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‘A hard winter’ ahead for airlines: IATA

written by Hannah Dowling | June 19, 2020

London’s Heathrow Airport (Source: LHR)

As Europe begins to lift border restrictions, the International Air Transport Association has warned that the airline industry faces “a hard winter” ahead, as the aviation industry continues to reel from the outbreak of COVID-19.

The international association also renewed its call on governments around the globe to continue providing relief measures to aviation services, as those in the northern hemisphere prepare for a largely reduced flight capacity over the summer season, unlikely to offset the seasonal winter slowdown.

According to the IATA, airlines are collectively expected to post a loss of $84.3 billion in 2020, further validating the need for worldwide government financial relief. 

The bulk of airlines make their money in the northern summer season, while the winter season, even in the best of times, is a struggle to remain profitable, the association said.

For example, the 2019 net profit margin for European airlines followed the normal seasonal pattern and was 9 per cent and 17 per cent respectively in Q2 and Q3 (northern summer), after starting off the year at -1 per cent in Q1 and finishing the year at 2 per cent in Q4 (northern winter). 

The winter season is likely to be even more challenging amid the recovery from COVID-19.

Public opinion research conducted by the IATA in the first week of June 2020 showed greater caution among travellers in returning to travel. 

Travellers more reluctant to return to the skies

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Only 45 per cent of travellers surveyed stated that they intend to return to the skies within “a few months” of the pandemic subsiding, while a further 36 per cent said that they would wait six months before travelling.

That is a significant shift from April 2020 when 61 per cent said that they would return to travel within a few months of the pandemic subsiding and 21 per cent responded that they would wait about six months.

The research states that overall flight bookings are down 82 per cent year-on-year compared with June 2019, and passengers appear to be waiting to see how the pandemic develops before booking flights, meaning forward bookings are quickly declining.

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Bookings for travel 20 or more days in the future accounted for just 29 per cent of bookings made in May 2020, down from 49 per cent in May 2019. Similarly, 41 per cent of bookings made in May 2020 were for travel plans to depart within three days, more than double the 18 per cent seen in May 2019.

Additionally, historical trends suggest that around 14 per cent of all airline tickets are sold at least 22 weeks in advance of travel, however, long haul forward bookings for November 2020 are down 59 per cent from regular in-advance bookings.

Alexandre de Juniac, IATA’s director general and CEO, said, “People are returning to the skies but the horizon of uncertainty of the COVID-19 crisis is extending. Forward bookings are down, and people are hedging their travel bets by booking closer to the time of travel. 

“Airlines in the northern hemisphere rely on a strong summer season and a predictable booking curve to get them through the lean months. But neither of these conditions are in place and airlines will need continued help from governments to survive a hard winter. 

“Airlines will need much more flexibility to plan schedules around these changing consumer trends. Financial and operational flexibility equals survival.”

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