in ticket sales this year, a fall of 55 per cent compared to 2019, because of Covid-19 with demand likely to hit rock bottom in the second quarter.  It estimates that approximately 25 million jobs in aviation and its related value-chains - including the tourism sector - are at risk in the current crisis. Airlines will burn through roughly $61 billion in liquidity in the second quarter alone as demand plummets by 80 per cent while posting a quarterly mid loss of $39 billion.

As Middle Eastern carriers face a loss of $19 billion in revenue this year, the UAE airlines will lose $6.8 billion in revenues, putting 378,678 jobs at risk, according to Iata's latest data released on April 23.

The figures are higher than Iata's previous forecast released three weeks ago when it predicted $5.36 billion revenue loss and 287,863 jobs at stake in the UAE. For Saudi Arabia, Iata predicted $7.16 billion loss for airlines and 287,546 jobs at stake.

With survey results suggesting a slow recovery for air travel demand, the association of around 290 airlines has called on governments across the globe to work with the aviation industry on confidence-boosting measures in the face of an anticipated slow recovery in demand for air travel following the Covid-19 pandemic.

Iata's director general and CEO, Alexandre de Juniac, said passenger confidence would suffer a double whammy, even after the pandemic is contained - hit by personal economic concerns in the face of a looming recession on top of lingering concerns about the safety of travel. "Governments and the industry must be quick and coordinated with confidence-boosting measures."

"Confidence is everything," said Iata chief economist Brian Pearce on the survey on April 22. "We really do need to see measures that restore passenger confidence."

Pearce did not claim to know what measures are needed to restore passenger confidence. However, he did suggest that they will likely include initiatives on the ground and in the air, and by both airlines and governments.

Experts anticipate things like pre-flight health checks and, at least initially, social distancing measures onboard planes - like blocking middle seats - to be the norm for those flying post-Covid-19.

"Health is the new safety, or will be the new safety, for air travel," said Atmosphere Research president Henry Harteveldt.

"This is an emergency. Airlines around the world are struggling to survive. Virgin Australia, which entered voluntary administration, demonstrates that this risk is not theoretical. Governments will need financially viable airlines to lead the economic recovery. Many of them won't be around to do that if they have run out of cash," Iata chief said.

Early indications of this cautious return-to-travel behaviour are seen in the domestic markets of China and Australia, where pandemic infection rates have fallen to very low levels. In Chiba, domestic demand began to recover when the rate of virus infections fell into single digits and rapidly headed towards zero (measured by new infections as a percentage of the seven-day moving average of total Covid-19 cases).

While there was an early upswing from mid-February 2020 into the first week of March 2020, the number of domestic flights plateaued at just over 40 per cent of pre-Covid-19 levels. Actual demand is expected to be significantly weaker as load factors on these flights are reported to be low. China accounts for some 24 per cent of all domestic passengers, Iata said.

"Domestic market behaviour is a critical indicator, as the post-pandemic recovery is expected to be led by domestic travel, followed by regional and then intercontinental travels as governments progressively remove social distance and travel restrictions, as well as border closures," Iata said.

"In some economies, the spread of the pandemic has slowed to the point where governments are planning to lift the most severe elements of social distancing restrictions. But an immediate rebound from the catastrophic fall in passenger demand appears unlikely," said de Juniac. "People still want to travel, but they are telling us that they want clarity on the economic situation and will likely wait for at least a few months after any 'all clear' before returning to the skies. As countries lift restrictions, confidence boosting measures will be critical to re-start travel and stimulate economies."


Issac John

Editorial Director of Khaleej Times, is a well-connected Indian journalist and an economic and financial commentator. He has been in the UAE's mainstream journalism for 35 years, including 23 years with Khaleej Times. A post-graduate in English and graduate in economics, he has won over two dozen awards. Acclaimed for his authentic and insightful analysis of global and regional businesses and economic trends, he is respected for his astute understanding of the local business scene.

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