After the aviation industry’s sharpest decline since the global financial crisis in 2008 in Q2, a just-released survey by IATA suggests that airline executives expect weakness in passenger demand and profitability to persist for at least another year.
Detailed in the association’s July 2020 Airline Business Confidence Index report, the results of the survey of airline CFOs and Heads of Cargo confirms the severe impact of COVID-19 on global aviation.
Survey results also indicated mixed opinions, which are not surprising given the fluid nature of the pandemic.
Among the key findings:
• 42% of those surveyed expect that a recovery in demand to pre-crisis levels will take longer than two years. Only 19% expect to see a recovery within six to 12 months.
• North and Latin America regions are expected to return to 2019 levels of demand later than elsewhere. In fact, only 6% of respondents expect North America to be first to recover, while 39% believe the region will be last. Asia Pacific and Europe are the regions expected to recover first.
• Respondents point out that air fares could decrease due to the slow recovery in demand and highlighted the potential need for measures or incentives to help stimulate travel recovery. On the other hand, 19% of respondents expect prices to increase gradually once the supply and demand relationship is restored.
• With the recovery in demand likely to be slow, 55% of respondents expect to have to decrease employment levels over the coming 12 months.
• The majority (68%) of respondents expect a deterioration or no improvement in profits over the year ahead as a result of border restrictions being lifted only slowly and the restoration of passenger confidence to travel taking some time. On the other hand, around one third of those surveyed expect to see an improvement in profitability as passenger flights resume.
Some other findings:
• In Q2 2020, passenger demand collapsed while cargo demand improved slightly following a sharp decline in the previous quarter.
• The majority of respondents (77%) saw their profits decline in Q2 – a slightly lower share than the previous April survey. However, 19% of respondents reported an improvement in profitability, underpinned by the strong demand for air cargo.
The Future
As for the next 12 months, respondents have mixed views: 50% expect passenger demand to either decline further or remain stable, while the other half expect passenger demand to increase. The latter represents a significant lift in sentiment compared with the April survey where just 12.5% expected to see an improvement.
Nonetheless, those expecting to see a recovery in demand remain cautious and mindful that the situation will be challenging.