COVID-19: Outlook for air travel in the next 5 years

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05/23/2020 | 03:43 am

COVID-19

Outlook for air travel in the next 5 years

Brian Pearce

Chief Economist

13th May 2020

1

Air travel may recover more slowly than most of economy

Global RPKs recover 2019 levels in 2023, 2 years behind GDP recovery

Global GDP and global RPKs, indexed to equal 100 in 2019

120

110

Global GDP

in 2019

100

2019 level

90

100

80

Global RPKs

Index,

70

Current baseline

60

50

40

2016

2017

2018

2019

2020

2021

2022

2023

Source: IATA/Tourism Economics, Air Passenger Forecasts, April 2020

Governments have provided unprecedented support

Wage subsidies, grants and loans should allow strong GDP rebound

Germany

Italy

Japan

United Kingdom

France

Australia

United States

Spain

Canada

Korea

Brazil

Indonesia

China

Argentina

Turkey

Russia

Saudi Arabia

Mexico

India

South Africa

Government support for economy in 2020, % of GDP

Spending and tax measures

Loans, equity injections, guarantees

0

5

10

15

20

25

30

35

40

% of GDP

Source: IATA Economics using data from the IMF's World Economic Outlook, April 2020

Central banks have also injected cash into economies

The US Federal Reserve has added cash equivalent to 12% of US GDP

Central bank assets, US$ billion

7,000

6,500

6,000

European Central Bank

5,500

billion 5,000

US$

Bank of Japan

4,500

4,000

3,500

US Federal Reserve

3,000

2016

2017

2018

2019

2020

+$2.5 trillion (12% of US GDP)

Source: IATA Economics using data from Refinitiv Datastream

Business confidence has rebounded in China

As lock-down relaxed in China 'V-shaped' rise of business confidence

Business confidence (PMI) in manufacturing and services

60

55

expected

50

China

45

40

no change

35

30

=

US

50

25

20

15

Germany

Source: IATA Economics using data from Markit

Solving health challenge critical for international travel

Until vaccine, opening borders to travel requires fall in COVID-19 risk

New COVID-19 cases, % of total cases, 7-day moving average

20%

15%

10%

Russia

5%

India

Brazil

US

Japan

0%

China

1-Apr

5-Apr

9-Apr

13-Apr

17-Apr

21-Apr

25-Apr

29-Apr

3-May

7-May

Source: IATA Economics using data from the World Health Organization (WHO)

China domestic air travel lagging business confidence

Rise in flights with return to work & VFR, but discretionary travel weak

China domestic flights, COVID-19 new cases

rate of change in Covid-19 Cases,

60%

80000

50%

70000

Number of flights per week

7-day moving average

60000

40%

50000

30%

40000

20%

Domestic flights

30000

20000

10%

Daily

10000

New cases COVID-19

0%

0

Source: IATA Economics analysis based on WHO data, and data provided under license by FlightRadar 24. All rights reserved.

Average trip length will fall sharply

Domestic markets open first and initial preference for short-haul trips

Average trip length, kilometers

2,100

kilometers

2,050

2,000

length,

Fall of 8.5%

trip

1,950

Average

1,900

1,850

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

Source: IATA/Tourism Economics, Air Passenger Forecasts, April 2020

International RPKs will lag domestic air travel markets

International air travel may not recover 2019 levels until 2023-24

Indexed to equal 100 in 2019

130

120

110

100

90

80

70

60

50

40

Global domestic and international RPKs, indexed 2019=100

Domestic RPKs

International

RPKs

2016

2017

2018

2019

2020

2021

2022

2023

2024

Source: IATA/Tourism Economics, Air Passenger Forecasts, April 2020

Long-term drivers for expanded demand remain

Populous emerging markets are still likely to want more air services

Trips per capita

Airline passengertrips per year and GDP per capita

10.0

France Germany US

1.0

Russia

Brazil

China

0.1 India

Nigeria

Ethiopia

0.0

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

GDP per capita (US$, inflation-adjusted)

Source: IATA/Tourism Economics, Air Passenger Forecasts, April 2020

Return to growth post-COVID but at a lower level

Global RPKs forecast to be 32%-41% below expected levels in 2021

Global RPK medium term scenarios

12,000

Pre-COVID

2025: 10% below pre-

11,000

forecast

10,000

COVID expected level

Current

baseline

2021: 32% below pre-

9,000

COVID

COVID expected level

setback

8,000

Billion

scenario

7,000

6,000

5,000

2021: risk that RPKs

4,000

could be 41% lower

3,000

2,000

2012

2014

2016

2018

2020

2022

2024

Source: IATA/Tourism Economics, Air Passenger Forecasts, April 2020

Contacts

economics@iata.org

www.iata.org/economics

Disclaimer

IATA - International Air Transport Association published this content on 13 May 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 May 2020 07:42:03 UTC

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