Airlines tumble on warning of lagging travel demand through 2025

by Bloomberg May 13, 2020

U.S. airlines plummeted to the lowest since 2013 after the International Air Transport Association warned that demand for flights will lag behind pre-coronavirus forecasts for at least five more years.

Global traffic, or the number of passengers carried times the distance flown, will still be about 10% below original estimates in 2025, Brian Pearce, the trade group’s chief economist, said in a media briefing Wednesday.

Traffic next year will be down between a third and two-fifths from projections made prior to the pandemic, according to IATA, which doesn’t see travel recovering to last year’s levels until 2023 at the earliest. Pearce said he expected a rebound in demand to come about two years after an upturn in GDP, partly due to the increased inconvenience of flying.

A Standard & Poor’s index of major U.S. carriers plunged 7.1% at 11:42 a.m. in New York as the broader market slumped on fears over the economy and U.S.-China tensions. The airline gauge earlier slid as much as 7.8% to the lowest intraday level since March 2013. The index has fallen 66% this year, the worst industry drop on the S&P 500.

United Airlines Holdings Inc. led the declines among U.S. carriers Wednesday, sinking 9.5% to $20.59. In Europe, British Airways parent IAG SA dropped 4.3% to 173.70 pence. Air France-KLM slipped 2.6% to 3.95 euros.

IATA said underlying drivers behind a decades-long boom in air travel—chiefly improved living standards in emerging markets—remain solid and will ultimately spur demand.

Alexandre De Juniac, IATA’s chief executive officer, said the industry lobby and its members are completely opposed to the imposition of quarantine measures for people arriving in countries such as the U.K. and Spain.

“International travel cannot restart under such conditions,” De Juniac said, citing a study that found 59% of people wouldn’t fly under such conditions. A globally coordinated bio-security system including temperature checks and contact tracing would manage the risk, he said.