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| 1 minute read

More pain to come, but reason to be optimistic for airlines?

While airlines and the aviation industry at large pinned their hopes on borders re-opening in 2021 to kick-start a recovery from the devastating effects of worldwide travel restrictions, IATA's latest forecasts illustrate the depth of the crisis as those travel restrictions continue to delay recovery.   

Although IATA forecasts a 26% improvement in travel (measured in revenue passenger kilometres, or RPK) from the position in 2020, there is still a long way to go: that 26% improvement over the course of this year equates to a return to just 43% of 2019 levels. IATA also paints a similar picture for revenues, with an estimated growth of 23% from 2020 figures (taking 2021 revenues to 55% of revenues generated in 2019).  

Even as travel restrictions are eased and passenger numbers increase, the effects of the pandemic on airlines' finances will be felt for some time to come as airlines seek to deal with their debt burden, which is estimated to have increased by $220 billion to $651 billion as at the end of 2020.

Put simply, the recovery is going to take longer than many were anticipating.  As Willie Walsh says: "This crisis is without question, the worst challenge, the greatest crisis, we've ever faced. It is much deeper and has extended longer than anybody had expected."

However, despite the scale of these challenges, there are still reasons to be optimistic. 

Some domestic markets, which are not subject to the same travel restrictions as international markets, are showing signs of significant improvement - for example, IATA has estimated that domestic markets could recover to 96% of 2019 levels in the second half of 2021.  

This sentiment is echoed by US airlines who have recently reported that the pace of recovery is accelerating, with demand for the summer holiday season boosted by restrictions being eased and the vaccination roll-out.

There is clearly a pent-up demand for travel and, as travel restrictions ease, passengers are returning to the skies.  All this points favourably to a recovery - it may just take longer than anticipated.

I'm optimistic. I think there's good evidence to support recovery. We've demonstrated the resilience of the industry and that we are prepared to do what's necessary.

Tags

transportation, covid-19, aviation, airlines

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