Airlines Brace for COVID-19 Impact
Airlines and the aerospace industry will likely suffer an extended period of turbulence from the COVID-19 crisis. Hopes for a fast recovery by airlines have not materialized, and a full return to pre-pandemic traffic is not expected for years. This has secondary effects on aerospace manufacturing and other industries that rely upon commercial aviation for business.
Published: August 3, 2020
Pandemic Risk
Jet fuel prices are convalescing despite an increase in scheduled flight capacity amid fears of a second wave of the coronavirus in some European countries.
Early Identification of Pandemic Risk and Mitigating Actions in the Airline Industry
The COVID-19 crisis has had an extreme and almost immediate effect on the airline industry.
Despite the industry’s vulnerability to pandemic risk, this analysis shows that airline companies have paid too little attention to this high impact risk and have struggled to publicly report on comprehensive action plans to respond to its potentially disruptive effects.
While the airline industry faces longer term disruption effects from COVID-19, many experts agree that the frequency of such disruptive events will increase in the coming years.
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Air Traffic
We have updated our global air passenger traffic forecasts and now expect traffic to fall by as much as 60%-70% in 2020 versus 2019. This is weaker than the 50%-55% drop we forecast at the end of May. We now expect 2021 air passenger traffic to decline 30%-40% compared with the 2019 base, and foresee a more gradual recovery to pre-COVID-19 levels by 2024.
S&P Sees Larger Drop in Air Traffic, says Airline Ratings to Stay Under Pressure
Global air passenger traffic will decline more than previously estimated in 2020 as the coronavirus pandemic continues to ravage travel demand, raising pressure on the credit quality of airline companies, S&P Global Ratings said in a new report.
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S&P Global Ratings took various rating actions on 60 ratings on 23 aircraft and aircraft engine ABS transactions that were originally placed on CreditWatch with negative implications on March 19, 2020, as a result of the unprecedented impact of the COVID-19 outbreak and the restrictive policies put in place to slow its.
Here S&P Global Ratings provides further details on those rating actions on a transaction-by-transaction basis. Aggregate data and the list of rating actions can also be found at the end of this report.
U.S. Airport Ratings Placed on CreditWatch Negative on Severe Passenger Declines and Weakening Credit Metrics
S&P Global Ratings placed 98 ratings on most U.S. airports and airport-related obligations on CreditWatch with negative implications, affecting 63 different obligors.
The CreditWatch placements are based on our view that a material change in the performance of airports and related issuers has occurred and the magnitude of the rating impact has not been fully determined.
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Data Dispatch
Some of the biggest institutional investors in the U.S. airline sector slashed their holdings as the travel industry's share prices and outlook crashed amid the coronavirus pandemic, according to an analysis by S&P Global Market Intelligence.
Dumping Airline Shares Likely was Right Call for Berkshire, Despite Steep Losses
The airline shares that Berkshire Hathaway Inc. dumped at the start of the travel-quashing COVID-19 pandemic have continued their slide since Warren Buffett's sudden investment reversal, and the companies face a lengthy trip to full recovery.
Jet Fuel
Across Europe consumers are opting for domestic holidays and destinations reachable by car this summer, widening the chasm between recovery in jet and road fuel demand.
According to traders, some consumers are afraid to fly in light of the coronavirus pandemic, and others fear a quarantine may be imposed on their return. 
IEA Lowers 2020/21 Oil Demand Estimates on Stalling Mobility Recovery, Weak Aviation
The International Energy Agency on Aug. 13 lowered its estimates for world oil demand this year and next, along with its estimate of the "call" on OPEC crude oil, due to a slower-than-expected recovery for mobility and aviation.
Noting an "upsurge" in coronavirus cases and recent mobility data, the IEA said it had downgraded its road transport fuel demand estimates, particularly for gasoline, for the second half of this year, as it published its monthly oil market report.
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APAC
Airports’ traffic recovery to hinge on domestic policies and travel, with international traffic key for earnings quality. Sector outlook is negative.
Japan Airlines Expects 2020-21 Passenger Income to Drop by up to 65%
Japan Airlines expects its earnings from domestic and international passenger flight to drop by as much as 65% in fiscal 2020-21 (April-March) because of the coronavirus pandemic, a strong indication that a return to normal in air travel and jet fuel demand will be painfully slow.
JAL said August 3 its domestic and international passenger flight service income in 2020-21 would be about 35%-45% of the Yen 1.057 trillion ($9.97 billion) income from the segments a year earlier based on its simulated passenger demand recovery outlook.
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Further Reading
