The Hurdles Ahead: IATA Forecasts Grim Future for Asia’s Aviation
While the public seems to be (righteously) preoccupied with novel coronavirus strains, insufficiently high vaccination rates in certain parts of the world, and the continued inability to get used to the new, post-pandemic socio-economic structures and behavior frameworks, the thought of the airline industry’s struggles probably slips the minds of the vast majority of the planet’s population. Meanwhile, it comes as no surprise that 2020 served as a major knockdown to the global aviation sector. In fact, so much so that the following year managed to bring little comfort to the involved parties. This is precisely why the so-much-needed good news was highly expected from the most recent airline industry performance forecast released at the end of October by IATA. May we allow ourselves a bit of optimist at long last?
The short answer is no. Despite great expectations and the global sense of the worst being behind us, the reality seems to have different plans. Surely, forecasting has always been a tough task, given the sheer complexity of the world and an almost uncountable number of factors contributing to the various scenarios. Now, the activity starts to resemble a game of fortunetelling due to the ever more volatile world where covid-19 reigns as a king. However, if there is an authoritative estimate that is to be taken seriously, IATA is the best option we have.
As seen from the chart above, in 2022, the third year into the pandemic, the best we could count on is an anemic international travel market recovery, relative to the pre-covid days. The situation looks especially grim for Asia. ‘Within-Asia’ traffic is forecast to stay nearly 90% below 2019 levels for the full next year, meaning that not much will have changed compared to the present position. The rest of the markets are not doing much better, projected to perform either in their teens or low twenties levels.
Overall, total global air traffic demand for 2021 is expected to stand at around 40% of 2019 levels, rising to approximately 60% in 2022. Despite an upwards trend, this is still quite a depressing figure given the industry’s traditionally razor-thin margins and prior demand shocks of the 5%-10% magnitude. Should this forecast turn into reality, the ramifications for overall sector profitability are promising to be dangerously tangible, putting the very existence of some of the players at stake.
Through the pandemic, airlines will have racked up USD200 billion in losses – not something that can be readily absorbed. According to some experts, this debt level might only be expected to return to the pre-pandemic levels early next decade. In such circumstances, a sharp increase in demand is highly necessary. However, the continuous quarantine measures imposed by various regions continue to be the biggest deterrent to global traveling.
Hopefully, the industry will be able to adapt itself fast enough and come up with innovative ways of fighting the consequences of the pandemic, as well as changing itself to accommodate the ever-increasing public concerns over the sustainability of the global airline sector.