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IATA's 2020 Traffic Forecast Deteriorates Due to Dull Summer
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The fact that the ongoing coronavirus pandemic has upended air travel is no longer news to us. Even though more than six months have elapsed since the health peril was declared a pandemic by the World Health Organization, the dreaded disease continues to cripple airline stocks by drastically eating into their passenger revenues.
Due to the ill-effects of this global health peril, the usually busy summer season for the carriers in the Northern Hemisphere turned out to be a damp squib this time. This dismal performance prompted the International Air Transport Association (IATA) to downgrade its current-year airline traffic forecast.
Per IATA, global air traffic is expected to plummet 66% in 2020 compared with the 2019- levels. The previous projection had hinted at a 63% year-over-year decline. The dismal prediction reflects the weaker-than-expected recovery in air-travel demand. The emergence of fresh cases in Europe and the re-imposition of restrictions on many European countries are likely to serve as a further dampener to the already slow rebound. Notably, European low-cost carrier Ryanair Holdings (RYAAY - Free Report) recently announced that it will slash its October capacity by a further 20% due to travel limitations imposed by the European Union governments.
Given the current scenario, IATA expects air-travel demand to be restored at a much sluggish pace than estimated earlier. The airline association predicts that December traffic (measured in revenue passenger kilometers or RPKs) is now projected to plunge 68% from the 55% year-over-year fall predicted earlier.
Apart from the revised traffic forecast, IATA unveiled the global traffic report for August, which was equally disastrous. Per IATA, which represents 290 airlines across the globe, RPKs in August slumped 75.3% year over year. Capacity (measured in available seat kilometers) was down 63.8% from the August-2019 level. With traffic deteriorating more than capacity, load factor (% of seats filled with passengers) contracted 27.2 points to 58.5%. Such a tepid scenario can be gauged from the fact that the reading for load factor represented an all-time low for the month.
Per Alexandre de Juniac, IATA’s director general and CEO: “August’s disastrous traffic performance puts a cap on the industry’s worst-ever summer season”. The sole bright spot was the performance of the carriers in their domestic markets (apart from Australia and Japan), which bettered the international market levels with the recovery in demand on the international front being “virtually non-existent” per Juniac.
The improvement in the domestic markets is evident from the fact that the U.S. carriers including Delta Air Lines (DAL - Free Report) , United Airlines (UAL - Free Report) , American Airlines (AAL - Free Report) , Southwest Airlines (LUV - Free Report) , Alaska Air Group (ALK - Free Report) and JetBlue Airways (JBLU - Free Report) recorded an uptick in their respective August domestic traffic numbers from the July readings. While domestic traffic for the U.S. carriers in August declined 69.3% year over year, the July performance was worse with a 71.5% plunge.
Wrapping Up
Even though traffic is likely to be down significantly year over year at least in the remainder of the year as can be figured out from IATA’s downbeat forecast, the only solace is the improvement in the metric of most domestic flights across the globe. Airlines will be hoping that the upturn on their home turf continues on the back of the recently implemented safety-protocols to attract passengers. They will also be expecting a vaccine to soon hit the medical market for neutralizing the dreaded disease so that people can take to the skies without any apprehension,
Come what may, we expect investors interested in this not-so-long-ago high-flying space to stay tuned for further updates on how things pan out for the airlines in the near term.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
Image: Bigstock
IATA's 2020 Traffic Forecast Deteriorates Due to Dull Summer
The fact that the ongoing coronavirus pandemic has upended air travel is no longer news to us. Even though more than six months have elapsed since the health peril was declared a pandemic by the World Health Organization, the dreaded disease continues to cripple airline stocks by drastically eating into their passenger revenues.
Due to the ill-effects of this global health peril, the usually busy summer season for the carriers in the Northern Hemisphere turned out to be a damp squib this time. This dismal performance prompted the International Air Transport Association (IATA) to downgrade its current-year airline traffic forecast.
Per IATA, global air traffic is expected to plummet 66% in 2020 compared with the 2019- levels. The previous projection had hinted at a 63% year-over-year decline. The dismal prediction reflects the weaker-than-expected recovery in air-travel demand. The emergence of fresh cases in Europe and the re-imposition of restrictions on many European countries are likely to serve as a further dampener to the already slow rebound. Notably, European low-cost carrier Ryanair Holdings (RYAAY - Free Report) recently announced that it will slash its October capacity by a further 20% due to travel limitations imposed by the European Union governments.
Given the current scenario, IATA expects air-travel demand to be restored at a much sluggish pace than estimated earlier. The airline association predicts that December traffic (measured in revenue passenger kilometers or RPKs) is now projected to plunge 68% from the 55% year-over-year fall predicted earlier.
Apart from the revised traffic forecast, IATA unveiled the global traffic report for August, which was equally disastrous. Per IATA, which represents 290 airlines across the globe, RPKs in August slumped 75.3% year over year. Capacity (measured in available seat kilometers) was down 63.8% from the August-2019 level. With traffic deteriorating more than capacity, load factor (% of seats filled with passengers) contracted 27.2 points to 58.5%. Such a tepid scenario can be gauged from the fact that the reading for load factor represented an all-time low for the month.
Per Alexandre de Juniac, IATA’s director general and CEO: “August’s disastrous traffic performance puts a cap on the industry’s worst-ever summer season”. The sole bright spot was the performance of the carriers in their domestic markets (apart from Australia and Japan), which bettered the international market levels with the recovery in demand on the international front being “virtually non-existent” per Juniac.
The improvement in the domestic markets is evident from the fact that the U.S. carriers including Delta Air Lines (DAL - Free Report) , United Airlines (UAL - Free Report) , American Airlines (AAL - Free Report) , Southwest Airlines (LUV - Free Report) , Alaska Air Group (ALK - Free Report) and JetBlue Airways (JBLU - Free Report) recorded an uptick in their respective August domestic traffic numbers from the July readings. While domestic traffic for the U.S. carriers in August declined 69.3% year over year, the July performance was worse with a 71.5% plunge.
Wrapping Up
Even though traffic is likely to be down significantly year over year at least in the remainder of the year as can be figured out from IATA’s downbeat forecast, the only solace is the improvement in the metric of most domestic flights across the globe. Airlines will be hoping that the upturn on their home turf continues on the back of the recently implemented safety-protocols to attract passengers. They will also be expecting a vaccine to soon hit the medical market for neutralizing the dreaded disease so that people can take to the skies without any apprehension,
Come what may, we expect investors interested in this not-so-long-ago high-flying space to stay tuned for further updates on how things pan out for the airlines in the near term.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
See the 5 high-tech stocks now>>