IATA Calls for Further Government Supports Following Disappointing October

New data from IATA, the International Air Transport Association, has revealed that the recovery of passenger demand continued to be disappointingly slow in October. Total demand (in revenue passenger kilometres) was down 71% compared to October 2019 – a modest improvement from the 72% year-to-year decline recorded in September. Capacity was down 60% compared to a year ago and load factor fell 22 percentage points to 60%.

International passenger demand in October was down 88% compared to October 2019, virtually unchanged from the year-to-year decline recorded in September. Capacity was 77% below previous year levels, and load factor shrank 38 percentage points to 43%.

Domestic demand drove what little recovery there was, with October domestic traffic down 41% compared to the previous year. This improved slightly from a 43% year-to-year decline in September.

“Fresh outbreaks of Covid-19 and governments’ continued reliance on heavy-handed quarantines resulted in another catastrophic month for air travel demand,” said Alexandre de Juniac, IATA Director General. “While the pace of recovery is faster in some regions than others, the overall picture for international travel is grim. This uneven recovery is more pronounced in domestic markets, with China’s domestic market having nearly recovered, while most others remain deeply depressed.”

Government Supports

In response to the figures, IATA called on governments to add market stimulation measures to the support they are giving to keep aviation financially viable. Such measures would encourage travel while systematic testing protocols enable a safe re-opening of borders.

“Financially viable airlines will be needed to lead the economic recovery from the depths of the Covid-19 crisis,” added Alexandre. “Government support of US$173 billion has helped many survive. With potential to safely re-open borders and revive travel with testing, governments will need to add measures that stimulate demand. Such targeted initiatives will help generate revenues, avoid adding debt to airlines, and immediately generate economic activity across the value chain.”

IATA identified five proven ways that governments can help stimulate the air travel market while avoiding adding more debt to already highly leveraged airline balance sheets:

  • Temporary waivers or suspensions of government charges, taxes and fees to airlines and passengers will reduce flight costs and lower travel costs for passengers.
  • Route subsidies for flights to local/regional destinations to support connectivity for rural communities and business.
  • Financial incentives in the form of rewards for operating flights, or seats flown, which can support airlines while load factors or yields are too low.
  • Advance ticket purchases that governments can use for future trips or distribute to the traveling public in the form of vouchers to support travel and tourism.
  • Passenger travel subsidies in the form of vouchers for passengers or as a percentage cash-back on overall travel costs.

In normal times, aviation supports more than 87 million jobs and US$3.5 trillion in GDP contribution worldwide. However, 46 million jobs and $1.8 trillion in economic activity supported by aviation have been put at serious risk by the dramatic fall in travel demand. The potential to re-start travel with testing should be a turning point – and creates the opportunity for government measures to stimulate demand, taking economic advantage from aviation’s role as an economic catalyst.

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