• Monday, June 17, 2024
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IATA’s Business Confidence Index paints tougher 12 months ahead for airlines

Why compensations on flight delays, cancellations should be shared responsibility – IATA

Results reported in the International Air Transport Association’s (IATA’S), the representative body for the global airline industry’s ‘Airline Business Confidence Index July 2020’ survey, published last week indicates that no less than 68 percent of the world’s airline chief financial officers (CFOS) and heads of cargo expect profits to drag or decline further over the next 12 months.

Further, 77 percent of the respondents to the IATA survey reported that, airlines suffered a fall in profits during the second quarter of this year. However, that represented a slight improvement in comparison to the situation reported in its previous survey, published in April.

In the latest report, 19 percent of respondents actually reported that their profits had risen. This was due to their focusing on air cargo operations, the yields for which rocketed because of a lack of capacity resulting from the loss of passenger airliner belly hold cargo capacity caused by the near global halting of passenger flights.

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Furthermore, 32 percent of respondents expected their profits to improve over the next year as air passenger travel resumed.

Regarding the overall impact of the Covid-19 pandemic, only 19 percent of respondents expected air traffic demand to return to 2019 levels within just six to 12 months, while 39 percent thought it would happen within 12 to 24 months, but the largest group, 42 percent, expected it to take more than two years to be achieved.

In terms of regions, 42 percent thought that the AsiaPacific would be the first to return to 2019 levels, followed by 35 percent saying it would be Europe. The Middle East was selected by 10 percent, Africa and North America by 6 percent each, while 0 pecrent chose Latin America. Focusing in on the question of demand, the survey showed that 96 percent of respondents had suffered from a fall in passenger demand during the second quarter. IATA observed that this was unsurprising.

However, there was no unanimity when it came to expectations of passenger demand over the next 12 months, with 42 percent expecting a further decrease in demand, 8 percent believing it would neither get worse nor get better and 50% expecting an improvement.

Regarding cargo demand, 30% of the survey respondents reported an increase during the second quarter, due to the lack of capacity created by the grounding of airliners.

For the next 12 months, 37 percent foresaw a decrease in cargo traffic volumes, 13 percent expected no change and 50 percent believed they would increase.

Unsurprisingly, there have been and are expected to be consequences for airlines’ workforces. During the second quarter, 45% of respondents reduced their staff complements, as part of cost-cutting in response to Covid-19; on the other hand, thanks to the assistance of their governments, 52 percent were able to avoid cutting jobs at that time. However, 55% believe that they will have to dismiss workers during the coming year, as they expect the scope of their operations will be smaller following the pandemic, which will require further cost-cutting.