Europe needs five years to reach pre-corona air travel levels

11 June 2020 Consultancy.eu

Demand for air travel could plummet by as much as 62% thanks to the coronavirus, according to a new study. The outlook may not rapidly improve when nations finally relax their Covid-19 measures either, with Europe’s airlines facing the possibility that they will take five years to recover their pre-pandemic passenger levels.

The Covid-19 lock-down has greatly exacerbated the steady decline witnessed by the aviation industry in the last three years. The number of airlines experiencing solvency issues, or completely collapsing, had rapidly risen in recent years – and the sudden freeze on international travel has pushed even more firms to breaking point in 2020.

Coronavirus was cited by UK airline Flybe as a factor in its collapse earlier in the year, while Virgin Australia also pointed to the pandemic as it appointed Deloitte for its voluntary administration. In Germany meanwhile, 700 of Lufthansa’s fleet of 760 planes have been grounded amid the coronavirus lock-down. With the number of passengers falling by 99%, the firm has also had to apply a round of voluntary restructuring, ahead of a state bailout.Global passenger forecast by world regionAccording to a new study from global consulting services company ICF, the crisis the industry faces at present is so deep that it may take the best part of four years for the industry to recover to its pre-coronavirus air travel rates. The consultancy estimates that the number of airline passengers in 2020 will be 62% lower than the year before, and this drop will not be reversed until 2024, when the sector will first move beyond its 2019 figures.

ICF suggested that while the US, Canada and the Asia-Pacific regions will take no longer than four years for air traffic to return to normal, Latin America and Europe will lag behind. This presents a drastic change from the last global recession – reversing the roles of the US and Europe in particular.

Following the financial crisis of 2008, Europe scarcely saw an impact on air passengers, and recovered in just one year, while the US took more than six years to return to pre-recession levels. The rest of the world was meanwhile unaffected, and continued to grow. Obviously, the situation then is different to the one faced by travellers now, however. Even if they are cleared to fly by national governments, and they have the money to do so, many will be left wondering if their respective trips are worth the health risk.

Recovery from Great Recession vs. COVID-19

Perhaps for this reason, ICF’s overall forecast is significantly more pessimistic than what is held publicly by the airline industry itself. For example, a poll by brokerage Cowen recently found that 62% of travel executives and stock analysts expect air transportation to get back to 2019 levels in no more than three years, while only 12% expect it to take more than four.

ICF, however, cautions that due to the unique nature of this crisis, the travel slump will last much longer than the coronavirus itself. Maintaining that the worst is yet to come, the long-term sunken demand will likely force airlines to scramble to reduce their fleets and send a ripple effect throughout the economy.

Speaking to Reuters, Carlos Ozores – a consultant at ICF who works with airline management teams – said, “We’ve never been in a hole this deep… This is a fall in traffic and revenue that could lead many airlines to go bankrupt… If you have fewer planes, you have fewer pilots and fewer crew members, and those layoffs will be permanent.”