Middle Eastern scheduled airline capacity is down 57.2 per cent on January 20 last year, according to the latest data from UK aviation analysts OAG.
Global airline capacity stands at just half of the same week last year, said OAG, citing the devastating impact of the pandemic on air traffic flows as well as the imposition of travel restrictions and quarantine laws.
International seats have now fallen back to 53.4 million, a level last seen in July 2020. Last week, global capacity was at 55.2 million meaning 1.8 million seats have been taken out of the schedule in a week.
“We expect bubbles, travel corridors and the lifting and unlifting of travel impositions to continue for some time,” said John Grant, partner at UK-based Midas Aviation consultancy, speaking on a webinar panel hosted by OAG.
“The dynamic nature of the market and the responsiveness of the airlines to what is being thrown at them on an almost daily basis is incredible,” added Grant. “Our expectation is that such changes will increase in the next few weeks and carriers will remove around 350 million seats that are currently in the system but for which there are either restrictions or no demand.”
Challenging outlook for 2021
According to Eddy Pieniazek, head of analytics and advisory at aviation finance consultants Ishka, the immediate outlook remains bleak for the global aviation industry.
“Nothing is going to change in the first half of the year,” he said. “The vaccine rollout is getting simply getting people fit to travel in the latter half of 2021.”
Pieniazek noted that open ‘travel corridors’ have delivered little or no traffic in 2021 for many airlines.
“The mingling of people in airports makes it difficult to secure travel corridors,” he said, adding that Middle East airlines secure up to 80 percent of their traffic through connecting passengers.
“Creating bubbles and corridors becomes near impossible for [Gulf airlines],” he added.
John Grant (left), partner at Midas Aviation and Eddy Pieniazek, head of analytics and advisory at Ishka
Pieniazek said that while the global vaccine is “extremely welcome”, until the rollout levels are at sufficient volumes, changes in global travel intent and behaviour would remain limited.
“In the bleakest weeks of 2020, we said it would be young people who would be flying sooner because they are more carefree but in the last two months there has been a flip – the vaccine has created a community of older people who are thinking about doing bucket lists, so there are changing trends for tourism boards to consider,” he said.
Very difficult time
Grant predicted a “very difficult time” for most major aviation markets in the next quarter.
“It looks like it will get worse in the next two months. Most airlines are currently only planning two to three weeks ahead,” the Midas Aviation expert said.
He also said that while there will be an overall slashing of corporate travel in the coming years, there will be growth in ‘premium economy’ demand as passengers seek more space and social distancing.
“It will be fascinating how the trend towards premium economy pans out,” he said.
Emirates Airline announced on January 3 that it would deploy its latest flagship A380 aircraft featuring new premium economy seats and enhancements across all cabins to London Heathrow.
While the seats are not yet bookable, passengers flying on the daily EK003/004 flight can experience the new-look premium economy as a discretionary upgrade until more seats are rolled out commercially and at scale.
Vaccine-led recovery?
According to the latest report from the International Air Transport Association (IATA), news flow regarding Covid vaccine developments has “fuelled hopes” for future global economic recovery over the past month.
“Airline shares rallied following the vaccine news despite the resurgence of Covid cases and new lockdown measures in some regions,” the report said.
“Although expectations of a vaccine-led recovery made financial market investors more tolerant of the recent rise in Covid cases, positive investor sentiment has not reflected in travellers’ behaviour,” it said.
The chart above compares bookings for the first quarter of 2021 and fourth quarter of 2020, all bookings made as of October 1 for Q4 2020 and as of January 1 for Q1 2021.
At the start of the fourth quarter bookings were 77 percent lower compared to the previous year and there was a downwards trend over the course of quarter.
Similarly, at the start of this year bookings point to another difficult quarter, as they are on average 79 percent below their level a year ago.
“This is even a slight deterioration compared to the start of the previous quarter indicating that the recovery in air travel demand, which has already stalled in the last quarter of 2020, could weaken further,” IATA said.
“Hence, airlines will keep burning cash until vaccines become widely available. The use of effective testing instead of quarantine to accelerate market opening will be critical for the survival of airlines in many regions.”
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