How long before the travel industry recovers from COVID-19?

| June 17, 2020

COVID-19 has adversely affected some industries more deeply than others, and the travel industry was amongst the hardest hit. In particular, airlines’ revenues have greatly declined since the spread of COVID-19 caused a significant crisis. This, in turn, has negatively affected many SMEs in the travel industry, not to mention SMEs in hospitality and other industries that rely on travellers as a source of revenue.

In order for these airline-reliant businesses to make a full recovery, they’ll either have to wait until international air travel can resume or pivot to find new revenue sources. Either way, challenges lie ahead. Let’s discuss some of the factors that will affect the timeline for the travel industry’s recovery.

Current status of the travel industry

Many countries, including Australia, have closed their borders to international travel. Some countries have reopened or are planning to reopen soon. But even in countries where borders remain open, some businesses within those countries have enacted travel bans for their employees because of worries about COVID-19.

On May 8, Australian Prime Minister Scott Morrisson announced a plan to re-open Australia, but the plan didn’t mention international air travel. This leaves us guessing as to when, exactly, the country’s borders will re-open for international tourism and travel. It is possible that perhaps Australians may be able to fly to New Zealand starting on July 1, but so far that is just a rumour that has not yet been confirmed.

Quarantine restrictions make quick international trips impossible

Some countries including the UK and France have initiated a 14-day quarantine period for arriving travellers. This effectively eliminates any hope international visitors may have of taking a quick holiday or business trip to these countries.

In multiple press conferences, Alexandre de Juniac, CEO of the International Air Transport Association (IATA) has expressed opposition to such quarantine measures being implemented by governments. In a 13 May 2020 press conference, he stated,

<blockquote>”International travel cannot restart under such conditions”.</blockquote>

Then in a follow-up press conference on 26 May, he further criticised governments for “the politicization of quarantine measures”. He believes that some of the recent quarantines are based more on politics than science.

Regardless, as long as these quarantines are in place, they will discourage people from travelling to the countries that have implemented them.

Alexandre de Juniac also expressed concern that governments are not doing enough to help the airlines through this period of turmoil. He pointed out that the majority of the assistance they are receiving comes in the form of loans and tax deferments that will increase the airlines’ debt burden. This does little to guarantee their long-term survival.

US air travel witnessed a slight upward trend over their recent holiday weekend

Across the pond, Americans in the United States celebrated their Memorial Day on Monday, May 25, 2020. The Memorial Day weekend is considered to be the country’s unofficial start of summertime, and it has historically been a popular time to travel.

The USA’s Transportation Security Administration (TSA) reports passenger throughput data, which can be used to roughly estimate how many people are travelling through their airports. There was an uptick in screenings over Memorial Day weekend as compared against the previous months when the COVID-19 lockdowns were enacted; however, the number of screenings was far lower as compared against Memorial Day 2019. Overall, US airport screenings were down an estimated 87 per cent.

Unfortunately, holidaymakers were apparently the most sizable group of travellers; business travel has not seen any significant amount of recovery as of yet. Executives have had to make tough choices on whether to travel as planned or change their plans; and many of them are choosing to cut travel expenses at this time.

In order for a full recovery to happen for the airlines, business travellers will need to resume their travels. Holidaymakers alone cannot provide the revenues airlines need to maintain fleets at their previous levels.

Some airlines are retiring significant portions of their fleets

Indeed, it seems evident that some airline industry executives are anticipating a slow recovery, as evidenced by the fact that their airlines are choosing to retire planes earlier than they had planned to. Delta and American Airlines both recently announced plans to cull planes from their fleets.

Local travel seems like it will rebound quickly, and the outlook is positive for many Australian travel SMEs

Despite the challenges, there are many Australian travel SMEs whose executives remain optimistic about the future. For example, Chris Cameron, founder of The Road Trip Australia, sincerely believes that Australian travel will bounce back from the Coronavirus later this year. He is encouraging travellers to book trips in advance for the remainder of 2020 and 2021. In the short term, as the lockdowns ease enough to make some local travel permissible, his company plans to welcome domestic Australian travellers who want to explore a variety of nearby destinations within their own country.

Businesses like this one, that have solid expertise and relatively low overhead, are likely to survive and hopefully even thrive through this tumultuous period. While international guests have historically been an important revenue stream for them, it is possible that their local client base may see a corresponding increase, because Australians who want to travel have now been forced to do so closer to home.

Indeed, it appears that domestic travel is likely to rebound quickly. Airbnb executives are celebrating a surge in local bookings within Australia, as some (but not all) states have announced plans to reopen their borders to domestic travellers. News.com.au is reporting that Australian domestic Airbnb bookings have rebounded to 90 per cent of pre-COVID levels when compared against the same week year-on-year. Some NSW destinations, including Jervis Bay and the Blue Mountain regions, are even seeing sizable year-on-year increases in search traffic and bookings, despite the fact that some activities within these regions are still in lockdown mode.

Obviously, it is not possible to guarantee the accuracy of future predictions about what the global economy, and industries within it, will do or not do. We can make educated guesses, but there may be surprises in store for us despite our best efforts to anticipate what will happen. That said, it seems unlikely that the travel industry will enjoy a swift and complete restoration to how things were before. However, local travel is likely to enjoy a resurgence in popularity as Australians rediscover how awe-inspiring our own landscape truly is.

 

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