Is a new dawn looming for the aviation industry?

By Lee Kah Whye |
June 27, 2022 7:49 a.m. STI

Singapore, 27th June (ANI): Last week, the International Air Transport Association (IATA) updated its outlook for the airline industry’s financial performance in 2022, citing the accelerating pace of recovery after the COVID-19 crisis.
Forecasts released at IATA’s annual general meeting in Doha on June 20 also predicted that passenger numbers would reach 83% of pre-pandemic levels in 2022 due to strong pent-up demand, lifting travel restrictions in most markets, low unemployment. in most countries, and expanded personal savings.
This more optimistic outlook is reflected in the latest Singapore Airlines (SIA) operating statistics for May 2022 released earlier in June. SIA said it carried more than 1.7 million passengers at the group level (which includes low-cost carrier, Scoot and its main brand, Singapore Airlines) in May. This is a staggering 1,326% increase from a year ago and 17.4% more than last month. Compared to a year ago, its passenger capacity has increased by 126%.
The SIA statement said the strong rebound in air travel that continued into May 2022 was due to Singapore’s easing of border restrictions that began in April, which removed “the need for quarantine and testing COVID-19 on arrival for fully vaccinated travelers and the removal of on-departure COVID-19 pre-tests.” He added that “aside from North Asia, travel demand has recovered quickly across all regions of the route.”
SIA Group’s passenger capacity (measured in available seat-kilometres) reached 61% of pre-COVID-19 levels in May 2022, four percentage points higher than the previous month. The passenger load factor (PLF) for the month reached a level not seen since the start of the pandemic at 78.2%. This is an improvement of 5.5 percentage points month over month or 63.9 percentage points year over year.
However, freight load factor was 22.3% lower year-on-year at 65.4% as freight capacity (tonne-kilometre capacity) increased by 30.2% following the resumption of passenger flights, which led to an increase in the belly hold. space.
IATA also expects poorer cargo performance from airlines this year. The airline organization said there will be a 10.4% drop in global air cargo yields in 2022 compared to 2021 as the global economy slows. However, this only partially reverses yield increases of 52.5% in 2020 and 24.2% in 2021. Overall, IATA forecasts cargo revenues to reach $191 billion this year, i.e. 7% less than in 2021 but more than double those before. pandemic revenues of USD 100 billion in 2019. The industry is expected to transport more than 68 million tons of cargo in 2022, which is a record.
“Airlines are resilient. Passengers are traveling more and more. And cargo is doing well amid growing economic uncertainty,” said Willie Walsh, IATA’s chief executive.
The industry organization further said that the general improvement in the aviation sector’s financial performance will be led by North American airlines, which are expected to make a profit of $8.8 billion in 2022. Globally, it now expects losses to narrow to $9.7 billion from its October 2021 estimate of a loss of $11.6 billion. At the height of the pandemic, the industry lost $137.7 billion in 2020 and $42.1 billion in 2021. IATA estimated that industry-wide profitability is within reach by 2021.
IATA added: “Efficiencies and improved yields help airlines reduce losses even with rising labor and fuel costs. The association also said it expects net delivery of more than 1,200 aircraft in 2022 due to industry optimism and commitment to reducing emissions.
Despite the optimistic outlook, IATA also highlighted some risk factors.
The war in Ukraine is one of them. The war is driving up fuel prices, which could dampen travel demand as airfares rise and consumer demand declines.
The conflict is also causing flights to be rerouted by carriers that would normally use airspace in the affected region, resulting in higher costs. About 7% of international passenger traffic and 19% of international cargo shipments normally pass through Russian airspace. The biggest impact is in the specialized area of ​​heavy freight, where Russia and Ukraine are the market leaders, and the corresponding loss of capacity will be difficult to replace.
Other negative factors are rising inflation which is affecting consumers’ purchasing power, rising interest rates which are impacting airline borrowing and the strength of the US dollar which will also dampen growth. by increasing the local currency price of all debt denominated in US dollars. and increases the burden of paying for fuel imports denominated in US dollars.
There is always the specter of an outbreak of a dangerous new variant of COVID-19.
In its outlook, IATA stressed that it assumes a gradual easing of COVID-19 related restrictions in China in the second half of 2022. China’s domestic market is the world’s second largest domestic aviation market and also accounts for around 10 % of world air transport. traffic in 2019. A prolonged implementation of its tough COVID-19 policy will continue to depress the country and wreak havoc on global supply chains.
IATA’s Walsh urged governments to continue to keep their borders open, saying: “Border closures create economic hardship but do little in terms of controlling the spread of the virus. With high levels population immunity, advanced treatment methods and monitoring procedures, the risks of COVID-19 can be managed.”
“Now is a time for optimism, although there remain challenges on costs, particularly fuel, and some lingering restrictions in a few key markets,” Walsh continued. “People who longed for the freedom to fly are taking flight again – and in growing numbers. By next year, most markets are expected to see traffic reach or exceed pre-pandemic levels.” (ANI)

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