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IATA: Lack of Confidence in Business Travel Will Stymie Total Travel Recovery Until 2024

By Dawit Habtemariam / July 28, 2020 / Contact Reporter
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Global air travel will not return to pre-Covid-19 levels until 2024, according to the International Air Transport Association, a year later than it had previously projected. IATA expects a recovery in short-haul travel to happen faster than it will for long-haul travel.

June 2020 global air traffic foreshadowed the slower-than-expected recovery, according to IATA. In June, global air demand fell 86.5 percent year over year. Global capacity fell 80.1 percent year over year. Load factor fell 26.8 percentage points to 57.6 percent, an all-time low for the month of June.

IATA noted that reductions in corporate travel have contributed to its revised outlook. "Corporate travel budgets are expected to be very constrained as companies continue to be under financial pressure even as the economy improves," IATA said in a statement. "In addition, while historically GDP growth and air travel have been highly correlated, surveys suggest this link has weakened, particularly with regard to business travel, as video conferencing appears to have made significant inroads as a substitute for in-person meetings."

IATA also cited the slow containment of the virus in the U.S. as well as flare-ups in other countries, and the continued suspension of international travel. IATA also noted weak consumer confidence caused by concerns over job security and rising unemployment.

One comparatively bright spot was domestic air travel demand, which in June fell by 67.6 percent year over year, compared with a 78.4 percent year-over-year decline in May, according to IATA. Domestic capacity in June was down 55.9 percent year over year, and load factor fell 22.8 percent year over year to 62.9 percent. In contrast, June international air travel demand fell 96.8 percent year over year. Capacity dropped 93.2 percent year over year, while load factor dropped 44.7 percentage points to 38.9 percent.

[Report continues below chart.]

0620_chart

"Domestic traffic improvements notwithstanding, international traffic, which in normal times accounts for close to two-thirds of global air travel, remains virtually nonexistent. Most countries are still closed to international arrivals or have imposed quarantines, that have the same effect as an outright lockdown," said IATA director general and CEO Alexandre de Juniac. "Summer—our industry’s busiest season—is passing by rapidly, with little chance for an upswing in international air travel unless governments move quickly and decisively to find alternatives to border closures, confidence-destroying stop-start re-openings and demand-killing quarantine."

To wit, the U.K. issued a quarantine directive over the weekend for arrivals from Spain, which applied to both U.K. nationals and visitors alike, with six hours' advance notice. It put the kibosh on leisure and business travel, according to a statement issued by U.K. travel management company association BTA. And it left TMCs grasping for solutions for their clients. 

In a letter to the U.K. secretary of state for transport, BTA CEO Clive Wratten referenced the knock-on effect of the quarantine announcement on business traveler confidence in going abroad. "The decision to reintroduce the quarantine with no warning means that many businesspeople are unlikely to travel this year. This is a mortal blow for our industry," he said. 

Even so, Wratten concluded, that the solution is a better partnership between government and industry, not a blind eye to health issues. "Whilst [quarantine] was the right decision for our nation’s health, we need to work with the government to help corporate travelers make informed choices," he said.

Delta Air Lines CEO Ed Bastian, however, during a Monday interview on NPR, suggested governments' top priority should be restoring traveler confidence by finding a treatment for the coronavirus.

"The bottom line is we've got to restore confidence amongst our consumer base in air travel," he said. "We need demand back. We need a medical cure. We need a vaccine. We need therapeutics. And I think that's probably where any government focus ought to go," he said.

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