The slow rebound in international traffic and constrained business travel are impeding the recovery in global air traffic, causing global revenue passenger kilometers (RPK) to be lower than originally expected, says Fitch Ratings.
Fitch has revised its 2021 and 2022 global RPK forecasts downward but noted increasing rates of vaccination, more coronavirus treatment options, and easing border restrictions across more countries will support an accelerating pace of recovery through 2022 and into 2023, with a return to pre-pandemic levels in 2024.
The rating house expects the adoption of endemic-style approaches to living with the virus, pent-up demand, global economic growth, and supportive governmental travel policies to push air traffic back toward pre-pandemic levels over the next two years. However, new, highly contagious variants, such as Omicron, highlight the likelihood operating conditions remain volatile and the downside risk to forecasts. While it is too early to assess the effects of the Omicron, additional waves of infections and policy responses could lead to travel restrictions and stalled or temporary declines in traffic.
The downward revision to its expectations is neutral to ratings. Adequate liquidity enables most airlines to navigate continued volatility in the operating environment, but individual carrier performance will differ, due to varying levels of exposure to international routes and business travel. However, developments related to variants that cause RPKs to be lower than current forecasts could drive future negative rating actions for some issuers.
Global RPKs are projected to be approximately 55%, 30% and 10% below pre-pandemic levels in 2021, 2022 and 2023, respectively. Prior base case forecasts were approximately 35%, 15% and 5% below 2019 pre-pandemic levels. The recovery trajectory is expected to vary across regions. For example, RPK is forecast to be 20% below 2019 levels for North American, 35% below pre-pandemic levels for EMEA, 35% below 2019 levels for APAC, and 25% below the 2019 baseline for Latin America.