Airline woes intensify with new COVID-19 variants

New restrictions on international border-crossings, combined with faltering COVID-19 immunization efforts, have dashed hopes for a significant rebound in air travel in 2021.

Why it matters: For global aviation, which suffered its worst year in history in 2020, the misery is likely to continue, holding back a broader economic recovery.

• Forecasts that air travel would recover to 50% of pre-pandemic levels in 2021 now seem like a stretch, industry officials caution.
• “There’s a recovery, but it’s a much smaller recovery,” Brian Pearce, chief economist of the International Air Transport Association, told reporters this week.
• “What we’ve seen in recent weeks is governments taking a much, much tougher, more cautious approach.”
• His worst-case scenario: air travel in 2021 is just 38% of 2019 levels.

The big picture: The world is more locked down today that at any point in the past 12 months.

• New, potentially more contagious strains of the coronavirus have triggered renewed limits on cross-border travel and a dizzying array of quarantine restrictions.
• While the arrival of new vaccines is good news for air travel, the slow rollout means herd immunity is still a long way off.

An ominous sign: Bookings for future travel slowed significantly in January, IATA reported.

• "Things are going to become much harder before they get better," warns aviation consultant Shashank Nigam, CEO of Simpliflying.
• Even countries that are vaccinating quickly will keep their borders shut for some time, he predicts.
• Israel, for example, leads the world with 20% of the population fully vaccinated, but imposed a ban on international travel last week to combat rising cases from a fast-spreading U.K. variant.
• And regional travel bubbles such as those between Hong Kong and Singapore or Australia and New Zealand didn't last.

Context: The rebound that began last summer stalled in the fourth quarter as coronavirus cases spiked around the world.

• Air travel was down 70% in October, November and December vs. year-ago levels.
• For all of 2020, passenger demand fell 66%. International passenger demand was down by 75%; domestic demand by nearly half.
• Americans who did fly were seeking sun and beaches: Travel to places like Mexico and the U.S. Virgin Islands fell the least in December, according to Airlines for America.
• One bright spot: air cargo fell only 10% last year, helping to keep many airlines afloat.

What they're saying: "Last year was a catastrophe. There is no other way to describe it," Alexandre de Juniac, IATA’s Director General and CEO, said in a statement.

• "I don’t think that anyone foresees a world free from COVID-19 anytime soon. Certainly not in the next months or even within this year. But our ability to manage the risk is increasing as more people get vaccinated and testing capacity expands."

Airlines say widespread testing, not border restrictions, will allow international air travel to resume safely.

• Nigam's company is rolling out a service called Fit2Fly.travel that links airlines and testing laboratories so passengers can schedule a COVID-19 test as part of the booking process.
• New smartphone apps like CommonPass and IATA's Travel Pass could help validate passengers' health status so governments can safely reopen borders.

Yes, but: When it comes to domestic flights, U.S. airlines are urging the Biden administration not to require pre-departure testing, saying it would limit travel access for low-income and rural communities.

What to watch: For airlines, the outlook for the next year or two is uncertain, and will depend on how effectively vaccines and testing can head off the spread of new variants.

The bottom line: Aviation isn't likely to return to pre-pandemic levels until 2023 or 2024.