Global airline recovery is patchy, driven by domestic traffic

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By Judson Rollins


May 20, 2021, © Leeham News: Despite widespread hope, the global passenger travel recovery many expected in 2021 has proven elusive to date. Airline industry advocate International Air Transport Association (IATA) said that March global passenger traffic was still down more than two-thirds from 2019.

First-quarter airline earnings in most parts of the world have been lackluster or worse as borders remain closed and business travel continues to be deeply depressed, even within the few countries where vaccine rollouts have made the greatest progress. And jet fuel prices have rebounded to nearly where they were before the pandemic.

Aircraft parked in Alice Springs, Australia. Source: Bloomberg.

Traffic volumes are rapidly growing in the US and Chinese domestic markets, but US carriers are reporting average yields 20%-30% below pre-COVID levels. Chinese carriers don’t provide any visibility into their yields. Forward booking data from IATA shows the domestic-international divergence will only widen in the coming months.

Air cargo continues to cushion the fall in passenger revenue at many airlines, but to nowhere near the extent necessary to fully offset it.

  • International travel continues to weigh on airline earnings globally.
  • US carriers are optimistic about the strength of leisure recovery, less so on business.
  • Asia and Australasia remain largely isolated due to strict border controls.
  • EU internal borders are slowly reopening; vaccinated travelers likely to be admitted soon.
  • Cargo provides a revenue offset to some regions, but not all.

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