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Coronavirus impact: Air travel set for long and difficult recovery, says Iata

Issac John /Dubai
issacjohn@khaleejtimes.com Filed on July 2, 2020
aviation, coronavirus, covid-19, flights cancelled, flying safety measures

(Reuters file)

Middle Eastern airlines posted a 98 per cent traffic contraction in May, more than the global average.

The global air passenger demand, measured in revenue passenger kilometre or RPKs, contracted 91 per cent on the year in May, after plunging 94 per cent in April, the International Air Transport Association said.

"May was not quite as terrible as April. That's about the best thing that can be said. As predicted, the first improvements in passenger demand are occurring in domestic markets. International traffic remained virtually stopped in May," said Alexandre de Juniac, IATA's Director General and CEO.

"We are only at the very beginning of a long and difficult recovery. And there is tremendous uncertainty about what impact a resurgence of new Covid-19 cases in key markets could have," he said.

Middle Eastern airlines posted a 98 per cent traffic contraction in May, more than the global average, compared with a 97.3 per cent demand drop in April. Capacity tumbled 93.9 per cent, and load factor sagged to 23.9 per cent, down 49.1 percentage points compared to the year ago period.

In the UAE, the impact of the shutdown of air traffic on the aviation industry and on economies has been severe. In May, there was a 55 per cent contraction in passenger demand, down by 32.33 million. The impact on airline revenue was a loss of $7.1 billion while the industry job losses spiralled up to 392,900.

"With the UAE getting back to normalcy in almost every sector, it is only a matter of weeks for the travel industry to recover up to 30-40 per cent of the pre-lockdown business. All UAE carriers are getting ready to resume operations on phased manner to markets that already open for commercial air traffic," said Harish Kumar, chairman of Dubai-based Jubilant Travel Group.

The slight uptick in May relative to April was due to developments in domestic markets with international air travel close to zero in both April and May, according to Iata.

"A more significant uptick in demand is expected in June as many countries -- notably in Europe -- ease their lockdowns and airlines partly restore some of their seat capacity," Iata said.

"The restart period will be challenging for airlines. Some countries appear to have contained the virus but at the global level the crisis is far from over, especially in some of the key emerging markets. Indeed, while showing improvement compared with April, the level of bookings in late June is still 80 per cent lower than the level of a year ago. Moreover, the risk remains that the recent demand gains could be reversed if there is a second wave of infections," it added.

A dip in airline bookings in the second half of June give grounds for caution about the prospects for the industry in the coming months as Covid-19 cases start to spike again in certain countries, Brian Pearce, Iata chief economist said.

While June had on average been better than the month before, the second half of the month had seen a drop in bookings, and that prolonged travel restrictions to the United States or Latin America could hit its base case forecast for the year.

"There was a dip in bookings in the second half of June, as coronavirus cases picked up... This is causing us to be rather cautious about prospects in the next few months," Pearce said.

"Governments also need to avoid adding blockers to the recovery, such as implementing entry quarantines. They have the same impact as outright travel bans and will keep economies closed down to the benefits of aviation connectivity. Governments should also avoid new fees and charges to cover the cost of Covid-19 related health measures (such as testing and contact tracing), which will make travel less accessible," said de Juniac.

"Looking ahead, capacity planning in the near-term will be especially challenging for airlines. There are indications that passengers have changed their booking behavior amidst the Covid crisis, buying their tickets much closer to the date of departure than was the case previously. This change in the timing of ticket purchases has reduced airlines' visibility on future demand in an already highly uncertain environment," Iata said.

issacjohn@khaleejtimes.com

author

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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