China, the United States and Indonesia are leading the recovery of the heavily battered global airline industry out of the unimaginable demand destruction caused by the COVID-19 pandemic with their resumption of domestic flights.
The International Air Travel Association (IATA) pointed out the industry's global recovery from the massive financial damage caused by the pandemic is rightfully being led by domestic airlines flying domestic routes. It said international travel will likely remain volatile for the time being but should begin an uphill climb starting 2021.
"It will be enough to kick start the airline industry in some countries," said Brian Pearce, IATA chief economist about the resumption of domestic flights. "For many airlines, they do depend on international air travel."
China Southern Airlines, the country's largest air carrier, in late February resumed over 2,100 domestic flights despite the pandemic. In March, Hainan Airlines resumed all domestic flights into and out of Hainan, southern China's tourist island.
By May, China Eastern reported that average daily flights rose by nearly 40% compared to April. In June, Indonesia's Lion Air and subsidiaries, Batik Air and Wing Air, restarted domestic flights which have since picked-up.
As for air travel between China and the U.S., Delta Air Lines on Thursday announced a resumption of flights between the U.S. and China. The twice-weekly flights from Seattle will travel through Seoul, South Korea before landing in Shanghai. Other carriers are planning to resume flights to China.
Pearce is also optimistic enough to expect a recovery by the second half of 2020. Whatever gains airlines make in the second half, however, will be nothing compared to the horrific financial losses inflicted on them.
IATA predicts airlines will lose an unprecedented $84 billion in 2020. It revealed air travel declined 98% in April year-on-year as countries closed their borders to stem the pandemic.
IATA fears a second wave of the pandemic might lead to more air service restrictions. This will lead to further losses of $15 billion in 2021 on top of the $84 billion projected for 2020.
IATA said the flight to recovery for the airline industry is all uphill. It forecasts much reduced passenger demand and inadequate cargo demand. Airlines now have to contend with a high debt burden, while competitive pressure to reduce fares will suffocate income.
The pandemic's financial impact will leave the world with a much smaller airline industry. This will, unfortunately, boost prices and weaken demand, leading to further losses.
