Some business travel supplier executives in recent months have resigned themselves to the notion that a full return to pre-pandemic volume levels depended on the development of an effective Covid-19 vaccine. In November, science delivered, with announcements that multiple pharmaceutical companies had developed, albeit without peer review, apparently astonishingly effective vaccines at a near-miraculous pace.
But that news stood in sharp contrast to the ghastly outbreak of new Covid-19 cases especially in the United States and Europe, with U.S. records for new cases and hospitalizations set a near-daily pace. As such, several travel suppliers and organizations in recent weeks warned that booking paces were again slowing, vaccine news notwithstanding.
Southwest Airlines in a Nov. 12 filing with the U.S. Securities and Exchange Commission noted that the carrier "has experienced a deceleration in improving revenue trends for November and December 2020 in recent weeks. While the company expected the [Nov. 3 U.S.] election to impact trends, it is unclear whether the softness in booking trends is also a direct result of the recent rise in Covid-19 cases. As such, the Company remains cautious in this uncertain revenue environment."
One week later, United Airlines in an SEC filing drew a more direct line between the Covid-19 outbreak and the carrier’s booking pace. "In the last week, ending November 18, 2020, there has been a deceleration in system bookings and an uptick in cancellations as a result of the recent spike in Covid -19 cases," according to United.
Noting that United "does not currently expect the recovery from Covid-19 to follow a linear path and, as such, the Company’s actual flown capacity may differ materially from its currently scheduled capacity," the carrier said it now expected fourth-quarter scheduled capacity to decline "at least 55 percent" year over year, versus a prior forecast of 55 percent.
Meanwhile, the weekly air sales levels by U.S. corporate travel agencies as recorded by the Airlines Reporting Corp. in recent months has been relatively static, generally down each week by about 85 percent year over year. Sales for the week ending Nov. 22 by leisure-focused and online travel agencies dropped noticeably year over year versus the prior week. Leisure sales were down 72.1 percent year over year compared with 68.2 percent the week before, while online travel agency sales fell 60.4 percent year over year versus 54.2 percent the week before.
Credit ratings agency Standard & Poors last month downgraded its outlook for global airline demand, according to Travel Procurement portfolio mate The Beat.
"We see a weak recovery in 2021," noted S&P Global Ratings credit analyst Philip Baggaley in the report. S&P now forecasts 2021 global air traffic and airline revenue to decline 40 percent to 60 percent from 2019 levels; previously, it projected no more than 40 percent declines from 2019 levels for each.
S&P issued the revised forecast after Pfizer announced encouraging results of its Covid-19 vaccine trials, but before Moderna, as well as Oxford University and AstraZeneca, did likewise. S&P called vaccine progress "promising," according to The Beat, but "merely the first step toward a return to social and economic normality." S&P added that "equally critical is the widespread availability of effective immunization, which could come by the middle of next year."
The International Air Transport Association last month downgraded its forecast for airline revenue and profitability, projecting that the first half of 2021 would be "difficult" in terms of passenger demand. IATA now projects global airlines to lose in aggregate $118.5 billion in 2020 and $38.7 billion in 2021, down from prior forecasts of $84.3 billion and $15.8 billion, respectively.
"The numbers couldn’t get much worse," IATA director general and CEO Alexandre de Juniac said in a statement. "But there is a way forward. With the continued financial support of governments to keep airlines financially viable and the use of testing to enable travel without quarantine, we have a plan to overcome the worst immediately. And longer-term the progress on vaccines is encouraging."
In fact, IATA now projects global airlines in the fourth quarter of 2021 to turn cash-positive in aggregate, earlier than it previously forecast, based on "aggressive cost-cutting" and "increased demand."