Covid-19 pandemic to wipe out three years of growth for airline industry, Iata says

Air passenger numbers will be 52% lower in 2021 than pre-crisis levels, recover to 88% in 2022 and 105% in 2023, chief economist says

People wearing protective masks walk through Ronald Reagan National Airport in Arlington, Virgina, as air travel picks up in the US for this week's Memorial Day holiday. Global air passenger numbers are expected to be 52 per cent lower this year, according to Iata. Bloomberg
People wearing protective masks walk through Ronald Reagan National Airport in Arlington, Virgina, as air travel picks up in the US for this week's Memorial Day holiday. Global air passenger numbers are expected to be 52 per cent lower this year, according to Iata. Bloomberg

The Covid-19 pandemic will cost global airlines up to three years of growth, though a strong recovery will ensue once governments remove travel barriers, according to the International Air Transport Association (Iata).

Total air passenger numbers in 2021 will be 52 per cent lower than they were in 2019, making for a "disappointing" year and a slight downward revision from the forecast in January, Brian Pearce, Iata's chief economist, said during an online media briefing on Wednesday. In 2022, passenger numbers will bounce back to 88 per cent of their pre-crisis levels before exceeding pre-pandemic levels (105 per cent) in 2023.

"In our view, the long-term impact is that we've lost two to three years' worth of growth, but once those travel barriers come down, we should see a fairly rapid snapback," Mr Pearce said.

By 2030 global passenger numbers are expected to have grown to 5.6 billion, which would be 7 per cent below Iata’s pre-Covid forecast and an estimated loss of 2-3 years of growth.

Iata’s long-term post-Covid forecast on Wednesday showed that the recovery in passenger numbers is slightly stronger than the recovery in demand measured in revenue passenger kilometres (RPKs). This is because of the expected faster rebound in domestic markets like China with large passenger numbers and shorter distances, as international travel lags behind.

In terms of regions, different markets will recover at a varying pace, depending on travel restrictions, the pace of vaccination distribution and governments’ approach to risk, Mr Pearce said.

Airlines in regions with large domestic markets such as Asia will be the first to recover, while markets that are much more reliant on international travel such as western Europe, Africa and the Middle East, will lag behind by about a year, he said.

In the long term, once travel restrictions are removed and once economic drivers of air travel and demographics improve, Asia-Pacific will be the fastest-growing region in terms of passenger numbers with a 5.4 per cent compounded annual growth rate between 2025 and 2030, the chief economist said. Africa and the Middle East will grow by 5 per cent, western Europe by 2.3 per cent and north America by 1.5 per cent.

This points to an expectation that the Covid-19 pandemic will accelerate a shift in the centre of gravity for air travel eastwards because of the relative strength of the Asian and emerging markets.

“This is quite important for those airlines acting as global super-connectors, there’s a geographical advantage for airlines based around the Gulf region, which we’d expect to persist,” Mr Pearce said.

While the long-term damage to the industry from the Covid-19 pandemic will be felt for many years to come, the short-term indications point to pent-up demand for air travel, Iata said.

The global economy has followed a V-shaped recovery, with production and trade increasing to 2 per cent above 2019 levels, Mr Pearce said. Consumers have also accumulated savings during the lockdowns and in some markets, such as the US and UK, these have exceeded 10 per cent of GDP, Mr Pearce said.

“Potential travellers have money to spend,” he noted. “The evidence is there of pent-up demand.”

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During the media briefing, Iata’s boss Willie Walsh also weighed in on the incident involving a Ryanair jet flying to Vilnius that was diverted by authorities in Belarus to Minsk.

A “detailed and fundamental” review of what happened when the plane was forced to land in Belarus is required and the international community needs to rally together to ensure that such an incident is never repeated, he said.

The Iata chief also called on governments to agree on a common standard for digital health certificates, which show proof of Covid-19 testing and vaccination, to avoid delays and chaos at airports.

Updated: May 27, 2021 09:07 AM

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