Over the last few weeks, a few countries lifted travel restrictions, only to scale them back later. Governments around the world are simply responding to rising case numbers in many countries. This uncertainty has definitely upended travel plans for many frequent travelers. Not too long ago, I made the argument that travel will be suppressed for much longer and won’t return to normal any time soon. It now seems like that prediction is unfortunately coming true. The IATA expects that any recovery of air travel will take much longer and could well not happen until 2024.
Air Travel Recovery Predictions
A couple of days back, I wrote about how Amex’s top execs expect corporate travel spend to continue to remain low for a while. We can also see the same trend in IATA’s forecast. Corporate air travel serves as a major revenue driver for airlines. Corporate travel spend is bound to remain low for much longer than expected, thereby impacting air travel as well.
IATA’s data depicts some sombre numbers for the air travel industry, which is covered in this Business Traveller report.
Passenger traffic worldwide in June 2020 fell by 86.5 per cent compared to the same period last year. This compares with a 91.0 per cent contraction in May.
IATA says that the more pessimistic recovery outlook is based on a number of recent trends: Slow virus containment in the US and developing economies, Reduced corporate travel and Weak consumer confidence
Passenger numbers are expected to rise 62 per cent in 2021 off the depressed 2020 base, but still will be down almost 30 per cent compared to 2019. A full recovery to 2019 levels is not expected until 2023, one year later than previously forecast.
Thankfully, the report states that people still have some pent up demand for visiting friends and relatives. However, they’re choosing to stay indoors thanks to a combination of an economic recession coupled with bleak public health data. 55% of respondents told IATA in June that they don’t plan to travel in 2020.
The Pundit’s Mantra
With every recession, we see a few trends die and new ones emerge. This time we’re facing a double whammy with a public health crisis as well. For now, we’re seeing a sudden uptick in the use of devices and other technologies in order to ensure that people can still communicate and work remotely. This uptick in the use of video conferencing could well have some long term impact on corporate air travel.
As compared to International travel, domestic travel will recover sooner. However, the current scenario shows no promising signs of either of those happening soon. The most recent data actually pushes the predicted date for air travel recovery one year further, until 2024.
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Thank you again China for destroying the world’s economy. I hope that your trade surplus erodes into a deficit in the next ten years.
Then why does this government want to bail out airlines to the tune of $billions, yet again – pay them to keep employees on the payroll to do what? ….. Stand around and look at all the work they don’t have, stand there and look at one another ??? Just let them get smaller and downsize. Start over, build it up again at the right time.