A new report by Stifel, an investment bank, has revealed that air travel demand will not return to pre- COVID-19 outbreak levels until at least mid-2021, and that’s only if the best-case scenario plays out.
The best-case outcome, as analyst Joseph DeNardi wrote in the report that was released on April 1, 2020 is that the growth of COVID-19 cases would slow around the US and abroad as the weather warms up, and as various measures to contain the virus such as social distancing and shelter-in-place orders have an effect.
“Still, under that scenario, demand would only return to the pre-outbreak trend by mid-2021. However, even that may be optimistic. While timing is difficult to predict, we believe it’s rather likely that airlines suspend scheduled flying in the near future. As such, we assume very limited capacity in our 2Q estimates” the report said.
The good news, according to DeNardi, is that even though the industry will likely face structural changes on the other side of the COVID-19 crisis, travel demand should eventually return.
“Demand for air travel has been incredibly robust historically through outbreaks, terrorist attacks, war, aviation accidents and we see no reason why it won’t be once this outbreak stabilizes and is better understood” the report added.
Recall that one of the industries most severely affected by the novel coronavirus outbreak is the airline industry and according to an analysis by The International Air Transport Association, IATA on the financial impact of the novel coronavirus (COVID-19) on the global air transport industry. IATA now sees 2020 global revenue losses for the passenger business of between $63 billion (in a scenario where COVID-19 is contained in current markets with over 100 cases as of 2 March) and $113 billion (in a scenario with a broader spreading of COVID-19).