International connectivity, the life blood of tourism, in lock down
Covid-19 is of course not just having a devastating impact on Irish tourism but is reeking havoc throughout the global travel and tourism sector. The number of global air departures scheduled for this week (commencing March 29th) is less than half the level planned at the start of the year. The increase in flight cancellations, while across numerous country markets , is especially marked across Western Europe where international connectivity was cut by more than two thirds last week.
Global air service connectivity has been significantly reduced as the rapid spread of Covid-19 continues resulting in a rapid decline in passenger demand with lock downs in many countries together with the imposition of travel restrictions around the world. The USA, Canada, Australia, Russia, Mexico, New Zealand, and United Arab Emirates are amongst countries to totally ban the entry of foreign nationals.
The current situation has seen airline fleets grounded as carriers attempt to mitigate the impact of the current pandemic by reducing costs and cutting non-critical expenditure. The majority of European airlines have made heavy cuts with several, including EasyJet and Stobart, temporarily suspending operations. Most airline schedule cuts are in place for at least April with a few not anticipating any significant change up to end May. According to airport representative council ACI Europe, airports across Europe are likely to see a loss of over 700 million passengers and €14 billion in revenues by the end of April.
The International Air Transport Association (IATA), the trade association of the world’s airlines, has calculated that airlines will see a 38% fall in global demand and a $252 billion loss of passenger revenue 44% down on 2019 – should the severe travel restrictions last for up to three months. The fall in demand is forecast to be deepest in the second quarter ending June 30 with a 71% drop in revenue. The latest analysis IATA has been asking governments to provide a lifeline of financial support, with some airline failures and further consolidation within the sector inevitable. To-date several countries have committed to financial relief, including Singapore, China, Hong Kong, Australia, Brazil, New Zealand, Qatar, Colombia, Sweden, Denmark, Norway, and Finland, together consideration of support including a $58 billion package in the US and significant support measures from the European Central Bank.
The figures speak for themselves. The air transport industry is in its deepest crisis ever. One bright spot is now appearing in China, where Covid-19 began its spread, as Chinese authorities are now beginning to lift restrictions and domestic flights are beginning to ramp up to almost three times the level at the bottom of the cycle back in the middle of February.
However, there is no certainty as to when air service connectivity will be able to resume as airlines continue to monitor the situation based on regulations and demand.
Current outlook for international tourism
The travel and tourism industry is resilient and has historically returned to a growth trend following external shocks such as 9/11, SARS, and the global financial crisis of 2008. The economic impact of the pandemic will be a primary determinant of demand for international travel and tourism if and when the crisis subsides and consumers are free to travel. The impact will undoubtedly also have a psychological effect of prospective travellers and could well result in disruptive changes to established patterns of social behaviour, including travel. Post SARS research suggested that tourist were more predisposed to travel to countries which experienced no or a low incidence of the disease and an increase in health considerations in selecting the type and venue for leisure travel.
International tourism worldwide is expected to fall of between 20-30% this year representing a loss of between US$300-450 billion, or almost one third of the US$ 1.5 trillion generated in 2019, according to the latest projections from the UN World Tourism Organisation (UNWTO). Putting this into context it would mean that between five and seven years’ worth of growth will be lost to Covid-19. By comparison international tourism declined by 4% in 2009 on the back of the global economic crisis, while the SARS outbreak led to a decline of just 0.4% in 2003. Travel and tourism is one of the hardest hit sectors within the global economy by the pandemic as flights, cruises, hotels, meetings and conventions, attractions and a web of supporting businesses struggle to survive the current unprecedented situation.
InterVISTAS, a respected specialist aviation consultancy, has projected the recovery for global airline passenger traffic under 3 scenarios:
- Summer Recovery into late 2020: a 37% loss of annual traffic following a gradual and generally coordinated lifting of travel restrictions creating momentum for a rapid build-up and recovery.
- Uneven Recovery through to mid/late 2021: a loss of 50% of expected 2020 passenger traffic with some regions/countries still struggling to contain the spread of the virus and travel restrictions remaining in some markets.
- Protracted recovery into 2022-23: a 75% loss of traffic in 2020 as travel restrictions remain in place in some major aviation markets and some regions/countries face new Covid-19 outbreaks.