Airlines cling to hopes for 2024 travel recovery, even with war in Ukraine

Russia's invasion of Ukraine is causing direct disruptions in air traffic flows. PHOTO: AFP

LONDON (BLOOMBERG) - The International Air Transport Association (Iata) sees air passenger numbers exceeding pre-Covid-19 levels by 2024, even as the near-term impact from Russia's war in Ukraine mounts.

North American air travel is expected to reach a full recovery next year, ahead of other regions, thanks to the strong United States domestic market, according to the group representing major network carriers worldwide. Europe should rebound in 2024.

Meanwhile, a slow removal of border restrictions in Asia combined with tight domestic rules during Covid-19 outbreaks will keep air travel below pre-Covid-19 levels until 2025. Africa and the Middle East will also take until at least the middle of the decade to fully recover.

War Risks

The forecast does not include the impact of the conflict between Russia and Ukraine, Iata says, as air transport is "resilient against shocks".

Nevertheless, there are clearly downside risks in the near term. US President Joe Biden on Tuesday (March 2) closed US airspace to Russia, in the latest move to punish Russian President Vladimir Putin for his invasion.

The Bloomberg World Airlines Index has sunk 12 per cent since Feb 10, with European carriers like Ryanair Holdings declining twice as much.

"Airline profitability is going to fall," said Bloomberg Intelligence analyst George Ferguson on a webinar on Tuesday hosted by aviation consultancy IBA.

Using the example of US airlines, he said unit costs are rising, in part due to higher wages, and the conflict in Ukraine is disrupting energy markets so jet fuel prices are rising to well above 2019 levels. While demand is rising, fares are lower, and the economy is slowing in a number of markets.

Russia's invasion of Ukraine is causing direct disruptions in air traffic flows, with reciprocal airspace bans closing down chunks of sky for operators in the conflict zone and in Europe. While the US flight ban on Russian carriers will likely prompt a reciprocal response, American carriers have already stopped overflying Russian airspace.

If the situation is not resolved relatively quickly, and Russian international traffic is effectively reduced to zero while its domestic travel suffers due to sanctions and other factors, the combination could delay the global aviation recovery by at least two months, according to IBA chief revenue officer Stuart Hatcher.

The group has not modelled past that point, he said.

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