Air Passenger Market Analysis June 2021 Slow air travel recovery continued for another month • June was another month of modest gains in air travel. Industry-wide revenue passenger-kilometres (RPKs) fell by 60.1% compared with the pre-crisis June 2019 – an improvement on the 62.9% decline in May. • Global domestic RPKs continued to recover, however performance was mixed across the key domestic markets. Russia, the US and Brazil showed positive RPK developments, but air traffic deteriorated in China and Australia. Int’l traffic also sustained its moderate recovery, with all regions but Asia Pacific showing better outcomes vs. May. • Passenger’s willingness to travel remains strong but elevated international travel restrictions and rising COVID cases in some regions represent a risk to further air travel rebound. Global RPK contraction eased for another month expanding by a robust 33% compared with the pre- crisis period. Despite the surge in COVID cases and Slow air travel recovery continued in June amidst new restrictions in some areas, country’s domestic air modest improvements in both domestic and travel was largely unaffected in June. That said, some international travel. Industry-wide revenue passenger- of the most popular tourist destinations such as Black kilometres (RPKs) declined by 60.1% compared with Sea resorts recently started to implemented rules that the pre-crisis June 2019 – an uptick from the 62.9% will allow only vaccinated travelers, travelers with contraction in May. In seasonally adjusted terms, RPKs negative PCR tests or confirmed antibody tests to stay continued to trend upwards (Chart 1). in hotels. This might weigh on passengers’ willingness Chart 1 – Air passenger volumes to travel in the coming months. Industry RPKs (billion per month) Chart 2 – Domestic RPK growth versus the same 900 month in 2019, registration basis Actual 800 Jun 2021 May 2021 700 Industry -22.4% -23.7% 600 Domestic Russia 33.0% 22.6% 500 Seasonally adjusted -10.8% Domestic China 6.3% 400 -14.9% Domestic USA 300 -25.4% Domestic Brazil -31.1% 200 -44.0% Dom. Australia -40.7% 100 -34.7% Domestic Japan -67.6% 0 -68.0% 2016 2017 2018 2019 2020 2021 Domestic India -70.8% Sources: IATA Economics, IATA Monthly Statistics -73.8% -100% -80% -60% -40% -20% 0% 20% 40% Mixed developments across key domestic markets Domestic revenue passenger kilometres (% year-on-year) Sources: IATA Economics, IATA Monthly Statistics Aggregated domestic RPKs fell by 22.4% in June compared with the same period two years ago – a Positive RPK developments were reported also in the 1.4ppts smaller decline than in May (Chart 2). US and Brazil domestic markets. In the former, Performance across the key domestic markets was passenger traffic reached 85% of the pre-crisis levels mixed reflecting pandemic developments and as life returns quickly back to normal with successful government restrictions. Russia was the best COVID vaccine rollout. performer by far with domestic passenger volumes Air passenger market overview - June 2021 To aid understanding, the table includes both % comparisons with pre-crisis 2019 months and 2020 months. World June 2021 (% ch vs the same month in 2019) June 2021 (% year-on-year) share 1 RPK ASK PLF (%-pt)2 PLF (level)3 RPK ASK PLF (%-pt)2 PLF (level)3 TOTAL MARKET 100.0% -60.1% -51.6% -14.8% 69.6% 192.5% 145.6% 11.1% 69.6% International 45.7% -80.9% -71.0% -28.5% 55.2% 470.5% 327.0% 13.9% 55.2% Domestic 54.3% -22.4% -15.5% -6.9% 78.8% 140.2% 93.3% 15.4% 78.8% 1 2 3 % of industry RPKs in 2020 Change in load factor vs. the same month in 2019 Load factor level Air Passenger Market Analysis – June 2021 1 In Brazil, the pandemic is far from over but there has Chart 4 – International RPK growth versus the same been a clear improvement in air travel demand month in 2019 (airline region of registration basis) compared with the previous month (-44.0% RPK fall in Jun 2021 May 2021 May vs. -31.1% decline in June). The recovery has Industry -80.9% -85.4% been largely driven by positive vaccine progress in the Africa -68.2% country. -71.5% L. America -69.4% RPK outcomes in the remaining key domestic markets -75.3% were less positive. Domestic China returned to N. America -69.6% contraction and RPK decline accelerated in Australia -74.2% Europe -77.4% amidst new virus outbreaks and the resulting travel -85.5% restrictions in both countries. The pandemic Middle East -79.4% resurgence weighed also on passenger recovery in -81.3% Asia Pacific -94.6% India and Japan – with both markets reporting RPKs -94.5% only at ~30% of the pre-crisis levels. The start of the -100% -90% -80% -70% -60% -50% -40% -30% -20% -10% 0% Olympic games in Tokyo would typically be associated International revenue passenger kilometres (% year-on-year) with rising air traffic in July but since fans are not Sources: IATA Economics, IATA Monthly Statistics allowed to attend the event, the air travel boost will Recovery in passenger capacity remains slow most likely be less significant compared to similar sport events in the past. Passenger capacity showed a small improvement vs. the previous month. Industry-wide available seat International air travel sustained its recovery in June kilometers (ASKs) fell by 51.6% vs. June 2019, Global international air travel continued to recover in compared with a 54.1% decline in the same metric in June, albeit slowly due to still elevated international May. At the regional level, North American airlines restrictions that have been one of the key obstacles to posted the smallest capacity fall (-29.6%) on the back faster air travel rebound (Chart 3). The measures have of the recovering US domestic market. On the other been the strictest in Asia Pacific where vaccination hand, Middle Eastern airlines reported the weakest has been slow, and governments are risk-averse outcome, with ASKs down -62.9% vs. June 2019. towards border openings to limit the spread of the Chart 5 – Passenger load factors by region virus. That being said, travel regulations remained Jun 2021 Jun 2019 All-time Jun low* All-time Jun high* elevated even in the regions with swift vaccine rollouts Industry 69.6% 84.4% and more successful pandemic control, such as North America and Europe. N. America 80.6% 88.9% Chart 3 – Stringency of government international air L. America 78.4% 83.3% travel measures by region Europe 65.8% 87.4% International travel stringency index weighted by population (Jan 2020 - Jun 2021) 4 - total border closure Asia Pacific 65.7% 82.2% 3 - closed to Africa some regions 58.7% 71.1% Middle East 2 - quarantine 45.9% 76.4% arrivals from high risk regions 30% 40% 50% 60% 70% 80% 90% Central and South America Asia-Pacific Passenger load factors (% of available seat kms, actual) 1 - screening Africa & Middle East Europe Sources: IATA Economics, IATA Monthly Statistics *Data from 1990 onwards North America Although passenger load factors (PLF) recovered from 0 - no measures the last year’s record lows, they remained well below Source: IATA Economics analysis based on Oxford University data the pre-crisis levels in June. The industry-wide metric was at 69.6% – ~15ppts lower compared with the Overall, the decline in industry-wide international same month two years ago (Chart 5). Regions show RPKs eased to 80.9% in June 2021 vs. June 2019 some variation. PLFs in Latin America were hovering (Chart 4). All regions with the exception of Asia Pacific close to pre-pandemic levels and were also – where the travel restrictions remain the highest – rebounding robustly in North America due improving contributed to this minor improvement. African demand in key domestic markets (Brazil and the US airlines posted the smallest int’l RPK decline for resp.). In the regions with high reliance on still muted another month (-68.2%) since cross-border travel international travel such as Africa and the Middle East, regulations in the region are less strict compared with the other parts of the world. the load factors were the lowest this month. Overall, domestic load factors perform significantly better Air Passenger Market Analysis – June 2021 2 compared with the international counterpart (78.8% emerging economies, the vaccine supplies remain vs. 55.2% in June). tight, raising the risk of new outbreaks. Economy is improving but COVID cases are rising Chart 6: COVID cases New COVID19 cases per week (000's) The drivers of air travel demand have been mixed. The 3500 latest global manufacturing and services PMI hovered 3000 above 50, indicating that the global economy continues to recover from the crisis, led by China and 2500 the US. This is good news because improving 2000 economic activity has been historically associated with healthy demand for air travel. Another positive 1500 APAC development is the recovery in consumer confidence, 1000 Europe which means that consumers are becoming less Latin America 500 Africa worried about their financial situation. A closer look Middle East Nth. America into air travelers’ confidence is also promising, 0 Jul-20 Jul-21 Apr-20 Apr-21 Oct-20 Jan-20 Jan-21 Jun-20 Jun-21 Feb-21 Feb-20 Mar-20 Mar-21 Sep-20 Nov-20 Aug-20 indicating that there has been a strong demand to Dec-20 May-20 May-21 travel. The results of IATA’s latest passenger survey Source: ECDC for June show nearly 60% of the respondents plan to Mixed developments in passenger bookings take a flight within a month or two (Chart 6), and other Domestic and international bookings for future travel 30% plan get on the plane within six months or so.