Air Travel Demand To Remain Uncertain In 2021: CAPA

Advertisement

Aviation consultant Centre for Asia Pacific Aviation (CAPA) has predicted that demand recovery will remain uncertain even in 2021, especially for international traffic.

CAPA India on January 5 released a report on 10 key issues to watch in Indian Aviation in 2021. The Key highlights are as below:

  1. Consolidation is inevitable (as CAPA India has stated since May-2020) and will be strategic in nature. It could result in a 2-3 airline system in the near to medium term.
  2. After almost 30 years of deregulation a largely market-driven sector will finally emerge from 2021, with long term strategic implications for consumers, competition and industry structure. The government’s commitment to the privatisation of Air India and airports is laudable.
  3. The structure of competition may change in the near to medium term, possibly resulting in a two-horse race in both the airline and airport sectors.
  4. Demand recovery remains uncertain, especially international traffic. Long haul traffic in particular is likely to take some time to repair.
  5. FY2022 is expected to be another year of large losses for the entire industry, but especially airlines.
  6. Lenders and investors will remain wary of the sector (especially airlines) unless the government intervenes in the form of sector-specific policy measures.
  7. The government may be tempted to maintain price floors and caps, at least for the first half of 2021.
  8. A protectionist bilateral regime is expected to persist as a near-term policy.
  9. Air cargo has performed well in FY2021 but designing new businesses on the expectation that this will continue may be risky.
  10. IndiGo will emerge from COVID19 significantly stronger relative to the competition, largely due to its very strong balance sheet.

As per CAPA, international traffic is only expected to recover 35-40% of financial year 2020 levels, while domestic traffic in financial year 2021-22 is expected to reach 70-80% of financial year 2020 levels.

Advertisement

According to CAPA, there has been very limited discretionary travel demand that could be stimulated through lower fares. Though some carriers opposed pricing restrictions, CAPA expects no major push to change the regulations.

It also stated that discretionary domestic travel segments (business, institutional, MICE, leisure and foreigners travelling on the domestic network), that accounted for an estimated 55% of the market before the Covid-19 outbreak, is unlikely to return until the pandemic is under greater control or deployment of a vaccine is widespread.

The need to modernise these agencies can no longer be ignored as the entire industry will soon be market-driven. Hiving off and corporatising the air navigation services division of the Airports Authority of India (AAI), in line with global best practice, is another overdue reform that should now be pursued. The AAI requires a new long-term business model given that the largest airports will have been privatised,” CAPA said in a report issued on Monday.


For the latest travel news and updates, Follow and connect with us on FacebookTwitter and Linkedin!

Advertisement

Also Read – Airlines That Offer Free COVID-19 Travel Insurance!

Advertisement

Newsletter Updates

Enter your email address below to subscribe to our newsletter