Airlines face a prolonged uphill climb before air travel demand recovers to pre-pandemic levels, as passenger numbers are likely to remain below last year’s levels until 2023, S&P Global Ratings has suggested in a new report.
The ratings agency forecasts a “swoosh-shaped” recovery in which, after plummeting up to 55% this year compared with 2019, passenger numbers will gradually creep back up to pre-coronavirus levels at some point in 2023.
S&P anticipates a much sharper drop in 2020 passenger numbers than it did just a couple of months ago. The agency in March predicted a 20-30% decline this year, but in a report published on 28 May revises this figure to 50-55%. It has also extended by a year the length of time it expects demand recovery to take.
“It will be a much more protracted recovery than the rebounds observed after [the] 9/11 terror attack, the SARS pandemic of 2003, and the 2008/2009 global financial crisis,” says the report.
European air traffic will be the worst affected, S&P predicts. Recovery for all regions will depend on factors such as passenger confidence and whether there is a second wave of Covid-19 outbreaks that results in further lockdowns.
“Now that the peak of the virus spread appears to have passed in many countries, several governments are looking to slowly and selectively open their borders,” the report notes. “The path to air traffic recovery will depend not just on the pace of these border openings, but also on airline fleet capacity and route planning, passenger demand, and the economic burden resulting from the severity of the coronavirus pandemic.”
Despite the expected slow road to recovery, S&P’s long-term forecast for the aviation industry is more positive.
“Over the longer term, we believe that air travel will eventually return when current health and safety concerns have been meaningfully addressed by the industry, and consumer confidence rebounds, supported by steady historical growth rates in air traffic of 4-5% per year,” says the agency.
However, it cautions that a more widespread adoption of remote working during lockdowns “could have a lingering impact on business travel, which has been the more lucrative passenger segment for the airlines”.