• Thu. Aug 4th, 2022

Mood of Cautious Optimism as Airline Industry Heads to IATA’s Annual General Meeting | Newsletter

ByKimberly A. Brochu

Jun 17, 2022

As the global airline industry gathers in Doha ahead of this year’s IATA AGM, June 19-21, there is plenty to be positive about, as well as reason for caution about the outlook.

First and foremost, the airline industry appears to have survived its greatest crisis with surprisingly few carriers lost along the way. Most airlines still have a lot of work to do to repair their balance sheets, but they are able to face the pandemic with more confidence than at any time in the past two years.

Indeed, as more and more governments drop Covid-related travel restrictions, the huge pent-up demand is finally driving a widespread return to the skies.

Indeed, while many industry watchers have expressed concern during the darkest days of the pandemic that demand could return below pre-Covid levels, some stakeholders are suggesting the opposite may prove to be true. .

Speaking earlier this month, Delta Air Lines chief executive Ed Bastian told a conference in Bernstein that the experience of living through the pandemic would likely encourage people to travel more than before.

“I think demand will stabilize at a higher level of activity than what we saw in 2019,” he predicts.

Indeed, people “will no longer take travel for granted as they did in the past,” says Bastian, and “will want to invest” in more travel experiences.

“[People have] lost almost three years of experience during the pandemic and I don’t think it will be something that will happen this summer or just this year, ”he adds in reference to the strong travel demand seen in the markets of Delta today.

The latest global traffic data from IATA reflects this enthusiasm, as the gap with pre-crisis levels continues to close. Passenger demand in April decreased by 37.2% compared to 2019.

Above all, more countries in the Asia-Pacific region – with the exception of China – are opening their borders, making the recovery a truly global affair.

“April’s data is cause for optimism in nearly every market except China, which continues to severely restrict travel,” IATA Director General Willie Walsh said. “Experience from the rest of the world demonstrates that increased travel is manageable with high levels of population immunity and normal disease surveillance systems.”

Removing remaining travel restrictions – including the recent end to the Covid-19 testing requirement among arrivals to the United States – will ensure the recovery maintains momentum.

But it’s impossible to ignore some of the headwinds facing the industry today.

At some point, the measures taken by the government to reopen the borders will be challenged by a new variant of Covid-19. No one is likely to take anything for granted in this regard.

But even if the epidemiological situation remains on a positive track, a key question is what impact other factors will have once the initial wave of enthusiasm for travel subsides and the northern hemisphere enters its season. winter.

Operational issues affecting a number of markets are an immediate concern, as staffing shortages combine with other factors to lead to delays and cancellations.

More generally, many geographies are worried about runaway inflation and the broader economic outlook.

At the same time, Russia’s invasion of Ukraine has shaken a number of markets and raised questions about a possible reversal in globalization trends.

Partly due to the security situation in Europe, fuel prices have skyrocketed, creating new cost challenges for an industry that is still burning cash in many areas.

And the industry’s savior during the Covid-19 crisis – air cargo – is facing a setback after a strong performance in 2021.

The latest data from IATA shows air cargo demand contracted 11.2% year-on-year in April as the war in Ukraine and lockdowns in China take their toll.

“But with China easing lockdown restrictions, there is cause for optimism and the imbalance between supply and demand is keeping yields high,” Walsh said.

In terms of longer-term challenges, sustainability remains a top priority as airlines seek to retain control of their own destiny. Just two weeks ago they received a reminder of the bumpy road ahead, as the European Parliament voted to extend the EU emissions trading scheme to cover all flights departing from the bloc from 2024, putting it in conflict with the scope of the global CORSIA programme.

If the industry wants to walk away from the Covid-19 discussion in Doha, it cannot complain about a lack of alternative talking points.