An Apology
We were right, but need to apologise...
In May we went out early with a forecast that international demand would not recover this year and that in fact it could be worsethan 2020; it looks like we were right,but it pains us to say that now. The final confirmation of our forecast arrived yesterday when London Heathrow forecast lower passenger numbers for 2021 than 2020; could we ever have expected that at the start of the Covid-19 crisis?We may have ruined a few holiday expectations, including our own, but we gave early warning of how bad it could be; it was our very own “Emperor’s Clothes” moment.
Since May through to the end of October over a quarter billion scheduled airline seats have been removed from airline schedules and more will be stripped out in the coming weeks. The revenue loss to airlines runs into billions of dollars and in many cases, markets remain virtually closed. Bubbles have burst and traffic lights failed whilst vaccination rates in many countries have reached 70% plus levels,and globally over half of the world’s population have been shot at least once. The inconsistency of government action has been staggering and the chart that we prepared for the most recent OAG webinar highlighted just how some of the “finest public servants” have failed to serve their customers.
Logic clearly does not get in the way of political expediency in many countries. The UK and Canada have some of the highest one-shotvaccine rates and yet continue to havesome of the largest international capacity cuts. Meanwhile, Mexico peering over the border at the US Dollar with less than a 30% vaccine rate has essentially kept its border open to everyone. So bizarre is the situation that a two week holiday in Mexico or Ecuador for a European national allows them to enter the US without any checks and yet they cannot fly direct; that’s environmentally friendly....not!
This summer has been a shambles for the airline industry through no fault of their own. Lots of governments have failed the very industry that they will look to support their economic recoveries with business travel bringing back trade. Shame on them all. Another opportunity missed.
Forecasting is horribly inaccurate, never more so than in the last eighteenmonths but even today we need to try and look forward, however hard that may be. We got it right in May, will we get it right in August? Probably not but here goes.....This week we saw global capacity dip a little but still remain above the 80 million mark.
In 2019 this week saw some 119 million seats on sale, so we are 31% below the old normal. Our expectation is that we will settle back to around 74 million seats a week as we head towards the end of another awful year. Driving our forecast are a number of factors, including :
China will not reopen for any significant international services before the end of the year and may continue to be essentially closed until ChineseNew Year and the Winter Olympics scheduled for early February in 2022, if not later.
Major South East Asian markets such as Indonesia, Malaysia and the Philippines will continue to see infection spikes accompanied bysudden and sharp lockdowns.
Australia and New Zealand will continue their policy of global isolation. Given their current positions, should they even be removed from global maps? Don’t expect to see anything significant change until after the current Australian coalition loses power at the next election midway through 2022.
Low vaccination rates and high infection rates in the US will keep that market locked down until late 2021 at the earliest. The US domestic market is buoyantand will remain so until the end of October at least, so why risk a UK tourist infecting Mickey Mouse?
Continual traffic light failure in the UK will further frustrate the European recovery with any chance of a bounce back.
And Africa will sadly remain hampered by low vaccination levels and Governments directing cash towards maintaining empty B787 services to destinations with no demand. Expect no real recovery outside of domestic markets before perhaps the end of 2022.
Roll all ofthose factors and the many unknowns that will inevitably occur in the next few months and if we finish 2021 with weekly capacity at just 30% below the levels seen in 2019 then that may be considered a success. 2021 really has been a wasted year for everyone.
Happy New Year all!
-John Grant