It may be years until passenger demand returns to 2019 levels for US airlines
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By all estimates the airline industry is in for a lengthy downturn as economies dip quickly into recession, companies lay off staff and unemployment rolls grow amid the novel coronavirus outbreak. The question is: how long of a downturn?
Several new forecasts see travelers beginning to return to the sky in considerable numbers as soon as June but as late as the fourth quarter that begins in October. However, those same estimates put a return to 2019 traffic levels, when around 926 million people flew in the U.S. alone, at at least a few years off.
“We anticipate that traffic growth will improve beginning in [the fourth quarter of 2020], but not reach 2019 levels until 2022 at the earliest,” wrote Cowen analyst Helane Becker in a report on March 27.
Raymond James analyst Savanthi Syth told TPG she does not expect passenger numbers to hit the previous peak until around 2023. She expects something of a “new normal” with passenger demand, at least in the U.S., holding at around 10-15% lower than 2019 levels by the end of 2020.
“In past pandemics we’ve seen this V-shape in the travel profile with a sharp recovery in about six months, but this time is different because we’ve got a deep recession,” said Brian Peace, chief economist at industry body the International Air Transport Association (IATA), during a briefing on Tuesday. “It won’t be until 2021 that we would expect a significant recovery.”
Airlines are already preparing to come back smaller than they were before. Delta Air Lines executives told employees as much on March 19. United Airlines executives followed with the added warning of likely furloughs a week later. Similar prognoses are expected from other carriers.
U.S. carriers have received something of a lifeline in the form of $50 billion in government aid. If taken, the funds require airlines to keep staff on the payroll at current wage rates through Sept. 30, as well as maintain air service to all of the domestic cities they served on March 1.
Airlines in other countries are not as lucky. Many have to go individually to their respective government for support, a scenario that IATA director general Alexandre de Juniac warns could see many carriers “die,” or close their doors or consolidate with another airline.
In the U.S., once the restrictions in the aid package sunset, airlines will have to adjust both their schedules and staffing to whatever level of demand exists on Oct. 1.
“It could be that it takes us much longer to get through the issues of the virus, it could be the virus comes back,” said Pearce emphasizing that IATA’s forecast is just that, a forecast. “We’re looking at various scenarios.”
Featured image by JIM WATSON/AFP via Getty Images.
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