CAPA outlook - international air travel to struggle to get off the ground in 2021

Featured Analysis

CAPA Founder and Chairman Emeritus, Peter Harbison, has issued a blunt warning to the global aviation and travel industry at the outset of 2021 - that vaccines are "not the solution" to the problems the industry faces.

The call comes prior to this week's CAPA Outlook presentation that Mr Harbison will deliver as part of the monthly CAPA Live virtual event series. The January edition will play live, globally, on 13-Jan-2020.

"There seems to be a failure to diagnose what the problem is, rather than rushing straight to the solution for airlines and particularly international airlines. So, diagnosing the challenge is essential to solving it, for without diagnosis there can be no cure", he said.

Vaccines are "just a sideshow" for international aviation

According to Mr Harbison, vaccines will just be a 'sideshow' for international aviation for most of 2021, and the direct and flow-on impact of the new vaccines will be 'very limited', because:

  • The roll-out of vaccines will take many months, and we have already seen significant delays and clear indications of difficulties in the supply chain.
  • Vaccination priority is going to be given to categories who actually have, in most cases, lower travel propensity. The younger, healthier people will not receive vaccinations till later in 2021 - that's if they receive them at all in 2021.
  • Then there's the point that no one is vaccinated until everybody is vaccinated. Many countries will be left out in the first rounds, while the rich countries sadly seem to claw the vast bulk of vaccines to themselves.
  • Then there's the issue of the number of vaccines and recognition of the many vaccines and setting of safety standards. This remains with national health authorities, and they have varying levels of risk tolerance. Consequently, quarantine requirements will persist for many months, and borders will close and open unpredictably, as circumstances change.

Most trunk routes "will not be commercially viable"

The absence of corporate travel will significantly undermine the economics of long haul flying.

The revenue profile for airlines in this first half of 2021 looks 'something close to catastrophic', given that they've been holding their breath for so many months already. It should improve in some markets in the second half of 2021, particularly towards the end of the year, but with only modest acceleration after the end of the first half.

Most trunk routes "will not be commercially viable", said Mr Harbison. There'll be very limited business travel, perhaps as much as 50% of previous levels in the second and half of the year, but even that's probably optimistic.

Many countries will only allow very limited and fluctuating access, making scheduling, and pricing, and the whole array of things extraordinarily difficult. Most European and US major airlines rely heavily on international profits, especially on the North Atlantic where there's less competition, and there's a lot of business travel.

And at the other end of the line, shorter-haul feeder services are increasingly competitive and lower yielding.

"So, the whole supply chain, as it were of the full service carrier, is being very, very significantly attacked in this environment", said Mr Harbison.

As a result, government subsidies are likely to be needed to maintain key long haul trunk routes

The CAPA Founder concludes that in one way or another, "government subsidies are going to be needed to maintain core international truck routes, at least in the short term, because they're going to be largely unviable at least until well into 2022".

Mr Harbison explains which airline business models are best suited to the current and evolving circumstances, noting that conditions will suit the LCC models best.

"They're usually best positioned to benefit from the recovery process after a major shock. And the recovery will be led by domestic and international short haul leisure markets", he said.

Mr Harbison goes on to explain the outlook for major transit hubs in the Middle East, Singapore, Hong Kong, as well as the establishment of bilateral bubbles.

Mr Harbison's presentation will screen at 13:00 GMT on 13-Jan-2021, and registrations are available at this link.

CAPA Live screens on the second Wednesday of every month throughout 2021, bringing together thousands of aviation professionals to listen and interact with our industry leaders, such as those featured below. Join us today!

Want More Analysis Like This?

CAPA Membership provides access to all news and analysis on the site, along with access to many areas of our comprehensive databases and toolsets.
Find Out More