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Diving Into the Global Airline Industry Rebound
Global consulting firm McKinsey last week hosted a webinar on global air travel rebound in which it highlighted a series of drivers for sector recovery and point out the challenges airlines will face as they work to get out of the Covid-19 crisis.
The firm’s analysis suggests that a main driver for air travel recovery is a region having a positive economic outlook and the ability to contain Covid-19, defined as having low case numbers over a sustained period. For example, since November 2020, New Zealand has managed to have fewer than 5 million daily Covid-19 cases on most days except for a small spike in April when the country passed the 10 million mark for just a few days. Domestic travel in the country has also increased since, now running at roughly 70% of pre-pandemic levels.
The same applies to countries that are more advanced in vaccinations. In the U.S, airlines have seen a surge in ticket sales since February, according to USAToday, and the Transportation Security Administration has screened more than 1 million people every day since March. In the same way, countries with higher vaccination rates tend to see more forward bookings than those where vaccination is slower.
McKinsey also argues that leisure travel tends to recover faster than business travel after a downturn, and this crisis will be no exception. While recovery will take some time and leisure travel recovery will only reach roughly 40% of 2019 levels globally, it will recover to 90% of pre-pandemic levels by 2022 and surpass those in the following years.
Meanwhile, it is not known whether business travel levels will ever reach pre-pandemic levels. With remote work having proved successful in many aspects and offering a much more cost-effective solution for cross-border interactions, it is likely that companies will favor more remote interaction in the future when dealing with international work and have less frequent travel for critical aspects of work, where needed.
As a result, the firm believes business travel will only reach 30% of pre-pandemic levels by the end of the year and 67% by 2022. Its estimates project that by 2024, business travel will reach 80% of 2019 levels. Their latest projections show that overall air travel will reach 35% of pre-pandemic levels by the end of the year, while demand will pick up at 80% of pre-pandemic levels by 2022.
While the west is already seeing light at the end of the tunnel, there’s still plenty of time before most of the world is vaccinated and able to enjoy a greater sense of normality. Until then, there will be significant disparities in market recovery, as some domestic markets remain slowish in growth and international ones are still halted by travel restrictions. In this way, there is still some time until the world comes back to normal and air travel is able to fully rebound.
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