2022 prospects: Will North America lead the aviation industry?

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The catastrophic impact of the ongoing global COVID-19 pandemic, which was declared in March 2020, is still being felt in the aviation industry in 2021.  

However, large-scale vaccination efforts have been a key driver behind global efforts to relax stringent border control measures and reopen for international travel. As a result, both passengers and airlines are beginning to regain confidence in safe air travel.  

International Air Transport Association (IATA) analysts forecast that the coming year could result in a stronger financial performance for airlines as well as reduced pandemic-related losses in 2022 compared to 2021. 

Promising prospects for 2022 

IATA’s analysts counted that in 2021 the global demand for air connectivity services has been recovering steadily. It is expected that by the end of 2021 the overall air travel demand will reach around 40% of pre-pandemic levels in 2019. However, analysts also predict that the average passenger load factor in 2022 will remain at 75.1%, an alarmingly low level that has not been recorded in the industry since 1994. 

The industry will end 2021 with an air travel demand that is lower than half of that recorded pre-COVID-19. In 2022, IATA has a more promising perspective.  

In 2022, overall demand is predicted to increase to 61% of 2019 levels with capacity reaching around 67% of the pre-crisis rates. Analysts predict that an average passenger load factor should recover to at least 75% of 2019 levels in 2022.  

IATA projects that with fewer restrictions across regions, the continued increase in domestic demand is the key factor driving the airline’s recovery. Analysts speculate that the industry will end 2021 with domestic demand reaching 73% of pre-crisis levels. In 2022, the industry could see a spike in domestic demand and an increase to at least 93% of 2019 levels. 

While analysts project a successful recovery for domestic demand, international demand may continue to recover slowly owing to ongoing governmental travel restrictions as well as uncertainty around changing quarantine rules.  

Analysts count that by the end of 2021, the demand for international air travel will only reach 22% of 2019 levels, but has the potential to increase to 44% in 2022. 

IATA’s Director General: Aviation is well “past the deepest point of the crisis” 

With net industry losses expected to shrink to 11.6 billion in 2022 following a $51.8 billion loss in 2021, the magnitude of the ongoing crisis for airlines is still being felt.  

Between 2020 and 2022, IATA estimated that the total losses for the aviation industry could surpass $200 billion. In 2021, to mitigate the impact of the pandemic on financial performance, airlines continued to implement aggressive cost reduction measures. It is estimated that carriers worldwide have already reduced expenses by around 34% in 2021 compared to 2019.  

However, IATA’s Director General Willie Walsh claims that despite a $51.8 billion loss in 2021 (which has increased from $47.7 billion estimated in April 2021), passenger numbers are expected to rise and reach 4 billion in 2022 (1.1 billion passengers fewer than pre-pandemic).  

“To survive airlines have dramatically cut costs and adapted their business to whatever opportunities were available. That will see the $137.7 billion loss of 2020 reduce to $52 billion this year. And that will further reduce to $12 billion in 2022. We are well past the deepest point of the crisis. While serious issues remain, the path to recovery is coming into view. Aviation is demonstrating its resilience yet again,” Willie Walsh, IATA’s Director-General, said. 

In the meantime, IATA predicts that the industry will end the year with a 26% increase in overall revenue in 2021 than was originally forecasted in 2019, resulting in around $472 billion. IATA also predicts that revenue growth will equal 39.3% in 2022, resulting in a rise of $658 billion.  

Will North America lead the aviation industry in 2022? 

While the general trend for the upcoming year looks promising, analysts have a different outlook when approaching specific regions.  

According to IATA, all regions will strengthen their financial performance in 2022 compared to 2021. However, since vaccination rates among travelers are seen as a key driver for recovery, carriers located in regions where the distribution of vaccinations is much slower, such as airlines operating in Asia Pacific, will experience a prolonged recovery. 

Airlines operating in North America are expected to outperform other regions due to the recovery in domestic passenger demand in the United States market. The region has already turned cash-positive in the Q2 of 2021, and is expected to follow a positive trend through 2022. IATA’s analysts predict that North American will hit a $9.9 billion profit in 2022, becoming the only region to have a positive financial performance. 

European air operators are projected to reduce pandemic-related losses from $20.9 billion in 2021 to $9.2 billion in 2022. Analysts outline that the positive impact on the region’s financial performance is led by increasing vaccination rates across the territory as well as the implementation of the European Digital Covid Certificate. The digital certificate will help governments coordinate the broader opening of international markets in the upcoming months.  

However, a negative trend could be seen across the Latin American region. While airlines might be able to cut losses from $5.6 billion in 2021 to $3.7 billion in 2022, IATA predicts that significant restructuring costs incurred as the region’s carriers adjust to new business realities will weigh on financial performance, keeping the region in a collective loss. 

Middle Eastern carriers will also see limited improvement in financial performance. Analysts predict that the region’s airlines will reduce losses of $6.8 billion loss in 2021 to $4.6 billion in 2022. The financial performance of these carriers could be significantly better. However, without large domestic markets, airlines rely on connecting travel, especially to the Asia-Pacific region, which has been slow to re-open to international air travel. 

A similar situation is projected for carriers in Asia-Pacific and Africa. While Asia-Pacific airlines are expected to decrease losses from $11.2 billion in 2021 to $2.4 billion in 2022, African carriers will see a slow recovery in financial performance from a $1.9 billion loss in 2021 to a $1.5 billion loss in 2022. IATA also states that because vaccination rates across countries in both regions remain low, significant improvements in international markets are not expected until later in 2022. 

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