CIBC: From Transportation & Aerospace WeeklyAirlines Preparing For Winter Blues --
Air travel typically slows down after the holiday season but expectations are for the airline sector to experience a challenging winter season as governments re-impose lockdown measures and implement more stringent border controls in an effort to combat rising COVID-19 cases. Commercial flights hit a pandemic high of 83,670 flights on December 18 (still down 29% Y/Y) and 77,428 on December 23 when looking at the seven-day moving average (down 34% Y/Y). Looking at commercial flights through January 8, 2021, they are down ~5%-6% versus the last two weeks of December. Comparing to last year, commercial flight activity during the start of 2020 was flat with the last two weeks of 2019.
OAG notes that four of the five largest regional markets are reporting capacity reductions week on week during the first week of January. North American carriers have cut 10% of capacity and have removed 1.4 million seats versus the week of December 28. Northeast Asia reflects a similar pattern with a million fewer seats operating. For the Caribbean markets, where this is typically the high season, capacity is down 9% W/W and down 40% Y/Y. Conversely, lower South America and Eastern Europe are seeing growth.
Expectations were low that the pick-up in air passenger demand during the holiday season would carry over into the new year, so the focus returns to H2/21. We continue to expect that when the COVID-19 vaccine becomes readily available to the general public and borders reopen, unleashed pentup travel demand will be released. IATA is currently forecasting global air travel will increase by 50.4% Y/Y in 2021 (though still down 50% from 2019 levels).