Global airlines 'optimistic' about 2022 outlook as Omicron-related restrictions ease

Passenger traffic recovered to 42% of 2019 levels last year and cargo volumes were up 7% from 2019

Willie Walsh, director general of the International Air Transport Association, taking part in a panel discussion at the industry body's Annual General Meeting in Boston, Massachusetts, on October 5, 2021. Reuters

The global airline industry is “optimistic” about the outlook for air travel in 2022 as Omicron-related restrictions are eased or removed, and after annual passenger traffic recovered to 42 per cent of 2019 levels last year and cargo volumes rose 7 per cent from 2019.

Domestic travel led the passenger traffic recovery in 2021, which was down 28 per cent from 2019 levels, while international trips recovered more slowly to 75.5 per cent below pre-pandemic levels, with Asia-Pacific lagging behind other regions due to border closures, the International Air Transport Association (Iata) said in an online press briefing on Tuesday.

Overall passenger demand fell by 58.4 per cent in 2021 compared with 2019.

Air cargo volumes recorded a strong performance in 2021, rising 18.7 per cent from 2020, making it an important source of revenue and cash for airlines. The outlook for cargo “continues to be positive” in 2022, despite supply chain disruptions triggered by the pandemic, which are expected to ease from record-high levels.

“We're ending the year generally in better shape than we started the year,” Willie Walsh, Iata's director general, said. “Going into 2022, I think there will be a short-term impact as a result of government restrictions in response to the Omicron variant that we've seen since the end of November. But more and more governments are reviewing those restrictions, and we’re pleased to see that some if not all are beginning to be relaxed or removed. That's a positive indication for the industry.”

Last year was “another tough year for airlines overall but quite a bit of positive to take from it as we went through the year”, Mr Walsh said. “Cargo was the star performer in 2021 as it was in 2020.”

Premium and economy class travel on international routes recovered at the same pace during 2021, a positive indicator for airlines, particularly those depending on long-haul travel, a segment that is expected to recover “quite strongly” in 2022, Mr Walsh said.

However, Iata warned that rising jet fuel prices, higher labour costs and labour shortages are putting pressure on airlines' operating costs.

Average jet fuel prices, the single biggest element in an airline's cost base, have strengthened to about $101 in January, significantly higher than Iata's price forecast in October of $77.8 per barrel.

“Clearly, this is something that airlines will be closely monitoring,” Mr Walsh said. “Given what we've seen in the last couple of years, it is unlikely that most airlines will have significant hedging in place to protect them against this increase in the oil price.”

The rise in jet fuel prices will be a factor in determining airfares through the year, he added. While higher oil prices represent a “financial challenge” to airlines, they are also indicative of stronger economic conditions, which are typically beneficial to the industry.

The industry has experienced an exodus of skilled workers, who left their jobs permanently as airlines were forced to restructure and as government-imposed travel restrictions caused uncertainty, while other employees have been temporarily unable to work due to being infected with Covid-19.

The so-called Great Resignation has “hit our industry particularly hard”, the Iata chief said.

Weighing in on a heated dispute between Airbus and its customer Qatar Airways, Mr Walsh said the European plane maker's decision to cancel an order by the airline was a “completely new” and “worrying” development.

Mr Walsh and other airline chief executives want to understand the underlying issues behind the cancellation, he said.

“I would hate to think that one of the suppliers is taking advantage of their current market strength to exploit their position, and that is something we are watching very closely,” Mr Walsh told reporters.

Asked about the impact of the Russia-Ukraine crisis on the industry, Mr Walsh said it was unlikely to affect airlines' traffic over that region significantly, as most have already avoided that airspace due to earlier tensions.

Updated: January 26, 2022, 8:37 AM