ICAO has confirmed that international passenger traffic fell 60% during 2020, bringing air travel totals back to 2003 levels. ICAO data shows that seat capacity fell by 50% last year, with just 1.8 billion passengers compared to 4.5 billion in 2019. ICAO predicts airline financial losses of $370 billion resulting from the impact of COVID-19, with airports and air navigation services providers (ANSPs) losing a further 115 billion and 13 billion, respectively. The pandemic plunge in air travel demand began in January of 2020, but was limited to only a few countries. As the virus continued its global spread, however, air transport activities came to a virtual standstill by the end of March.
Domestic travel demonstrated stronger resilience and dominated traffic recovery scenarios, particularly in China and the Russian Federation where domestic passenger numbers have already returned to the pre-pandemic levels, or so has been reported to the ICAO. Overall there was a 50% drop in domestic passenger traffic globally, while international traffic fell by 74% or 1.4 billion fewer passengers.
The ICAO global report has some sobering notes: “The global $370 billion drop in gross airline passenger operating revenues represented losses of $120 billion in the Asia/Pacific, $100 billion in Europe, and $88 billion in North America, followed by $26 billion, $22 billion and $14 billion in Latin America and the Caribbean, the Middle East and Africa, respectively. The near-term outlook is for prolonged depressed demand, with downside risks to global air travel recovery predominating in the first quarter of 2021, and likely to be subject to further deterioration.”
“We expect any improvement in the global picture only by the second quarter of 2021, though this will still be subject to the effectiveness of pandemic management and vaccination roll out. In the most optimistic scenario, by June of 2021 passenger numbers will be expected to recover to 71% of their 2019 levels (53% for international and 84% for domestic). A more pessimistic scenario foresees only a 49% recovery (26% for international and 66% for domestic),” according to ICAO - Guidance on Economic and Financial Measures
That is the outline, but the information above is the past, the future is this:
If airlines are grounded still in June then all bets are off and there will be significant failures. Governments everywhere will have to choose which airlines to save and which to let fail. Existing airlines cannot help but burn cash right now. The future in many cases lies with those start-up airlines waiting in the wings for the full opening of the global economy. Many of those start-ups are the big brands of tomorrow that lessors will power forward.
Many airline executives might need to take a step back over the coming weeks and wonder if they too should have a start-up brand waiting in the wings with no COVID-19 legacy debt burden attached to it, which they can get out of the blocks fast when the market returns.
Also thinking about the future, we need to mention the situation in Myanmar. Will sanctions be re-imposed on the country following the military coup over the weekend? It is most likely that they will be, which means the possibility of no aircraft or spares being allowed to go into: Air KBZ, Asian Wings Airways, Golden Myanmar Airlines, Mann Yadanarpon Airlines, Myanmar Airways International, Myanmar National Airlines, Yangon Airways.
This affects a number of lessors and manufacturers, and it remains to be seen what the effect will be on lessors that have aircraft on the ground in the country. It’s possible that the impact could be significant for many and one assumes that if previous sanctions were reinstated, then lessors would not be able to receive (by law) rental payments from some (if not all) airlines based in Myanmar. The market should brace for announcements from Capitol Hill and Brussels over the coming days.
But to end on good news (see APAC section below), it seems that the best run airline in the world right now is Vietjet, which has come out with some of the best crisis management figures of any airline seen these past 12 months, having just recorded a profit. Well done to them.