More job losses expected as airlines downsize with demand fall

The aviation industry may not fully recover for years and job losses will continue as airlines resize to cope with the effects of the coronavirus pandemic, experts said.

The air travel sector has been hit hardest by the deepening crisis, with revenue losses among global carriers estimated at $314 billion this year. So far, many of the world’s biggest players in the business, including Gulf carriers Emirates and Etihad, have cut thousands of employees.

“The resizing of the industry, following the drop in demand and drop in traffic and revenues, means some significant layoffs and restructuring in many airlines, as we’ve seen [in many markets]. So, unfortunately, it will probably continue,” Alexandre de Juniac, director general and CEO of the International Air Transport Association (IATA) said on Wednesday.

De Juniac said the pandemic will also mean that there will be fewer airlines in the future, as travel demand has been decimated. “It will probably lead to fewer players and consolidation around the most solid or strongest ones,” de Juniac said during a weekly press briefing.

Brian Pearce, chief economist at IATA, said it would take “several years” for the industry to recover fully from the effects of the pandemic. “The demand for air travel and air transport is going to be smaller for several years before it returns to 2019 levels. We need a smaller industry to serve a small amount [of demand],” Pearce said.

Some airlines around the world have resumed their passenger services recently following the lifting of travel restrictions.

Revenue passenger kilometres (RPKs)

The latest statistics released by IATA showed that global air travel started to see an uptick in May. However, in the Middle East, travel demand has yet to see even the slightest improvement, with revenue, RPKs declining by 97.9 percent in the same month compared with a 97.3 percent demand drop in April. Capacity in the region also tumbled 93.9 percent, while load factor sagged to 23.9 percent, down 49.1 percentage points compared to the year-ago period.

The global uptick was driven mainly by the recovery in some domestic markets, particularly China.

However, Pearce said the overall improvement in RPKs still lags behind the rebound in global business confidence, which is typically correlated to the gross domestic product (GDP) and a key driver for air travel.

“The main reason is that we’ve still got a substantial number of travel restrictions. We know that roughly 20 percent of countries [around the world] are starting now to ease restrictions, but there are still 65 percent where borders are still completely closed to international travel. We really need a relaxation of these restrictions before we see a significant rebound in air travel,” Pearce said.

Business, consumer confidence

Pearce also noted that the despite a rebound in global business confidence, corporate travel demand will not be recovering very strongly, especially in the early stage of air travel restart. He said companies will remain “very cautious” about sending their staff on a business trip. Consumer confidence also has yet to pick up.

“Unfortunately, [the rebound of business travel], which is the key driver for industry profitability may be absent in the first part of the reopening of markets. At least that is what the surveys have been telling us. The corporates are going to be very cautious about travel in the future.  But confidence is up among businesses,” said Pearce.

“By far, the majority of air passengers travel for leisure or visiting friends and families. And there, the picture is not quite positive because consumer confidence is still very low. We’ve seen some pickup in China in May and early June, but in other key markets, such as US, UK, Germany, we’ve not seen consumer confidence pick up at all from the lows reached in April,” Pearce added.

According to de Juniac, the situation remains “fragile, so government support in restarting air travel is needed at this time.

“We need governments to support and strengthen the restart by quickly implementing the International Civil Aviation Organisation’s (ICAO’s) global guidelines for restoring air connectivity contained in ICAO’s (guidelines),” de Juniac said.

“Governments also need to avoid adding blockers to the recovery, such as implementing entry quarantines. They have the same impact as outright travel bans and will keep economies closed down to the benefits of aviation connectivity,” added de Juniac.

 

Source: https://www.zawya.com/mena/en/business/story/More_job_losses_expected_as_airlines_downsize_with_demand_fall-ZAWYA20200702065811/

 

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