IATA has plans and a travel pass to get planes and passengers flying again. The industry needs to avert a total meltdown
The International Air Transport Association (IATA) urged states to comply with recommendations on international travel from the World Health Organization (WHO). In particular, IATA highlighted the following recommendations:
1- “Do not require proof of vaccination as a condition of entry.”
IATA believes that the freedom to travel across borders should not be limited to those who are able to get vaccinated. It does, however, support governments opening borders to those who have been vaccinated and that testing should also play a key role where vaccination is not possible.
2- “Implement coordinated, time-limited, risk-based, and evidence-based approaches for health measures in relation to international traffic.”
Most scientists believe that COVID-19 will become endemic and that society will need to learn to live with the virus. IATA continues to call on governments to work with the industry to establish plans to safely reconnect their people and economies via air transport based on clear benchmarks for reopening and testing/vaccination protocols to manage risks.
3- “Reduce the financial burden on international travelers for the measures such as testing, isolation/quarantine, and vaccination.”
IATA firmly believes that government-mandated public health measures to manage the risks of COVID-19 should not be a financial barrier to travel. States agreed that the cost of mandatory measures such as testing should be borne by the government in Article 40 of the International Health Regulations. With the cost of PCR testing at $100 at the low end and the requirement for multiple tests for a single journey, this could easily make flying unaffordable for individuals and families. The same applies to quarantine measures where mandated by governments.
4- “Prioritize vaccination for seafarers and aircrews.”
IATA strongly supports the recommendation to prioritize aircrew for vaccination. This is critically important during the crisis for global supply chains transporting vaccines, medicines, and medical equipment required to combat the virus.
“The goal is to safely return to more normal lives, including the freedom to travel, while managing the risks of COVID-19 which are likely to be with us for some time. Airlines are experts at risk management. Governments should tap into the airline industry’s capabilities to help them implement efficient measures for testing and vaccination that can supersede the blunt instrument of quarantine,” said Willie Walsh, IATA’s Director-General.
IATA Travel Pass
The IATA Travel Pass manages testing and vaccination documentation for travel. Governments are also producing similar apps of their own. But without global standards, these efforts will remain disjointed and never reach their full potential, according to IATA.
“Agreement on a digital standard for testing and vaccination documentation is a critical next step. Without a globally recognized standard, the potential for frustrated travelers, fraudulent actors, and overwhelmed border authorities is very real. Work needs to be accelerated or the eventual restart will be defeated by mountains of paper,” added Walsh.
Unilabs, the leading European diagnostic services provider, and IATA have signed an agreement to incorporate Unilabs’ worldwide COVID-19 testing network into IATA Travel Pass.
The IATA Travel Pass provides information on entry requirements, directs travelers to trusted labs, and allows passengers to receive and manage digital certificates for COVID-19 tests or vaccinations. Unilabs and IATA are currently running a pilot program in the UAE. Once the processes are successfully up and running, the initiative will be rolled out to other entities of the Unilabs network in many countries.
Unilabs has since the start of the pandemic performed close to 10 million COVID-19 tests across its network in 17 countries.
Airline industry by the numbers
The IATA expects net airline industry losses of $47.7 billion in 2021 (net profit margin of -10.4%). This is an improvement on the estimated net industry loss of $126.4 bn in 2020 (net profit margin of -33.9%).
“There is optimism in domestic markets where aviation’s hallmark resilience is demonstrated by rebounds in markets without internal travel restrictions. Government-imposed travel restrictions, however, continue to dampen the strong underlying demand for international travel. Despite an estimated 2.4 billion people traveling by air in 2021, airlines will burn through a further $81 bn of cash,” said Walsh.
The outlook points to the start of industry recovery in the latter part of 2021. In the face of the ongoing crisis, IATA calls for:
1- Plans for a restart in preparation for a recovery
“A significant portion of the $3.5 trillion in GDP and 88 million jobs supported by aviation is at risk. Effectively restarting aviation will energize the travel and tourism sectors and the wider economy. That means governments must turn their focus to risk management to protect livelihoods as well as lives,” said Walsh.
2- Employment Support
Government financial relief measures and capital markets have been filling a big hole in airline balance sheets, preventing widespread bankruptcies. Owing to government relief measures, cost-cutting, and success in accessing capital markets, the industry’s debt burden ballooned by $220 bn to $651 bn.
The industry will recover but more government relief measures, particularly in the form of employment support programs, will be needed this year.
“There is a definite role for governments in providing relief measures that ensure critical employees and skills are retained to successfully restart and rebuild the industry,” said Walsh.
3- Cost containment/reduction:
The whole industry will come out of the crisis financially weakened. Cost containment and reductions, wherever possible, will be key to restoring financial health.
“There can be no tolerance for monopoly infrastructure suppliers gouging their customers to recoup losses through higher charges. Cost reduction efforts on all sides are needed,” said Walsh.
4- Industry Outlook Highlights
Travel restrictions, including quarantines, have killed demand. IATA estimates that travel (measured in revenue passenger kilometers or RPKs) will recover to 43% of 2019 levels over the year. While that is a 26% improvement over 2020, it is far from a recovery.
Domestic markets will improve faster than international travel. Overall passenger numbers are expected to reach 2.4 billion in 2021. That is an improvement on the nearly 1.8 billion who traveled in 2020 but well below the 2019 peak of 4.5 billion.
International passenger traffic remained 86.6% down on pre-crisis levels over the first two months of 2021. Domestic passenger traffic is expected to perform significantly better than international markets. This is driven by strong GDP growth (5.2%), accumulated consumer disposable cash during lockdowns, pent-up demand, and the absence of domestic travel restrictions. IATA estimates that domestic markets could recover to 96% of pre-crisis (2019) levels in the second half of 2021. That would be a 48% improvement on 2020 performance.
Cargo has outperformed the passenger business throughout the crisis. That trend is expected to continue throughout 2021. Demand for cargo is expected to grow by 13.1% over 2020. Total cargo volumes are expected to reach 63.1 million tons in 2021, similar to those in 2018. Cargo revenues are expected to reach $152 bn, a historic high. This is up from $128 bn in 2020 and $101 bn in 2019.
Revenues: Industry revenues are expected to total $458 bn. That’s just 55% of the $838 bn generated in 2019 but represents 23% growth on the $372 bn generated in 2020. Passenger revenues are expected to total $231 bn, up from $189 bn in 2020, but far below the $607 bn generated in 2019.
Middle Eastern carriers will benefit from relatively rapid vaccination rates on home markets. They will be hampered, however, by continued travel restrictions on many of the routes to emerging economies that are served through Gulf hub connections. Net losses in 2021 are forecast at -13.8% of revenues (reduced from -28.9% of revenues in 2020).