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TICKER VIEWS – International travel – are we there yet?
Like a child in the backseat of a car yelling “are we there yet?”, the global aviation sector is desperately hanging on to hope.
Richard Branson once mused “If you want to be a Millionaire, start with a billion dollars and launch a new airline.”
Well, a million seems rich these days in a deeply troubled sector.
There have been some green shoots this week – the launch of the long awaited travel bubble between Australia and New Zealand began, with hopes of more counties, like Australia-Singapore, to follow.
But the International Air Trransport Association paints a pretty bleak picture for the sector overall. Global airlines are set to lose $US47 billion this year.
IATA’s Director General Willie Walsh puts it simply.
“This crisis is longer and deeper than anyone could have expected. Losses will be reduced from 2020, but the pain of the crisis increases. There is optimism in domestic markets where aviation’s hallmark resilience is demonstrated by rebounds in markets without internal travel restrictions.
“Government imposed travel restrictions, however, continue to dampen the strong underlying demand for international travel. Despite an estimated 2.4 billion people travelling by air in 2021, airlines will burn through a further US$81 billion of cash,” said Willie Walsh, IATA’s director general.
RECOVERY
The outlook points to the start of industry recovery in the latter part of 2021. In the face of the ongoing crisis.
So what does the recovery actually look like? And who would be brave enough to predict it, given the various super-strains emerging around the world.
A lot of it is completely outside the control of airlines or passengers. Travel restrictions, including quarantines, have killed demand.
IATA estimates that travel will recover to 43 per cent of 2019 levels over the year. While that is a 26 per cent improvement on 2020, it is a long way from recovery.
DOMESTIC GROWTH
Domestic markets will improve faster than international travel.
Overall passenger numbers are expected to reach 2.4 billion in 2021.
International travel has a long way to go – still 86.6 per cent down on pre-crisis levels over the first two months of 2021.
It’s why the 747 has disappeared from the skies, and the Airbus bosses must be glad they’ve already rolled the last A380 off the production line.
VACCINATION
Vaccination progress in developed countries, particularly the US and Europe, is expected to combine with widespread testing capacity to enable a return to some international travel at scale in the second half of the year.
But remember, early last year we hoped we’d be flying overseas again by the end of 2020.
2021 and 2020 have opposite demand patterns: 2020 started strong and ended weak, while 2021 is starting weak and is expected to strengthen towards year-end. The result will be zero international growth when comparing the two years.
Industry revenues are expected to total USD458 billion. That’s just 55 per cent of the USD838 billion generated in 2019.
And then there’s the aircraft manufacturers. Spare a thought for Boeing. Etihad announcing its retiring its 777-300ER fleet to focus on becoming a smaller 787 boutique airline. While international travel slowly resumes, it will be a long time before airlines take the risk to buy larger, wide bodied aircraft.
But while the short term future looks grim, the airline industry has been battered before, and survived. The shoots of green have started to appear.
