Airlines across the world may be hard hit by the changes in corporate travel patterns brought in by the novel coronavirus pandemic, but “not all bad news” await he aviation sector as there are opportunities to be had in the leisure sector of the industry, believes Mark Manduca of Citi.
The pandemic had cause in travel restrictions and border closures resulting in a severe slump in global airline industry. This year, the global airlines industry is expected to lose $84.3 billion, said the International Air Transport Association this week.
At least a portion of the regular tourists are ready to start traveling again, believes Tim Kelly of Atlantis Resorts. “We’re actually starting to see a lot of tourist interest, believe it or not, in (the fourth quarter) of this year,” he said.
In the long term however, there is likely to be pressure on corporate travelling and that could hit the profitability of airline industry according to the prediction of Manduca a managing director at Citi.
But the airline industry can hope to have a positive leisure travel segment along with discounts that are being offered by manufacturers, he said.
But there can be a large impact on the profits of airlines because of a small adjustment in corporate travel, said Manduca, who is an associate director of EMEA research at Citi.
He believes that there can be a “secular shift” in the long run on corporate travel because of the “proliferation” of virtual meetings brought about by the pandemic even though he says that the mandatory quarantines and strict border rules will have a short term impact on business travel.
“Given the fact that a 1% movement in corporate travel volumes impact airline profitability by 10%, it’s not a crazy supposition to assume that the airline industry will struggle actually to get profitable again,” Manduca said in a television show.
However the positives for the global airline and aviation industry even in this gloom of the pandemic related crisis include lower wages for employees, airport costs and fuel prices.
“Lessors as well, and manufacturers are offering once-in-a-lifetime deals. So it’s not all bad news for the airline sector right now,” he said.
He is “seeing signs of green shoots” for recreational travel, Manduca also said. “If you look at the facts, short-term demand is indeed recovering, particularly on the leisure side.”
“About two thirds of our customers, they’re ready to come back now. They’re less constrained and less concerned about the circumstances, and there’s a third that are kind of waiting it out,” Kelly said while agreeing to the analysis of Manduca. Kelly is currently the executive vice president and managing director of Atlantis The Palm and The Royal Atlantis Resort and Residences in Dubai.
International travel is expected to open up in the third quarter, according to Kelly. “We’re actually starting to see a lot of tourist interest, believe it or not, in (the fourth quarter) of this year.”
However Kelly still believes that there would be “slow growth and a long runway” for te airline industry and according to his predictions, it could take “anywhere between 12 to 16 months” before traffic returns to normal.
“I’m hoping that it will be in (the fourth quarter) of 2021, once the Expo arrives in Dubai,” he said. “I think that will be the point where we’ll have a lot better clarity and insight with regards to the market.”
(Adapted from CNBC.com)