Airlines remain challenged as the world still mires through the COVID-19 pandemic. People are ready to travel, but the prolonged outbreak of COVID is creating different struggles in different markets.
The new year will bring need challenges and the market will see different trends from 2021 as the aviation market continues to recover. OAG’s Senior Analyst John Grant recently shared some of his takes with Airport Business on what he sees coming in 2022 what it could mean for the recovery.
Airfare for Summer 2022 will Skyrocket
Grant said we need to remember that in the last year air fares have been between 20- to 30 percent below normal market fares pre-pandemic as airlines sought to stimulate demand everywhere. The market was also “artificially” restricted by the lockdowns and travel bans from Europe and other key markets to the U.S. and notwithstanding Omicron that market is now open again and travelers have a combination of vouchers that will lapse and disposable income for travel and vacations.
That combination will lead to a very strong 2022 demand for domestic travel in the U.S. and airlines will be able to enforce the normal principles of revenue management so for anyone looking for a bargain book early. If for no other reason than airlines will at some point next year begin to reimpose booking conditions on air fares that have been waived for the last few years.
Long-Haul ULCCs will Try Again
Grant said ULCC’s clearly have a space in the market and carriers like Frontier, Spirit and Allegiant in the U.S. have done well this year and cost will always be a factor in decision making. The more interesting area to watch will be the long-haul low-cost market and new airlines attempts to relaunch services across the Atlantic and indeed the low-cost Icelandic carriers. Those carriers are starting from scratch and the key questions will be can they recreate the market and the price of oil which will be much higher than when these carriers operated a few years ago.
European Air Travel will Go Back to 85% of it’s Pre-Pandemic Levels
Open access to the European market and increased consumer confidence will support growth as will the number of new services being added by the U.S. legacy airlines with U.S. having announced some new seasonal services Grant said.
It’s likely Europe will represent good value next year with the Dollar strong against the Euro and that will provide good value for money travel, combine that with some new low-cost airline capacity, not just from JetBlue but Norse Air and this should result in a strong period of demand as well.
Australian Air Service will be a Challenge
Despite recent changes in policy in Australia moving away from a zero-based COVID strategy to managing the pandemic, Grant said the levels of international capacity to the market will still be lower than in previous years. A major source market for inbound demand was China and a combination of political relationships between the two countries, Chinese carriers appetite for more international services and the ongoing zero-COVID situation suggest that market will not open until the very end of 2022 and that would be damaging to Australia.
In addition, Cathay Pacific, a major feeder of international connecting traffic to Hong Kong are running at less than 30 percent of normal capacity, Malaysia Airlines remain in a fragile situation and Etihad Airways have scaled back their capacity. All of which points towards the market being a difficult market to reach.
China will Dictate International Travel Recovery
Whether or not China widely reopens their borders will play a huge role in determining how successfully airlines are able to recover in 2022 according to Grant.
China is very aware of the power its aviation market has in the Asian market and the very heavy restrictions on international travel it currently has make any reopening of the market difficult to see before the last quarter of next year.
The Winter Olympics will be a “domestic” event with very few international tourist and Summer 2022 is markets that used to rely on China for large tourism volumes such as Thailand are already focusing their efforts on other markets for the next year.
“China is in no rush to reopen its borders and once they do open I would expect them to have put a lot of controls and processes in place for travel which will further frustrate demand,” Grant said.
