​​​​​​​IATA Revises Forecast, Warns Summer Air Travel Will "Remain Weak"

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by Tyler Durden
Thursday, Feb 25, 2021 - 02:45 AM

The International Air Transport Association (IATA) just wrapped up a media briefing around 0830 ET Wednesday. The big takeaway from the world's airlines' trade association is that air travel trends in the first half of 2021 will be weaker than initially forecasted from December. 

IATA said booking remains stubbornly "weak" for the summer period. The association is very concerned that only 7% of summer travel bookings have been set, indicating that global travel and tourism will continue to remain weak in the coming months. Even with a vaccine rollout, the airline industry has yet to experience a "V-shaped" recovery. 

The association shows a chart of global COVID-19 cases slumping.

But the group pointed out travel restrictions in many regions of the world remain harsh.

"IATA raises concerns about uncertainty when governments vaccinate vulnerable populations, travel industry body sees more cautious approach to re-opening up," said SCMP's Danny Lee

Lee said, "IATA revises its forecasts and see the difference in charting two different scenarios Vs. pre-crisis levels." 

IATA said additional rounds of stimulus will be needed for airlines as the recovery wanes. With continued cash burns, mounting debt, many airlines will go into 2022 with "too much debt," IATA chief economist said. 

Under current conditions, some airlines might not survive and may restructure or be forced to merge with others. 

IATA warns without the lifting of global flight restrictions, additional risks persist for airlines. 

The association's warning comes as the number of single-aisle aircraft in service has plunged since the beginning of the year. Cirium's data showed single-aisle aircraft in service fell below the 8.8k mark on Feb. 5, a drop of 15% compared with Jan. 3 figures. 

Source: Bloomberg 

The outlook for a rebound in travel and tourism this year has severely dimmed in the last couple of months. After the air travel industry experienced the worst year on record, last year (2020), with one billion fewer international arrivals, recovery might not be in the cards for a few years. 

United Nations World Tourism Organization recently said 2021 prospects for a travel and tourism rebound have worsened. 

"In October, 79% of experts polled by the agency believed a 2021 rebound was possible. Only 50% said they believed that in January, and some 41% didn't think travel would reach pre-pandemic levels until 2024 or beyond," WSJ said.

For example, US hotel demand recovery is not expected to return to 2019 levels until 2023. Room prices might not fully recover until 2025. 

While a "V-shaped" recovery in air travel seems unlikely in the first half, Robinhood traders continue piling into airline stocks like there's no tomorrow. 

JETS ETF is approaching a significant resistance level at the 27.70 mark, also seen by some technical traders as the 76.4 Fibonacci retracement level.