If the aviation sector which has been brought to its knees by the COVID-19 pandemic is to recover in the second quarter of 2020, bilateral openings of markets and government intervention will be key.
This was disclosed by Brian Pearce, Chief Economist of the International Air Transport Association (IATA) and Keith Mason, head of the Centre for Air Transport Management at Cranfield University in separate interviews with CNBC.
According to Pearce, “We’re really only just starting to see countries negotiating bilateral openings of markets. For example, the Trans-Tasman bubble between Australia and New Zealand, China, and Singapore, as well as China and Korea. It will be enough to kick start the airline industry in some countries. For many airlines, they do depend on international air travel” he said.
On his part, Mason posited that “Government aid will be important in ensuring the continuity of airlines. We’re going to see a consolidation in the market where airlines that are fully independent are struggling to survive, are going to go out of business,” he said.
Governments are increasingly offering financial assistance to keep ailing carriers afloat, including the U.S., Australia, and Taiwan. IATA predicted that a total of $200 billion in global government support may be needed.
Recall that not too long ago, the airline industry was preparing for a surge in passengers, with IATA forecasting 8.2 billion air travelers by 2037.
But in April, air travel declined 98% from last year as countries closed their borders in efforts to stem the coronavirus pandemic.
“We think airlines are going to probably lose an unprecedented $84 billion in 2020” Pearce had disclosed during the interview.
The coronavirus pandemic’s financial impact is also projected to leave the world with a smaller airline industry. That, in turn, could drive up prices and weaken demand.
While international travel will likely remain volatile for now, countries like China, the U.S., and Indonesia have resumed domestic air travel.