Iata sees 'light at the end of the tunnel' for pandemic-hit airlines
Global airlines battered by the Covid-19 pandemic, the worst crisis to hit the aviation industry, are at a turning point, according to the outgoing chief economist of the world's biggest airline industry body. But carriers must heed the harsh lessons learnt as they start to recover, Brian Pearce, the International Air Transport Association (Iata)'s top researcher, told The Nationalahead of his retirement next month.
Once governments roll back restrictions to air travel and as the
vaccine distribution gains pace more widely, more people will fly and
airlines will rely less on state aid, he said.
Large domestic travel markets – such as the US and China – are already recovering and expected to return to pre-crisis levels by the second half the year, he added.
"We see light at the end of the tunnel now, we can see the point in the future when international travel markets will be opened up as vaccinations roll out to a substantial number of the population," Mr Pearce said. "The game is changing now: it's moving away from governments keeping airlines on life support to thinking of a roadmap to getting back to air travel and an industry that can stand on its own feet."
International travel remains depressed, lagging behind domestic markets' recovery by a year or two, because of governments' risk-averse approach to reopening borders, the chief economist said. The uneven vaccination distribution in emerging markets is a concern, meaning mainly advanced economies will re-open to international travel faster, Mr Pearce said.
Iata expects the outlook for global airlines to brighten in the
second half of the year. Total air passenger numbers in 2021 will be 52
per cent lower than they were in 2019, before bouncing back in 2022 to
88 per cent of their pre-crisis levels and exceeding pre-pandemic levels
(105 per cent) in 2023.
There are lessons learnt from the pandemic that airlines must take into account to be better prepared for future shocks. Carriers will need to hold more cash balances, have a more flexible cost base, reduce their high level of debt that has worsened during the pandemic to avoid collapsing or government take-over and become much better capitalised, Mr Pearce said.
The industry also needs more consolidation, with some operators failing and weaker ones taken over by more efficient competitors, he said. "I worry that we have not really seen this process start, partly because governments have been so involved," the chief economist said. "I do worry that governments might get in the way of this necessary restructuring that needs to take place to end up with a healthier industry."
Since the pandemic started, governments around the world have provided $225 billion in aid to the aviation sector to support a travel recovery. The main threats to the uneven recovery unfolding around the world are containing the new virus variants effectively through vaccinations or testing programmes and governments' reluctance to lift travel barriers, Mr Pearce said.
Other risks to the recovery are the high charges imposed by some in the aviation supply chain, who are trying to recoup their losses from the pandemic and the high costs of PCR testing that are doubling or quadrupling travel expenses and hurting bookings, he added.
