Airlines Warn Worsening U.S. Virus Spread Threatens Revival
(Bloomberg) -- High coronavirus infection rates in the U.S. are threatening to undermine a global recovery in travel, according to the airline industry's main trade group.
International Air Transport Association economists said Wednesday their baseline estimate for a 36% drop in traffic this year could worsen to 53% if border curbs on emerging market countries and the U.S. remain in place.
The European Union this week relaxed a ban on non-essential travel from 15 countries beyond the bloc, including Australia, Canada and Japan, while maintaining a bar against visits by Americans. The decree suggests disruption to a U.S-EU air-travel market generating $29 billion a year in revenue will continue until authorities rein in the deadly disease.
“There's a compromise to find between the need to reopen and restart the economy, and the need for an approach to limit the transmission of the virus from one country to another,” IATA Chief Executive Officer Alexandre de Juniac said in a briefing on the impact of the virus.
Brian Pearce, the group's chief economist, said a sustained slump in trans-Atlantic travel would hurt European network airlines most, since they don't have a profitable short-haul market to fall back on, unlike their U.S. peers.
Pearce said a global recovery in flights had already dipped in the second half of June amid a resurgence of the outbreak in China, where domestic demand had been recovering.
He said he's cautious about coming months given the situation in the U.S. and emerging markets like Brazil, where the virus still has a firm hold. IATA's end-of-year estimates assume the Chinese setback is a blip and that demand will continue to revive there.
Air travel showed a slight upturn in May, with global traffic 91.3% lower than a year earlier, versus a 94% slump in April at the height of lockdowns, IATA said. The resumption of flights came at a cost, with record-low load factors of 50.7%, an occupancy level at which almost all carriers would lose money.
©2020 Bloomberg L.P.
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