I attended the International Air Transport Association (IATA) Annual General Meeting in Boston on October 4th. Throughout the meeting, I learned about the latest developments and emerging trends in the airline industry.
The losses decrease but the challenges continue
IATA announced the latest outlook for the financial performance of the airline industry, showing improved results amid the continuing COVID-19 crisis:
- Industry net losses expected to decline to $ 11.6 billion in 2022 after losing $ 51.8 billion in 2021
- Net loss estimates for 2020 have been revised to $ 137.7 billion (from $ 126.4 billion)
“The scale of the COVID-19 crisis for airlines is enormous. Over the period 2020-2022, total losses could reach 200 billion dollars. In order to survive, airlines have significantly reduced their costs and adapted their operations to all available opportunities. We are well past the deepest point of the crisis … “
Willie Walsh, Managing Director of IATA
- Demand (measured in RPK) is expected to be 40% of 2019 levels for 2021, rising to 61% in 2022.
- Total passengers expected to reach 2.3 billion in 2021. This figure will rise to 3.4 billion in 2022, which is similar to 2014 levels and significantly lower than the 4.5 billion travelers in 2019.
- Strong demand for air freight should continue. With demand in 2021 at 7.9% above 2019 levels, rising to 13.2% above 2019 levels for 2022.
Restoring global connectivity, the 11.3 million jobs (pre-COVID-19) in the aviation industry and the $ 3.5 trillion in GDP associated with travel and tourism should be priorities for governments.
“People have not lost their desire to travel, as we see in the strong resilience of the internal market. But they are prevented from traveling abroad by restrictions, uncertainty and complexity. More and more governments are seeing vaccinations as a way out of this crisis. Governments must work together and do everything in their power to ensure that vaccines are available to all who want them. “
Willie Walsh, Managing Director of IATA
Frustration with travel restrictions on the rise
A survey, commissioned by IATA, of 4,700 people surveyed in 11 markets in September demonstrated confidence that the risks of COVID-19 can be managed effectively and that the freedom to travel must be restored.
- 67% of respondents felt that most country borders should be open now
- 64% of those surveyed felt that border closures are unnecessary and have not been effective in containing the virus
- 73% responded that their quality of life suffers due to COVID-19 travel restrictions
“The message they are sending to governments is: COVID-19 is not going away, so we need to establish a way to manage its risks while living and traveling normally. “
Willie Walsh, Director General of IATA
In recent months, several key markets, which were previously closed, have taken steps to open up to vaccinated travelers. Europe was a forerunner, followed by Canada, the United Kingdom and the United States. Even Australia, which has some of the most draconian restrictions, is taking action to reopen its borders to vaccinated travelers by November. IATA has stated that it supports these measures and encourages all governments to consider the following framework for reopening borders:
- Vaccines should be made available to everyone as quickly as possible
- Vaccinated travelers should face no obstacles to travel
- Testing should allow those without access to vaccines to travel without quarantine
- Antigen testing is the key to cost-effective and convenient testing regimes
- Governments should pay for testing, so it doesn’t become an economic barrier to travel
Regions of the world where vaccine distribution is slower (developing economies and some developed economies in Asia-Pacific) will take longer to see an industry recovery.
Industry Outlook – Global demand is picking up steadily
- By 2021, aggregate demand is expected to reach 40% of pre-crisis (2019) levels. Capacity is expected to grow faster than demand growth, reaching 50% of pre-crisis levels by 2021
- By 2022, aggregate demand is expected to reach 61% of pre-crisis (2019) levels. Capacity is expected to continue to grow faster than demand, reaching 67% of pre-crisis levels by 2022
Domestic demand, with fewer restrictions in most countries, is driving the recovery. Global GDP is expected to grow by 5.8% in 2021 and a further 4.1% in 2022. In addition, accumulated consumer savings (worth 10-20% of GDP in some countries) help mitigate pent-up demand on domestic markets without restriction.
- By 2021, domestic demand is expected to reach 73% of pre-crisis levels (2019)
- By 2022, domestic demand is expected to reach 93% of pre-crisis levels (2019)
International demand is the slowest to recover, due to persistent restrictions on free movement across borders, quarantine measures and uncertainty among travelers.
- By 2021, international demand is expected to reach 22% of pre-crisis levels (2019)
- By 2022, international demand is expected to reach 44% of pre-crisis levels (2019)
Freight request (measured in CTK) is strong as companies continue to restock. The World Trade Organization forecasts world trade growth of 9.5% in 2021 and 5.6% in 2022.
- In 2021, freight demand is expected to exceed pre-crisis levels by 8% (2019)
- By 2022, freight demand is expected to exceed pre-crisis levels by 13% (2019)
Net zero carbon emissions by 2050
At the IATA AGM, members approved a resolution for the global airline industry to achieve zero carbon emissions by 2050. This commitment will align with the goal of the Paris Agreement so that global warming does not exceed 1.5 ° C.
“Airlines around the world have made a critical decision to ensure the sustainability of flights. Post-COVID-19 reconnection will be on a clear path to net zero. Through the collective efforts of the entire value chain and supporting government policies, aviation will achieve net zero emissions by 2050, ”said Willie Walsh, Managing Director of IATA.
Achieving net zero emissions will be a huge challenge. The aviation industry must gradually reduce its emissions while meeting the growing demand of a world eager to fly. In order to meet the needs of the ten billion people who are expected to fly in 2050, at least 1.8 gigatons of carbon must be reduced that year.
The strategy is to reduce CO2 emissions as much as possible from industry solutions such as sustainable aviation fuels, new aviation technologies, more efficient operations as well as infrastructure and the development of new zero-emission energy sources such as than electricity and hydrogen.
The resolution requires all industry stakeholders to commit to addressing the environmental impact of their policies, products and activities with concrete actions and clear timelines, including:
- Fuel companies bringing sustainable aviation fuels (SAFs) to market on a large scale and at competitive cost
- Governments and air navigation service providers (ANSPs) eliminate inefficiencies in air traffic management and airspace infrastructure
- Aircraft and engine manufacturers producing radically more efficient airframe and propulsion technologies
- Airport operators provide the necessary infrastructure to supply SAF, at cost and cost-effectively