Covid-19 Throws Airline Sector Off Course

Photo Source: @S&P Global Ratings

Airports and airlines will need at least three years before they begin to recover losses caused by the coronavirus (Covid-19) pandemic, with global passenger numbers set to drop by up to 55 percent in 2020 against 2019, an S&P Global Ratings study found.

The international ratings agency said it expects passenger numbers to reach pre-coronavirus levels at some point in 2023 and extended by a year the demand recovery period.

At the same time, the study adds that the financial strength and flexibility of airports will be impacted by the magnitude and duration of the sector shutdown.

“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.”

The study goes on to add that European air traffic will be the heaviest affected, dropping by at least 55 percent compared to other territories.

Analysts’ estimates for 2020 and 2021 are in line with IATA’s five-year outlook but said they expect a more prolonged recovery, due to operational challenges and unknown consumer behaviour.

Key factors affecting the resumption of air travel, according to the findings, include recurring Covid-19 outbreaks and renewed lockdowns, government actions, domestic vs international performance, airline capacity and profitability, and passenger behaviour.

Looking to the future, S&P’s expects the aviation sector to emerge stronger, eventually returning “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 percent per year”.