IATA Laments Unexpectedly Weak Traffic Improvements in June

 - July 28, 2020, 9:30 AM

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

Airlines have seen a modest increase in airline traffic since the so-called Covid lockdown period in April but the rise in June has proved unexpectedly weak, International Air Transport Association officials reported Tuesday. As a result, IATA now projects a 63 percent decline in revenue passenger kilometers (RPKs) during the second half of the year in relation to the same period in 2019, compared with its earlier forecast for a 50 percent drop. It also sees a return to 2019 traffic levels in 2024, a year later than it projected in its last forecast.

“The good news is we saw a further rise in air travel globally in June, for the second consecutive month from the April low point,” said IATA chief economist Brian Pearce. “The bad news is that the rise is barely visible. It was disappointingly and unexpectedly weak.”

June RPKs finished some 86 percent lower than at the same point last year, while at the low point in April traffic had declined year-over-year by some 94 percent.

“So it’s moving in the right direction but we see nowhere near the improvement in air travel that we see in global business confidence,” noted Pearce, adding that the rises in May and June came almost exclusively from domestic air travel. Asian markets led the trend, as China has returned to about 35 percent of its levels a year ago while domestic travel in Vietnam has completely recovered to pre-crisis levels. The U.S., at the same time, continues to lag despite increasing capacity with a resurgence of Covid cases there.

Pearce attributed the sluggish improvements internationally to continued border restrictions apart from a few air travel corridors or “bubbles” within the European Union, for example.

“Even there we’re seeing some resurgence of Covid-19 cases in a number of countries, which has resulted in the UK closing its borders to travel with Spain,” noted Pearce. “[The virus resurgence] is clearly creating not just closed borders but uncertainty in the minds of the traveling public, which is certainly damaging for the confidence that’s needed to get travel back.”

Separately, load factors in most cases remained at all-time lows for the month, reported Pearce. International load factors averaged less than 40 percent in June while domestic load factors approached 63 percent, thanks in large part to domestic Chinese traffic, which nearly reached 70 percent.

Meanwhile, break-even load factors rose during the period despite low fuel costs. “The challenge for airlines is that break-even load factors have risen because of the costs resulting from the impact of the health controls, so turnaround times [have increased] and less utilization of aircraft [has resulted] in some cases,” explained Pearce. “Airlines are still actually burning a lot of cash essentially because the rise in traffic has been less than expected.”