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Analysis

Aviation Associations Introduce Recovery Measures

By Alicia Arizpe | Thu, 02/18/2021 - 09:27

2020 closed as the worst year in the history of aviation, with the damage spilling well beyond the sector. Under these circumstances, stopping the bleeding and breathing life back into the sector is a priority for airline associations.

About 2.7 billion people chose not to fly during 2020, reports the UN’s International Civil Aviation Organization (ICAO). Total passengers for the year fell by 60 percent year-on-year, for a total of 1.8 billion. COVID-19 also costed the industry about US$370 billion in revenue, which led airlines across the globe to burn through their cash reserves and end the year US$118 billion in the red, reports the International Air Transport Association (IATA).

As reported by MBN, the industry sounded the alarm on the threat that COVID-19 placed upon the sector early last year, warning that numerous job losses and bankruptcies were possible should industry actors failed to take action. But the damage was much worse than most expected. IATA’s latest reports indicate that demand measured in revenue passenger kilometers (RPK) fell by 65.9 percent during 2020. The sharpest losses were felt in international aviation where demand fell by 75.6 percent for the entire year, while international capacity fell by 68.1 percent in assigned passenger kilometers (ASK). “Last year was a catastrophe,” said Alexandre de Juniac, Director General and CEO of IATA. “There is no other way to describe it. What recovery there was over the northern hemisphere summer season stalled in autumn. The situation turned dramatically worse over the year-end holiday season as more severe travel restrictions were imposed in the face of new outbreaks and new strains of COVID-19.”

The repercussions from this sharp contraction in travelers went far beyond the aviation industry. The world saw a sharp reduction in international tourism, which went from earning US$1.5 trillion in 2019 to between US$910 billion and US$1.17 trillion last year, according to UN’s World Tourism Organization. Airlines grounded large parts of their fleets due to the sharp drop in passenger demand and numerous lockdowns and travel restrictions. As about half of the world’s cargo travels in commercial aircraft, the groundings led to delays in the delivery of numerous goods, from essential medicines to key components of diverse manufacturing sectors, disrupting global supply chains. “Some routes have been altered by restrictions at certain ports, while others are lacking capacity due to the extreme demand that e-commerce has created,” said Carlos Robles, Vice President, Central Region of FEMIA, to MBN. “Parts (are) traveling to five or more places to be processed before being finished and delivered to their assembly point. Cost and complexity to move parts will remain a big challenge next year.” Altogether, trade volumes fell by 9.2 percent and the world’s economy saw a 4.3 percent GDP contraction in 2020, according to the World Bank.

Traffic is picking up but it is still far below pre-pandemic levels, mainly because numerous passengers are wary of traveling out of fear of being exposed to the virus. During January, bookings for future travel were 70 percent of what they were the previous year, explains IATA, “putting further pressure on airline cash positions and potentially impacting the timing of the expected recovery.”

While numerous countries relaxed their borders, the arrival of new strains of SARS-CoV-2 brought further lockdowns and landed a heavy blow to the aviation industry by the end of 2020 and at the beginning of 2021. More lockdowns and a delay in the delivery and application of vaccines could further impede recovery. IATA predicts that during 2021, demand for air travel will be only 50.6 percent of what it was before the pandemic. However, the association also forecasts a worst-case scenario where demand in 2021 will be only 38 percent of what it was in 2019 should lockdowns continue.

While all airlines saw a sharp drop in demand and traffic, recovery has varied widely from airline to airline. This is mostly due to the disparity in domestic and international air travel as a result of border closings and quarantine measures. Domestic aviation has proven much more resilient overall, falling only 50 percent in comparison to international aviation’s 74 percent drop, according to ICAO.

The Road Toward Recovery

The outbreak has already wreaked havoc in the aviation industry, leading three major airlines in Latin America to file for Chapter 11 Bankruptcy protection. Copa Airlines, LATAM airlines and Aeroméxico saw passenger traffic dry up, especially for international travel. Altogether, Latin America saw a 62.1 percent contraction in demand, a 58.3 percent fall in capacity and a 71.8 percent decline in total traffic in comparison to 2019, reported IATA. While these numbers place the region as the second-best performing globally, Latin American airlines saw little governmental support during their more troublesome months.

Under these circumstances, the sector has renewed its efforts to get the world traveling again. Among new initiatives is IATA’s Travel Pass, an app designed to provide users with information regarding different country’s entry requirements and the available COVID-19 testing and vaccination centers. This app aims to streamline compliance with travel requirements to revamp international air travel as some countries are requiring proof of a COVID-19 negative test before boarding a flight. To date, Emirates, Etihad Airways and Copa Airlines have agreed to test the app but Mexico’s Ministry of Tourism is already in talks with IATA to streamline its implementation.

While Mexico has not restricted international travel, the country has been greatly affected by border closure from major destinations. Just two weeks ago, Canada suspended all flights to Mexico and the Caribbean, which will represent a US$782 million loss, according to Miguel Torruco, Mexico’s Minister of Tourism.

Alicia Arizpe Alicia Arizpe Senior Writer