After two years of pandemic, it takes more than an economic crisis to worry Willie Walsh. Presenting traffic figures for this summer and forecasts for the coming months, the Director General of the International Air Transport Association (IATA) once once more affirmed his confidence in the solidity of traffic for the coming months.
In view of the summer that has just ended, Willie Walsh can only welcome such a dynamic. August figures are not yet consolidated, but for July, global companies had already recovered 87% of their domestic traffic and two-thirds of their international traffic. If the latter is still down, it has still more than doubled compared to last year. Unsurprisingly, the recovery has particularly materialized in North America, both domestically and internationally, but also in Europe. Asia-Pacific is lagging behind due to the restriction policies still very present in several countries, starting with China.
“The recovery is gaining momentum. We saw good traffic figures during the summer in the northern hemisphere,” said Willie Walsh, director general of IATA.
Willie Walsh praised the dynamism of this recovery: “There’s still a long way to go, but it’s a great sign as we approach the traditionally slower fall and winter terms in the northern hemisphere.”.
In fact, despite these results, which were still unexpected at the start of the year, the stakes are no longer in the summer. It is the sustainability of the recovery over the autumn and winter that raises questions, now that a large part of the outstanding demand has been satisfied, and while the economic crisis is becoming more and more pressing and that the still high kerosene costs are weighing on prices.
Confidence assumed for the end of the year
For the moment, the boss of IATA is confident: “We now expect this to continue in the August and September numbers given the positive trends we are seeing in forward bookings. So I think it’s a good situation, both on the passenger side and on the freight side. Clearly there are challenges ahead, particularly with fuel prices, but the outlook is positive for the industry. »
To support his point, Willie Walsh can refer to the level of reservations on domestic traffic, which has held steady since June at nearly 90% of that of 2019. If this is not yet back to the level before the crisis, this stability is appreciable for the companies following two years of incessant “yo-yoing”. They will still have to take their troubles patiently to regain this form of serenity on the international market, but in the meantime, they can be satisfied with a nice rise in the level of reservations: following having maintained themselves in April and June thanks to the approaching the summer holidays, it had fallen in July before accelerating once more in August. It is thus around 80% of the 2019 level, which seems to confirm that there will be no collapse in traffic this autumn.
One of the main reasons for concern in his eyes is the persistent gap that remains between the price of crude oil and that of kerosene, with very high refining margins which drive up the cost at the pump by almost 50%. Unheard of for Willie Walsh, who reminds us that this « crack spread » was 17% on average during the decade preceding the crisis. The narrowing of this gap, briefly seen in June, has fizzled out. The IATA boss hoped that the increase in production would reduce refining margins, but the recovery in traffic proved even stronger. He still hopes for a small improvement by the end of the year, but he warns that the fuel bill will continue to weigh heavily on airline accounts, and affect ticket prices with the risk of curb demand.
Inflation, not even afraid
Beyond that, whether it is the economic context, inflation or exchange rate risks, Willie Walsh considers that it is something that companies know and know how to face: “I think those are all headwinds, certainly, but those are headwinds that we’ve faced before. » He thus affirms that the period remains very positive for the companies, with little immediate impact: “These elements are having some impact on the rate at which demand recovers but, for now, we continue to see strong forward bookings. Although we are going through this period, it is clear that many airlines are generating good cash balances and are looking to repair their balance sheets by strengthening their liquidity. So it’s a tough environment, but the management teams of most airlines are looking at the positives and thinking regarding what they need to do to deal with these headwinds. »
In addition, Marie Owens Thomsen, chief economist of IATA, insists on the fact that the employment rate is currently very high throughout the world and that jobs continue to be created. She thus refers an unusual phenomenon […] a job-rich economic downturn, which contrasts with the jobless economic recovery that followed the global financial crisis” of 2008. While she willingly admits that inflation reduces individual purchasing power, the economist thus considers that overall purchasing power increases. It also notes the positive impact on household debt, the weight of which decreases with inflation.
The United States and Europe eclipsed by China
Asked regarding a possible structural weakening of business travel, Willie Walsh kicks in by indicating that the IATA looks at the classes of travel and not the reasons, and that, on this point, “the recovery of premium classes was slightly faster, or at the same pace, as the recovery of economy class”. However, he adds: “Like I said, we’re not looking at the reasons for travel but, when you talk to CEOs, they’re certainly more confident that business travel will resume. And it’s important to point out that not all business travelers travel in premium cabins. »
For her part, Marie Owens Thomsen considers above all that “If there are pockets in Western Europe or the United States where companies can afford to fly less and rely more on virtual conferencing, they will be dwarfed in number by the increase in these trips to all other regions as soon as possible, and in particular to China. »
Regarding other possible sources of disruption such as a resurgence of the pandemic, Willie Walsh seems, once more, bathed in optimism: “I like to think that governments would have learned from the mistakes they made. All the evidence shows that these border closures have done nothing to suppress the spread of the virus. » Not sure that this is enough to keep the borders open for all that.
Showing a little moderation, Willie Walsh nevertheless avoids going overboard. It thus maintains its forecast of a global return to pre-crisis levels in 2024, even if the end of 2023 has sometimes been mentioned. Above all, he specifies that, if the American market might have fully recovered as of next year, it will probably be necessary to wait until 2025 for the same to be true for Asia-Pacific.