A new aviation sector outlook paper from ING expects the recovery of the air travel sector to only start in the second half of 2021 with a full recovery unlikely “before 2024-2025”, with the outstanding question of whether summer travel will be allowed in the short-term.
“So far, the prospects of easing travel restrictions and the introduction of digital vaccine passports have disappointed the industry. However, the roll-out of vaccinations will help the sector restart in the second half of 2021. As most leisure travel demand remains on standby, we expect it to return as soon as restrictions are eased and travelling becomes safe again. Revenue passenger kilometres (RPK’s) is expected to start rebounding this year and might end up at an average of 40-50% of pre-pandemic levels in 2021.”
“Full recovery will take several years, probably until 2024-2025. Domestic traffic in large countries like Russia and China is ahead of the curve as domestic travelling is easier particularly in China which has so far escaped a second wave. Due to ongoing capacity shortages and a positive outlook, air cargo is no longer an overlooked niche. Instead, it is expected to be a continued bright spot in 2021, with new players building up positions in the market.”
Although leisure travel is expected to return first, ING states that business travelling will return at a much slower pace affecting airlines’ profitability. Cargo remains the bright spot, adds the report, with freight levels expected to rebound by 10% in 2021.
“In the past, air cargo was considered a niche activity receiving little attention, but now airlines operating freighters are making use of high tariffs providing some counterweight to losses in passenger transport. Some flag carriers – like Air Canada - are now, therefore, growing their freighter fleets.”
Commenting on whether the recovery in air travel will be greener, ING states that although older aircraft have been phased out by many airlines, orders for replacement new technology aircraft had “slowed”. Adding on the other hand that most government support schemes have included some “greening”, namely the Dutch government's package for KLM that required a biokerosene blending grade of 14% in 2030 and the French government’s request for Air France to scale down short distance national flights where it competes with high-speed rail services.