IATA Sees Recession Resulting in Slow Airline Recovery

 - April 21, 2020, 10:51 AM

This story is part of AIN's continuing coverage of the impact of the coronavirus on aviation.

The International Air Transport Association sees a “relatively modest” industry recovery in the third quarter of the year, given indications of tepid consumer confidence even as the Covid-19 crisis subsides in Australia, for example. According to IATA chief economist Brian Pearce, surveys show that more than 40 percent of would-be airline passengers would delay traveling for six months or more following the lifting of Covid-19-related restrictions, pointing to a slow return of demand in an industry that now has seen traffic decline 80 percent from its pre-Covid peak.

“The clear reason the Australian market is not recovering is that confidence is still at rock bottom in March,” said Pearce. “The same is true in the U.S. and this is obviously a product of the recession, and that will be a clear determinant of confidence. So once travel restrictions and the lockdowns are relaxed, there is still an issue about will there be the demand from travelers, from passengers to come back and fly.”

Even in China, which saw a relatively steep increase in traffic immediately following the decline of Covid-19 in late February, the improvements appear to have plateaued at around 45 percent of normal volume, said Pearce.

“Manufacturing [in China] is pretty much back to normal; at least it's back to a position where manufacturers are saying we're out of the recession or at least manufacturing output is stable. There was a return to work,” he explained. “But…the services side of China is still much, much weaker, still in recession territory. Certainly, where we've seen travel associated with the return to work, but also visiting friends and relatives, we’ve not seen a recovery of leisure [travel].”

Meanwhile, social distancing measures that will likely see a requirement for an empty middle seat means that airlines can fill only 66 percent of their cabins, undoubtedly leading to higher airfares and further suppression of demand at a time of unprecedented hardship for the industry, according to IATA director general Alexandre de Juniac.    

“It is clear that if social distancing is imposed inside the aircraft, meaning they neutralize a huge proportion of seats, at least a third for short- and medium-haul aircraft, that means two things,” said de Juniac. “Either you fly at the same price, selling the ticket at the same as the average price as before, and then you lose an enormous amount of money so it is impossible to fly for any airline…or you increase the ticket price by at least 50 percent, and then you are able to fly with a minimum profit.”