Outlook for airline industry positive for 2022
The forecast by Moody’s comes despite recent Covid-related turbulence
Economic analysts Moody’s forecasts that despite disruption caused by surging coronavirus cases and bad weather during the 2021-2022 winter holiday travel season, the global outlook for passenger airlines remains positive for this year.
The firm said: “For the first quarter, governments’ requirements regarding travel – vaccinations, negative tests, quarantines etc – will remain the primary impediment to airline bookings.” However, the company added that it expects such restrictions to ease as daily infection rates, currently driven by the Omicron variant, decline.
It forecasts that the rapid spread of the Omicron variant will peak in the coming weeks, on the basis that previous infection spikes worldwide have typically run for between 10 and 15 weeks.
Consequently, Moody’s forecasts that passenger volumes will ‘snap back strongly’ throughout 2022 and into 2023, driven by what the company views as strong pent-up demand for commercial flights, across leisure, long-haul and business sectors.
The company predicts that revenue for the 20 airline companies they rate, which accounted for approximately 35 per cent of global airline industry revenue in 2019, will increase to US$275 billion in 2022, rising by 60 per cent year-on-year from $165 billion in 2021.
Moody’s also says that it expects business travel by large companies to return this year. The company previously forecast that business travel’s recovery would begin in January 2022 – prior to the emergence of the Omicron variant – but now predicts the recovery to begin in the second half of the first quarter.
Moody’s remains positive despite a poor winter season for airlines
The analyst’s optimism comes despite flight tracking website FlightAware reporting more than 20,000 flight cancellations worldwide since 24 December due to Covid-related staff shortages and severe weather. Moody’s says this figure represents between 5-10 per cent of airlines’ daily schedules during what is typically one of the busiest travel periods of the year.
Moody’s said: “While high profile, the flight cancellations pose only a temporary problem for the airlines, and the cancellation rate will decline in upcoming weeks.”
The company also says it ‘expects the financial impact of the cancellations to be modest, marginally lowering operating cash flow,’ with ‘incentive compensation to support flight crew staffing’ being the ‘major cost pressure point’.
Demand has surged during previous periods of eased travel restrictions
The firm highlighted US Transport Security Administration reports that the volume of travellers who passed through airport checkpoints throughout the winter holiday season was around 85 per cent of 2019 levels.
Moody’s also highlighted that air travel across Europe increased to more than 65 per cent of 2019 levels following the relaxation of Covid-related travel restrictions by European governments last summer. This compares with the 30 per cent currently reported following the implementation of Omicron-related measures later in 2021.
The company also said that similar recoveries were experienced in Canada and Australia during periods of eased restrictions there.