Battered consumer confidence to slow airlines’ recovery

Faltering consumer confidence will slow the recovery of air travel once coronavirus restrictions end, the sector’s main global body IATA warned on Tuesday, citing bleak new survey data, reported Reuters.

More airlines are likely to follow Virgin Australia into administration without swifter government support, the International Air Transport Association (IATA) predicted, and fuel hedging will prevent many from benefiting from cheap oil.

Domestic and short-haul travel will pick up first, IATA said, but the demand upturn has been tepid in China and absent in Australia even after new COVID-19 cases have dwindled.

“Once market travel restrictions and lockdowns are relaxed, there’s still an issue about whether there will be demand from passengers to come back and fly,” IATA Chief Economist Brian Pearce said during an online media presentation.

Domestic air traffic is down 70% worldwide, IATA said.

The Geneva-based organisation expects the near-total shutdown of global aviation to cut industry revenue this year by more than half, with the $314 billion hit threatening 25 million jobs, and is backing airline demands for government support.

Some 40% of air travellers plan to wait at least six months before resuming their habitual flying, according to the IATA-commissioned survey published on Tuesday, and 69% say they will do so only after their personal finances stabilise.

The online poll of 4,700 consumers was conducted by Rockland Dutton with sample sizes of 300-500 in each of 11 countries.

In Europe, where the cycle of coronavirus spread, containment and travel reopening is lagging behind Asia, major carriers have locked in fuel costs through hedging, Pearce said.

Many airlines are therefore “unable to take advantage of the low prices even if they were actually flying”, Pearce said a day after U.S. crude futures turned negative for the first time in history.

The collapse of Virgin Australia, which entered voluntary administration on Tuesday, shows that many airlines will need quicker public support to survive, IATA’s Director General Alexandre de Juniac also said.

“The example of Virgin Australia is a perfect illustration of the warning we have put forward and the requests we have put in front of governments,” he said.