Traffic among Arab air carriers is not now expected to return to pre-crisis levels until at least 2024 and could potentially not reach those levels before 2027, fresh analysis from the Arab Air Carriers Organisation (AACO) shows. In its third status report of the impact of the pandemic on the economy, travel and tourism, published on 31 August, the Arabian airline body estimates the best-case scenario for passenger traffic among Arab carriers returning to 2019 levels is in 2024. But it considers a worst-case scenario that traffic for these airlines will not return to the previous highs until 2027. The fresh analysis comes as it now expects the global return in traffic to pre-crisis levels to take a year longer, in 2024, than its previous expectations. After a bright start to the year, Arab carrier traffic was all but wiped out by the pandemic during April. Passenger traffic among these carriers in the first half was down 55% - on capacity cut 51% - compared to the same period in 2019. ”As for the second half of 2020, demand is expected to improve gradually as restrictions are relaxed and passengers regain confidence to travel,” AACO says. It expects traffic to be 57% down among airlines in the region for the full year, though it sees capacity cut only a third compared to 2019. AACO also now sees a deeper impact for tourism to the Arab region. It had expected international tourist arrivals to be down 55% this year in a best-case scenario. It now projects a 65% drop in international visitors to the region in 2020 compared to last year. Echoing its traffic outlook for the region, it expect international tourist arrivals to remain below 2019 levels until 2024 at best. “If the pandemic intensifies and other related industries continue to suffer from its repercussions, the recovery path is expected to follow the worst-case scenario, where international tourist arrivals to the Arab world are forecast to remain below 2019 levels until 2027,” it says. The analysis also highlights the impact on the Arab economy, particularly from lower oil prices. AACO’s previous best-case forecast was for the Arabian economy to recover to 2019 levels next year. ”However, the impact of the dual-shock (the pandemic and the drop in oil prices), caused more damage than expected, leading to contraction in trade and a collapse in oil revenues, travel and tourism, and remittances,” it notes As a result it now see a return to last year’s levels in 2022 at the earliest - assuming average oil prices stay at around $45-50. If the oil price stays lower the economy may not reach 2019 levels until 2023. ”The outlook in the region remains highly related to the changes in the global oil markets,” AACO adds, noting oil revenues represented on average around 65% of the Arab world nominal GDP in 2019.

Source: Cirium

The lack of co-operation between governments is stymieing the restart of commercial air travel amid the coronavirus pandemic, potentially causing “irreparable demand to global connectivity”, according to IATA. Reflecting on a bleak set of figures for July passenger traffic today, IATA director general Alexandre de Juniac lamented that while governments had worked together to set guidelines for the ramping-up of air travel, that co-operation has ended when it comes to implementing the restart of services. “That’s why 90% of international flying has stopped,” de Juniac states. “The demand is there. When borders open without quarantine, people fly. But there is too much uncertainty in how governments are managing the situation for passengers to rebuild the confidence to travel. ”What is killing aviation is the fact that governments are not managing the risks of opening borders. Instead, they are keeping global mobility effectively in lockdown.” He cautions that if this continues, ”the damage to global connectivity could become irreparable”, with “severe consequences” for economies and public health. IATA’s latest figures for passenger travel in July show that traffic measured in RPKs was 80% down on the same month in 2019. Any uptick in demand is largely being driven by domestic markets – particularly in China, where RPKs were only 28% lower year on year. International markets remain in the doldrums, with demand 92% down year on year in July. Intra-European travel saw the most positive trend – lower by 79% from 2019 – but transatlantic, transpacific and intra-Asia travel had almost flat-lined at close to 100% down on 2019 levels. Looking into August, IATA expresses concern that the gap between capacity being added by airlines and the demand for travel is widening in the wrong direction. It notes that unlike during the recoveries from previous crises, airlines have been unable to use low ticket prices to stimulate demand, largely because depressed traveller numbers are related to low consumer confidence, which is being exacerbated by inconsistent travel restrictions. IATA also notes that it is increasingly seeing downside risks in its end-July projection for the industry’s recovery – which was itself a downgrade on previous expectations. With this challenging outlook in mind, the airline body has proposed a three-point action plan for governments to safely re-open borders, based around three areas: implementing ICAO’s “Take-off guidance” universally; building on ICAO’s Aviation Recovery Task Force (CART) to develop a common framework to reopen borders; and developing testing measures to aid the opening of borders. “Airlines have been largely grounded for a half-year,” de Juniac states. “And the situation is not improving. In fact, in many cases it is going in the wrong direction. We see governments replacing border closures with quarantine for air travellers. Neither will restore travel or jobs. Worse, governments are changing the entry requirements with little notice to travellers or coordination with their trading partners. “This uncertainty destroys demand. 10% of the global economy is sustained by travel and tourism; governments need to do better to restart it.” IATA also suggests that with state-support schemes coming to an end around the world, the airline industry is likely to need a second injection of financial help amid the weak demand recovery. It also reiterated its demand for a waiver of the 80:20 slot regulation from the European Commission, which has regulatory oversight of around half the almost 200 slot-controlled airports worldwide.

Source: Cirium

A day after United Airlines killed the long-hated change fee, Delta Air Lines and American Airlines have matched the Chicago-based carrier’s move, also pledging to “permanently” eliminate all change fees for domestic and some international travel. Atlanta-headquartered Delta and Fort Worth-based American both say on 31 August that the idea behind the policy change is to allow customers more flexibility with their travel plans during what is forecast to be a choppy post-coronavirus rebound. But an airline financial analyst wonders if the moves, which come shortly before a government financial aid programme expires, will indeed be permanent. “Management said this is permanent. We are choosing to take them at their word and assume permanent means permanent until traffic growth accelerates past 2019 levels, at which time we expect this may be re-evaluated,” says Helane Becker, senior research analyst for aviation at Cowen Securities. “In addition, if a lot of people move flights around and make it more difficult for airlines to plan for reasonably full and profitable flights, we expect the airline may reconsider,” she adds. In announcing the change, Delta chief executive Ed Bastian says his airline must “approach flexibility differently than this industry has in the past”. “Today’s announcement builds on that promise to ensure we’re offering industry-leading flexibility, space and care to our customers,” Bastian adds. American’s announcement came within minutes, with a similar explanation. “In a world that’s constantly changing, American is resolute to our purpose of caring for customers at all points of their travel journey,” says Vasu Raja, American’s chief revenue officer. “American is offering more flexibility and ease than ever before, should travel plans change.” Cowen’s Becker says that while eliminating change fees will please travellers, airlines will suffer minimal financial impact. Having suspended change fees due to the coronavirus earlier this year, “no one is making money in this area anyway”. She estimates those fees made up less than 2% of revenue prior to the global health crisis. The big three major US carriers are also offering free same-day standby on earlier flights to the same destination as well as better access to upgrades and fares. The policy at United and Delta applies to destinations in the US, Puerto Rico and the US Virgin Islands. American offers the policy to destinations in those regions as well as to Canada, Mexico and the Caribbean. All fares and classes are included except so-called “basic economy” fares. In one month, the US government’s payroll support for airlines will end, leaving carriers to fend for themselves and setting the stage for mass layoffs. According to unions, about 100,000 jobs could be lost when employee protections enshrined in the act expire – unless lawmakers pass an extension. For years, consumer-advocacy groups have criticised airlines for change fees, calling them unfair to travellers. Airlines had, until this year, resisted eliminating or reducing the fees, with the exception being Southwest Airlines, which did not charge fees to begin with. But the coronavirus downturn has shifted the industry, forcing carriers to broadly overhaul their businesses in response to a drastic collapse in demand. American Airlines, Delta Air Lines and United had already waived the fees temporarily due to the global pandemic.

Source: Cirium