By Judson Rollins
July 19, 2021, © Leeham News: A year ago last week, LNA published what might have seemed an apocalyptic call: global airline passenger traffic would not recover until 2024 at the earliest – and potentially not until 2028.
Early trends and forecast revisions by other parties point to the earlier half of our window. However, one major downside surprise has been an increasingly bifurcated world for airlines as demand returns at widely uneven rates by region and passenger segment.
Air travel is undergoing a “K-shaped recovery” like the global economy, with fairly obvious delineation between winners and losers. The upper leg of the “K” represents countries with large domestic markets, leisure travel, short-haul routes, and low-cost carriers.
The lower leg applies to developing countries, international traffic, business travel, long-haul routes, full-service airlines – and most airline suppliers.
In hindsight, our prediction probably answered the wrong question, because the key driver of renewed profitability and future investment in commercial aviation isn’t the recovery of airline traffic, but revenue. The many changes to business and long-haul travel make revenue more difficult to forecast, but it will clearly be even slower to return than traffic.
Most industry forecasts don’t call for airline traffic to fully recover until 2024 or 2025, even if large domestic markets recover sooner. That means airline revenue – and profitability – will still be hampered until late this decade.