The 2021 Aviation Market – A Tale of Two Halves?

By Frode Skulbru (Vancouver, Canada)

While the end of 2020 was celebrated with a wish of good riddance with promises of a new and improved model for 2021, this year seems to have begun bleaker than the last ended. In 2020, improved capacity for mostly domestic traffic saw global growth in air traffic post March 2020 with some countries moving above the 50% capacity loss compared to the same period a year earlier.

Positive Developments in December 2020

In December, Guangzhou became the busiest airport in the world based on seat capacity, followed by Atlanta and Beijing. Guangzhou was only 4.8% off its December 2019 capacity, whereas Atlanta and Beijing had lost 32.3% and 41.0% respectively. This reinforces what we all know that domestic traffic is recovering amidst the pandemic and international traffic is not.

The top twenty airports by seat capacity for December 2020 are included in the graph below.

Source: OAG

Most of these had a positive development from November, except Shanghai (-26.7%) and Hong Kong (-2.4%). Kuala Lumpur had a 49.9% increase month-to-month, followed by Changi at 41.4%, albeit from a much lower base than normal at these airports.

In Europe, One Quarter of Capacity Was Lost in One Week

Christmas is over, new COVID strains are spreading through Europe, and vaccines have not made much of an impact yet.

Up to January 11th global aviation, measured by seat capacity, declined by nearly 7%. Most of this is due to the lock-down of many European countries, which in turn has a ripple effect on other locations dependent on Euro traffic for capacity.

January as a total to date is now around 47% below January 2020, but this is likely to worsen as airlines re-adjust their schedules as a response to further travel restrictions being imposed.

Since March of last year, global capacity slowly recovered and at one point reached over 70% of the 2019 comparison period. The challenge has been that for one step forward, there seems to have been two steps back shortly thereafter.

China Persistently Maintains Historic Levels

China has managed to offer close to normal levels through these last few months, although the mix of traffic has changed. Domestic traffic now makes up almost 99% of all capacity versus around 88% this time last year.

Chinese New Years is coming up, which normally results in more travel unless new restrictions are imposed by the Government.

Australia Might be a Bright Spot

Australia has now entered the top ten country markets with some additional 50,000 seats week- on-week taking the country to around 46% of its normal levels. With Qantas now loading schedules for international flights in the second half of the year there is at least some hope of a longer-term recovery in the market.

The U.S. remains the largest market despite, or because of, political unrest, followed by China, making up almost two-thirds of capacity between them. India and Japan follow at a distant third and fourth. Australia now occupies the 18th spot.

Source: OAG

Airlines Have Learned Fast

The airlines are now very proficient in adjusting capacity at a speed that has seldom been seen earlier. Europe is an example with 25% of seats being cancelled in one week, leaving the continent with about 25% of the capacity compared to last year.

The dynamic nature of the market and the responsiveness of the airlines to what is being thrown at them on an almost daily basis is incredible. Every day appears to bring a new set of restrictions and airlines stoically adjust their schedules accordingly.

OAG expects that such changes will increase in the next few weeks as carriers make the changes to remove 350 million seats that are currently in the system but for which there are either restrictions or no demand.

With vaccine distribution on the rise, the effect of isolation and the summer season ahead, maybe we’ll see a much more positive picture in the second half of 2021?

In the meantime, stay safe!

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