• Wed. Jun 22nd, 2022

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.

Losses dwindle but challenges persist

IATA has announced the latest outlook for the airline industry’s financial performance, showing improved results amid the ongoing COVID-19 crisis:

  • Net industry losses expected to narrow 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 exceed $200 billion. To survive, airlines have drastically reduced their costs and adapted their activities to the opportunities that presented themselves. We are well past the deepest point of the crisis…”

Willie Walsh, Director General of IATA

  • Demand (measured in RPK) is expected to be 40% of 2019 levels for 2021rising to 61% in 2022.
  • The total number of passengers is expected to reach 2.3 billion in 2021. This figure will increase 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 2021 demand 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 wanderlust, as evidenced by the strong resilience of the domestic market. But they are being held back from traveling abroad by restrictions, uncertainty and complexity. More and more governments see 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 everyone who wants them.”

Willie Walsh, Director General of IATA

Willie Walsh, Director General of IATA

Frustration over travel restrictions is growing

A survey, commissioned by IATA, of 4,700 respondents in 11 markets in September demonstrated confidence that the risks of COVID-19 can be effectively managed and freedom to travel must be restored.

  • 67% of respondents felt that most national borders should be open now
  • 64% of respondents felt that border closures are unnecessary and have not been effective in containing the virus
  • 73% said their quality of life was deteriorating 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 travellers. 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 steps to reopen its borders to vaccinated travelers by November. IATA said it supports these measures and encourages all governments to consider the following framework for reopening borders:

  • Vaccines must be made available to all as soon as possible
  • Vaccinated travelers should face no obstacles to travel
  • Tests 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 the tests, so they don’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 steadily recovering

  • In 2021, aggregate demand is expected to reach 40% of pre-crisis levels (2019). Capacity is expected to grow faster than demand growth, reaching 50% of pre-crisis levels for 2021
  • In 2022, aggregate demand is expected to reach 61% of pre-crisis levels (2019). Capacity is expected to continue growing faster than demand, reaching 67% of pre-crisis levels for 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 another 4.1% in 2022. In addition, accumulated consumer savings (worth 10-20% of GDP in some countries) are supporting the alleviation of pent-up demand in unrestricted domestic markets.

  • In 2021, domestic demand is expected to reach 73% of pre-crisis levels (2019)
  • In 2022, domestic demand is expected to reach 93% of pre-crisis levels (2019)

International application is the slowest to recover, due to continued restrictions on cross-border freedom of movement, quarantine measures and traveler uncertainty.

  • In 2021, international demand is expected to reach 22% of pre-crisis levels (2019)
  • In 2022, international demand is expected to reach 44% of pre-crisis levels (2019)

Freight request (measured in CTK) is strong as businesses continue to restock. The World Trade Organization forecasts world trade to grow by 9.5% in 2021 and 5.6% in 2022.

  • In 2021, freight demand is expected to exceed pre-crisis levels by 8% (2019)
  • In 2022, freight demand is expected to exceed pre-crisis levels by 13% (2019)
Airline CEO Roundtable.  Sir Tim Clark, Chairman of Emirates with Carsten Spohr, Lufthansa Group
Airline CEO Roundtable. Sir Tim Clark, Chairman of Emirates with Carsten Spohr, Lufthansa Group

Net zero carbon emissions by 2050

At the IATA AGM, members approved a resolution for the global airline industry to achieve net zero carbon emissions by 2050. This commitment will align with the Agreement’s goal of Paris so that global warming does not exceed 1.5°C.

“Airlines around the world have made a momentous decision to ensure that flying is sustainable. Post-COVID-19 reconnection will be on a clear path to net zero. Through collective efforts across the value chain and supportive government policies, aviation will achieve net zero emissions by 2050,” said IATA Director General Willie Walsh.

Achieving net zero emissions will be a huge challenge. The aviation industry must gradually reduce emissions while meeting the growing demands of a world eager to fly. To meet the needs of the ten billion people expected to fly in 2050, at least 1.8 gigatonnes of carbon must be reduced that year.

Aviation Sustainability Roundtable
Aviation Sustainability Roundtable

The plan

The strategy is to reduce as much CO2 as possible from sector 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 demands that all industry stakeholders commit to addressing the environmental impact of their policies, products and activities through concrete actions and clear timelines, including:

  • Fuel companies bringing large-scale, cost-competitive Sustainable Aviation Fuels (SAF) to market
  • Governments and Air Navigation Service Providers (ANSPs) eliminate inefficiencies in air traffic management and airspace infrastructure
  • Aircraft and engine manufacturers are producing radically more efficient airframe and propulsion technologies
  • Airport operators provide the necessary infrastructure to supply SAFs, at cost and profitably