IATA /ACI offer positive air transport forecasts, but concerns emerge about extended WHO powers

Summary

• Passenger traffic recovered from 41.7% of 2019 volumes in 2021 to 68.5% (IATA)/72% (ACI) in 2022.
• Global passenger traffic is forecast to reach 8.4 billion passengers, or 92% of 2019 levels, in 2023 (ACI).
• North American airlines have led the industry recovery.
• International traffic increased significantly wherever travel restrictions were lifted, and that supports a positive outlook for (previously slow-to-recover) Asia Pacific.
• O-D passenger traffic increased 31.6% year-on-year during 2022, but since Jul-2022 it has "mostly trended sideways" compared to 2019 levels.
• IATA's Global Air Connectivity Index recovered to 74% of pre-pandemic levels for international connectivity and 87% for domestic connectivity, as of Dec-2022.
• International ticket sales gradually caught up to domestic sales in 2022.
• Most air ticket sales are for travel in the near future, as passengers still perceive some degree of uncertainty.
• IATA expects industry-wide passenger traffic to recover to 2019 levels in 2024, then grow at an average rate of approximately 3% per annum over its forecast horizon.
• The recovery and near term growth of passenger traffic will vary across regions, with North America leading the way.
• There is uncertainty about whether primary or secondary level airports will benefit the most, ‘post-COVID’.
• What value do forecasts 20 years into the future have today?
• Concerns grow about a potential power grab by WHO that would dictate the imposition of global vaccine passports.

The Three Amigos. Not.

The two organisations might be literally next door to each other in Montreal’s prestigious Victoria Square, but it is rare, to say the least, that the International Air Transport Association (IATA) and Airports Council International (ACI) are found “singing from the same hymn sheet”. At times there might be a Green Line between them, manned by blue-helmeted UN troops.

It is particularly gratifying that they are now doing precisely that, since the air transport business seems at last to be putting the massive disruption of the COVID-19 pandemic behind it.

Just when it will be safe to declare it all over, and come out from behind the sofa, rests of course with the World Health Organization (WHO), which has it in its powers to reduce COVID-19 from pandemic to endemic status but is reluctant to do that just yet.

When the United Nations agency does so it will be the moment for another one, the International Civil Aviation Organization (ICAO), which is based – you guessed it – in an office block right across the road from IATA and ACI, to step up to the plate, to investigate and acknowledge what it did right and wrong, especially during the early months of the pandemic; and especially the ‘wrong’ parts.

Montreal is to Air Transport what Rome, Mecca, Varanasi and Amritsar are to religion; as Washington is to political power; and as Paris is to romance. Montreal is the home, in this instance, to a tripartite power base that – if it hasn’t done so already – must strive to ensure that the global air transport industry is never again blindsided by an obscure pneumonia, reputedly arising out of an anonymous Chinese city.

Far better liaison will be needed from the get-go if COVID is ever repeated

And just as individual countries across the world are beginning their own investigations into how they handled or mishandled COVID, promising as ever that “lessons will be learned” (and often seeking to apportion blame rather than derive accurate information on which to base future strategies), Montreal collectively must seek to work closely and authoritatively with the WHO to make sure there is far better coordination of responses between governments and operators.

In particular, better coordination of the enforcing and lifting of travel bans, compared to what CAPA often described in 2021 as a “chaotic” lack of strategy.

Concerns grow about extended vaccine/passport powers sought by WHO

It must be of concern to airlines and airports alike that the WHO is seeking – and will probably soon get – powers to control the global response to future pandemics that will be above those of independent nations.

Moreover, it is pushing for global vaccine passports, digital certificates and other health-related documents to be adopted under its own auspices when it declares “potential or actual” health emergencies. That may be ratified as soon as May-2024.

Thus, the decision as to whether an individual can travel from their own country to a foreign one anywhere in the world would be at the whim of an unelected body in New York, rather than with nationally elected governments.

If an outbreak of Ebola in West Africa resulted in a single case on another continent, that could (in theory, at least) lead to air travel being available only to those that have been vaccinated against that disease, and that imposition would probably remain even after the outbreak was over.

Indeed, it could mean the imposition of such vaccination mandates simply on the grounds of a “potential” emergency, without transmission being detected away from the original source.

If the representative bodies for airlines and airports are not concerned about this development and are not lobbying governments about it right now – in a coordinated response – then it has to be asked: why not?

That light at the end of the tunnel is growing brighter; there’s a stronger willingness to fly, but bookings still left until late in the day

But for now, the air transport business will be grateful to see the light at the end of the tunnel growing brighter with every passing day.

Turning first to IATA’s 4Q2022 report, which was published in Feb-2023, the key takeaways are: passengers demonstrating a stronger willingness to fly, but waiting until nearer the travel date to book owing to continuing uncertainty; North America leading the recovery and reaching 2019 traffic levels in 2023, at least a year earlier than the rest of the world; and Asia Pacific taking the longest to recover (2025).

IATA, in its Quarterly Air Transport Chartbook for 4Q2022, reported the following passenger traffic highlights:

• Industry-wide traffic in Revenue Passenger Kilometres (RPKs) continued its steady recovery in Dec-2022 and for the full year 2022. Global air travel gained momentum and recovered substantially as travel restrictions were removed and passengers expressed a strong willingness to fly. Traffic recovered from 41.7% of 2019 volumes in 2021 to 68.5% in 2022;
• North American airlines led the industry recovery, followed by Latin American and European airlines;
• Routes between Europe and various regions recovered swiftly in 2022, driven by pent-up demand and the reopening of air travel markets. Traffic on routes connecting various regions to Asia were the slowest to recover due to travel restrictions;
• International traffic increased significantly wherever travel restrictions were lifted. The recent relaxations of China's zero-COVID policies and the reopening of air travel markets support a positive outlook for Asia Pacific;
• Global origin-destination (O-D) passenger traffic increased to 75% of pre-pandemic levels in Jul-2022. O-D passenger traffic increased 31.6% year-on-year during 2022, but has "mostly trended sideways" compared to 2019 levels since Jul-2022;
• IATA's Global Air Connectivity Index recovered to 74% of pre-pandemic levels for international connectivity and 87% for domestic connectivity as of Dec-2022. The number of domestic airport pairs served returned to pre-pandemic levels, but only 85% of international airport pairs have been restored. The recovery in international flight frequency lags further behind at 77% of pre-pandemic levels. International connectivity recovery reached 102% in Latin America and the Caribbean, 84% in North America, 82% in Europe and 52% in Asia Pacific;
• International ticket sales gradually caught up to domestic sales in 2022, due to positive developments in international travel demand and the easing of travel restrictions in China. International ticket sales improved in Jul-2022, despite high energy prices, traffic disruptions and other economic headwinds. The latest trends in domestic and international ticket sales indicate sustained activity levels over the northern winter period;
• Most air ticket sales are for travel in the near future, as passengers still perceive some degree of uncertainty when making travel arrangements. 88% of tickets sold in 4Q2022 were for travel within four months, and 12% were for periods beyond four months from the purchase date;
• IATA expects industry-wide passenger traffic to recover to 2019 levels in 2024, then grow at an average rate of approximately 3% p/a over its forecast horizon. Forecast risks are skewed to the downside due to various headwinds in the near term, including a prolonged war in Europe, high jet fuel prices, elevated general price levels, and slowing growth in the global economy;
• IATA expects the recovery and near term growth of passenger traffic will vary across regions. North America traffic is forecast to recover to 2019 levels in 2023, followed by Latin America, the Middle East and Europe in 2024, and by Africa and Asia Pacific in 2025.

ACI's forecasts overlook socio-political and socio-economic trends which spurn the very concept of air travel

IATA has focused on the here, now and near future in its report. ACI does the same but also projects forward as far as 2041.

In the light of events in the first three years of the 2020s – a decade that may turn out to be as blighted as were the periods 1915-1925 and 1935-1945 – with the threat of globally transmitted diseases lingering, along with wars and conflict actual and anticipated, and technology progressing at an exponential rate, it could reasonably be asked: what is the point of extrapolating air travel almost 20 years into the future anyway?

ACI says its data set presents 20-year traffic forecast figures, providing airport planners and investors with “reliable data”, but how can such data really be reliable today?

At least, if the status quo is somehow miraculously retained ACI has good news for those who work in the business

ACI World, in its 2022 and short term outlook, reported, like IATA, an upsurge in air travel demand across many markets amid heightened macroeconomic risks.

Highlights include:

• Global passenger traffic was 6.5 billion passengers in 2022, reaching 72% of 2019 levels;
• International passenger numbers were at 60% of 2019 levels and domestic reached 79%;
• Recovery in passenger volumes remained uneven across the globe, with Latin American-Caribbean markets reaching 91% of 2019 levels, whereas the Asia Pacific region lagged at 52%;
• Global passenger traffic is forecast to reach 8.4 billion passengers, or 92% of 2019 levels, in 2023. Baseline projections indicate the industry will recover to 2019 levels by 2024, driven mainly by domestic travel.

The ‘opening up’ of China could be a false dawn, and a ‘strong labour market’ means little when workers seek food charity

ACI World Director General Luis Felipe de Oliveira said, "86% of [survey] respondents plan to travel by air in 2023 – this is the highest intention to travel score since the beginning of the pandemic".

Mr Oliveira added, "The possible slowing in GDP growth in major economies[,] coupled with the rise in airfares due to higher jet fuel prices[,] weigh negatively on demand. On the other hand, a strong labour market and the re-opening of China, the second largest aviation market after the United States, represent an important boost to global passenger traffic".

So it is fair to say that both IATA and ACI are confident about the immediate prospects for the business, irrespective of economic downturns, inflation (which is stabilising, or at least not getting any worse in many countries), and military conflict.

At the same time it seems a little strange to talk about a strong labour market when leisure air travel is dictated by factors such as real income elasticity of demand, i.e. how much disposable income remains after the bills have been paid (and for many there is not much of that). Not by how much one earns.

Equally, is it not somewhat naïve to talk about ‘the re-opening of China’ when the proven provision of arms to Russia by China in order to perpetuate the Ukraine War would probably ensure massive economic retaliation by the nations of the West, not to mention the continuing potential for China to invade Taiwan?

Nevertheless, it is perfectly reasonable for ACI to assume that none of this will happen, that the Ukraine conflict will soon be resolved (and ACI admits it probably won’t), that COVID will quickly fade into history as its symptoms become those of a light cold, that inflation will reduce to normal, that there will be no more black swans, (that the aliens won’t invade…and that pigs might fly!).

In that case the world can anticipate, in the period 2023-2041:

• Passenger traffic worldwide is expected to reach 19.3 billion in 2041;
• Airports are predicted to handle almost 200 million tonnes of air cargo worldwide. The US and China will remain the two largest markets, accounting for 40% of global cargo;
• Airports worldwide will handle 153.8 million aircraft movements. The US, China and India are predicted to be the leading markets for aircraft movements in 2041.

Will bigger or smaller airports win in the future?

There is an intriguing dichotomy between a previous statement from IATA, which dates to Nov-2022 and which concerns European preferences, and a recent statement by an American Airlines executive, speaking about US airports.

Those statements are contradictory, and indicative of the confusion which remains ‘post-COVID.’

In Nov-2022 IATA reported the following results from a survey of 500 European business leaders:

• 89% believed that being close to an airport with global connections gives them a competitive advantage;
• 84% could not imagine doing business without access to air transport networks;
• 82% thought their business could not survive without connectivity to global supply chains via air transport;
• 61% rely on aviation for global connectivity either exclusively (35%) or in combination with intra-Europe travel (26%). The remainder (39%) primarily use intra-European networks. 55% reported that their offices are purposefully located within an hour of a major hub airport;
• 82% stated that air connectivity is more important than rail connectivity, with 71% reporting that the rail network is an adequate alternative for business travel and 64% saying that they would use rail more often for business travel if the costs were lower.

It would appear that in Europe the ‘desire’ within business circles, at least to travel through hubs rather than find and use a direct flight from a secondary airport, has returned. Undoubtedly this tendency will have been influenced by the service levels provided by alliance member airlines, both in the air and on the ground.

That state of play does seem to contrast somewhat with the position in the US, where American Airlines’ MD for Corporate Real Estate and Facilities, Katherine Goudreau, stated in Feb-2023 that passenger migration had resulted in "explosive" growth at small-to-medium sized airports (presumably for her airline), as passengers "abandon" larger cities.

Ms Goudreau noted that increased traffic may result in infrastructure issues, including parking constraints as facilities are unable to accommodate rapid growth, and she was probably speaking in general terms about ‘passenger migration’ from both the business and leisure segments, whereas the IATA survey was specifically of business leaders.

Nevertheless, the gulf in the philosophies is yet another mark of how hard it continues to be in such difficult times to identify accurately, and to forecast, global trends in the business.

That has ramifications for airports, airlines and tourist authorities, among many others.

There is plenty of work here for university postgraduate research degree applicants to get stuck into.

The full IATA and ACI reports can found online at CAPA’s website under IATA (subsection News) and ACI (subsection News).