The International Air Transport Association (IATA) warned that the airline industry faces a hard winter and called on governments around the world to continue providing relief measures as the COVID-19 crisis continues.
Airlines are expected to post a loss of $84.3 billion in 2020 and government financial relief is a lifeline to many airlines. The bulk of airlines make their money in the northern summer season, while the winter season, even in the best of times, is a struggle to remain profitable.
For example, the 2019 net profit margin for European airlines followed the normal seasonal pattern and was 9% and 17% respectively in Q2 and Q3 (northern summer). But it started at -1% in Q1 and finished the year at 2% in Q4 (northern winter). The winter season will be even more challenging amid the recovery from COVID-19.
Public opinion research in the first week of June 2020 showed greater caution among travelers in returning to travel. Only 45% of travelers surveyed intend to return to the skies within a few months of the pandemic subsiding. A further 36% said that they would wait six months. That is a significant shift from April 2020 when 61% said that they would return to travel within a few months of the pandemic subsiding and 21% responded that they would wait about six months.
The survey findings are corroborated in key passenger trends demonstrating continuing market uncertainty:
- Overall bookings are down 82% year-on-year compared to June 2019.
- Long-haul forward bookings for the first week in November 2020 are 59% below normal levels. Historical trends show about 14% of airline tickets are sold 22 weeks in advance of travel. Current bookings for 1-7 November show that tickets have been sold to only 5% of the 2019 number of passengers.
- Passengers are booking closer to the time of travel. Bookings for travel 20 or more days in the future accounted for 29% of bookings made in May 2020, down from 49% in 2019. Similarly, 41% of bookings made in May 2020 were for travel within 3 days, more than double the 18% in May 2019.
“People are returning to the skies but the horizon of uncertainty of the COVID-19 crisis is extending. Forward bookings are down, and people are hedging their travel bets by booking closer to the time of travel. Airlines in the Northern hemisphere rely on a strong summer season and a predictable booking curve to get them through the lean months.
“But neither of these conditions are in place and airlines will need continued help from governments to survive a hard winter. Airlines will need much more flexibility to plan schedules around these changing consumer trends. Financial and operational flexibility equals survival,” said Alexandre de Juniac, IATA’s Director General and CEO.
IATA highlighted four keys areas where governments could assist airlines which can be read Here.
(With the inputs from IATA Website)
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