Travel restrictions seen hampering EMEA’s air traffic recovery

Stringent Covid-19 related travel restrictions in key destinations such as the UK, Europe, Australia and New Zealand continue to place a stranglehold on air traffic recovery in the Europe, Middle East and Africa (EMEA) region, even as the North America (predominately US) and the Asia-Pacific (APAC) regions are leading the recovery table.

Releasing its latest global aviation industry report on June 2, 2021, Fitch Ratings, the New York-based global ratings agency, said the EMEA’s air traffic volume “is still running at about 40% of its 2019 capacity, compared to 70% in the US and APAC, mostly due to raised travel restriction levels following the latest coronavirus wave in many European countries”.

‘Negative Outlooks’

Fitch noted that the “EMEA carriers stay under significant pressure” as a result, with “most ratings remaining on Negative Outlooks”.

The biggest network carriers in the EMEA region are: Lufthansa, Air France-KLM, British Airways, Emirates, Etihad Airways, Qatar Airways, and South African Airlines.

The Fitch analysis noted that “the return of leisure travellers is driving airlines’ traffic revival in the [EMEA] region, although a full recovery is still three years away and is also dependent on a return of business and long-haul passengers”.

Significant pent-up demand for leisure travel after a prolonged period of travel constraints will be the main driver of air traffic recovery in the medium term.

LCCs’ status

Carriers that are better positioned to benefit from these trends are low-cost carriers (LCC), such as Ryanair and Wizz Air.

Network airlines, such as “British Airways and Etihad, have larger exposure to long-haul travel and will find it harder to recover traffic,” said Fitch.

These airlines also operate from a single country base with a weak domestic market and are more exposed to travel restrictions than those with a strong domestic base or those operating in multiple jurisdictions (such as large LCCs) that are able to reshuffle their route structures depending on changing travel restrictions and demand.

Fitch stated that “some business travel could be permanently lost due to the increased use of virtual meetings”, but also expected “most of it to return in the long term”, even as “long-haul international and business travel will be slower to come back”.

The Fitch research also noted that “despite some positive demand trends emerging for the summer 2021 season, supported by increasing vaccination roll-outs, we do not expect a full traffic recovery until 2024”.

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