IATA: High testing costs could stall recovery

Pax traffic continues year-on-year decline while cargo surges 4.4% above pre-COVID levels

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The International Air Transport Association (IATA) called on governments around the world Tuesday (4 May) to ensure that high costs for COVID-19 testing don’t put travel out of reach for individuals and families. To facilitate an efficient restart of international travel, COVID-19 testing must be affordable as well as timely, widely available and effective. IATA Director General Willie Walsh went so far as to accuse those governments and companies providing tests of “gouging” people who want to travel by charging far and above what the tests actually cost.

Passengers in protective overall and masks at Suvarnabhumi Airport going to check-in for repatriation flights and waving good bye during COVID-19 outbreak. (PHOTO: Shutterstock)

An IATA sampling of costs for PCR tests (the test most frequently required by governments) in 16 countries showed wide variations by markets and within markets. Findings include of the markets surveyed, only France complied with the World Health Organisation (WHO) recommendation for the state to bear the cost of testing for travellers. Of the 15 markets where there is a cost for PCR testing to the individual the average minimum cost for testing was US$90 and the average maximum cost for testing was US$208.

Download the IATA March Passenger Traffic Analysis here.
Download the IATA Cargo & Passenger COVID-19 update here.

Even taking the average of the low-end costs, adding PCR testing to average airfares would dramatically increase the cost of flying for individuals. Pre-crisis, the average one-way airline ticket, including taxes and charges, cost US$200 (2019 data). A US$90 PCR test raises the cost by 45 percent to US$290. Add another test on arrival and the one-way cost would leap by 90 percent to US$380. Assuming that two tests are needed in each direction, the average cost for an individual return-trip could balloon from US$400 to US$760.

The impact of the costs of COVID-19 testing on family travel would be even more severe. Based on average ticket prices (US$200) and average low-end PCR testing (US$90) twice each way, a journey for four that would have cost US$1,600 pre-COVID, could nearly double to US$3,040—with US$1,440 being testing costs.

Willie Walsh, director general , IATA. (PHOTO: IATA)

“As travel restrictions are lifted in domestic markets, we are seeing strong demand. The same can be expected in international markets. But that could be perilously compromised by testing costs—particularly PCR testing. Raising the cost of any product this significantly will stifle demand. The impact will be greatest for short haul trips (up to 1,100 km), with average fares of US$105, the tests will cost more than the flight. That’s not what you want to propose to travelers as we emerge from this crisis. Testing costs must be better managed. That’s critical if governments want to save tourism and transport jobs; and avoid limiting travel freedoms to the wealthy,” said Walsh. “Testing costs should not stand between people and their freedom to travel. The best solution is for the costs to be borne by governments. It’s their responsibility under WHO guidelines. We must not let the cost of testing—particularly PCR testing—limit the freedom to travel to the rich or those able to be vaccinated. A successful restart of travel means so much to people—from personal job security to business opportunities and the need to see family and friends. Governments must act quickly to ensure that testing costs don’t stall a travel recovery.”

MARCH PASSENGER TRAFFIC

Changi Airport in Singapore is still almost a ghost town in 2021. A lone student waits to say goodbye to a friend in a nearly deserted departure hall. (PHOTO: Matt Driskill)

IATA also announced that passenger traffic fell in March 2021 compared to pre-COVID levels (March 2019) but rose compared to the immediate month prior (February 2021). Because comparisons between 2021 and 2020 monthly results are distorted by the extraordinary impact of COVID-19, unless otherwise noted all comparisons are to March 2019, which followed a normal demand pattern.

Airlines around the world have had to ground thousands of planes as the COVID-19 pandemic has virtually shut down international aviation. (PHOTO: Shutterstock)

Total demand for air travel in March 2021 (measured in revenue passenger kilometres or RPKs) was down 67.2 percent compared to March 2019. That was an improvement over the 74.9 percent decline recorded in February 2021 versus February 2019. The better performance was driven by gains in domestic markets, particularly China. International traffic remained largely restricted. International passenger demand in March was 87.8 percent below March 2019, a very small improvement from the 89.0 percent decline recorded in February 2021 versus two years ago. Total domestic demand was down 32.3 percent versus pre-crisis levels (March 2019), greatly improved over February 2021, when domestic traffic was down 51.2 percent versus the 2019 period. All markets except Brazil and India showed improvement compared to February 2021, with China being the key contributor, as already noted.

“The positive momentum we saw in some key domestic markets in March is an indication of the strong recovery we are anticipating in international markets as travel restrictions are lifted. People want and need to fly. And we can be optimistic that they will do so when restrictions are removed,” said IATA’s Walsh. “The emergence of new COVID-19 variants and rising cases in some countries are behind governments’ reluctance to lift travel restrictions and quarantine. However, we are beginning to see positive developments, such as the recent announcement by European Commission President von der Leyen that vaccinated travellers from the US will be allowed to enter the EU. At least 24 countries have already said they will welcome vaccinated travellers. We expect this to continue and gather momentum as vaccination numbers rise. However, governments should not rely only on vaccinations, as it risks discriminating against those individuals who are unable to get a vaccine for medical or other reasons, or who lack access to vaccines—a common situation in much of the world today. Affordable, timely and effective testing must be available as an alternative to vaccines in facilitating travel,” said Walsh.

March Regional Performance

  • Asia-Pacific airlines’ March international traffic was down 94.8 percent compared to March 2019, barely better than the 95.4 percent decline registered in February 2021 versus February 2019. The region continued to suffer from the steepest traffic declines for a ninth consecutive month. Capacity was down 87.0 percent and the load factor sank 48.6 percentage points to 31.9 percent, the lowest among regions.
  • European carriers recorded an 88.3 percent decline in traffic in March versus March 2019, just slightly ahead of the 89.1 percent decline in February compared to the same month in 2019. Capacity fell 80.0 percent and load factor fell by 35.0 percentage points to 49.4 percent.
  • Middle Eastern airlines’ demand fell 81.6 percent in March compared to March 2019, improved over an 83.1 percent demand drop in February, versus the same month in 2019. Capacity fell 67.2 percent, and load factor declined 32.3 percentage points to 41.3 percent.
  • North American carriers saw March traffic sink 80.9 percent compared to the 2019 period, a gain compared to the 83.4 percent decline in February compared to two years ago. Capacity sagged 62.6 percent, and load factor dropped 41.0 percentage points to 42.9 percent.
  • Latin American airlines experienced an 82.4 percent demand drop in March, compared to the same month in 2019, a slight improvement compared to the 83.7 percent decline in February compared to February 2019. March capacity was down 77.4 percent compared to March 2019 and load factor dropped 18.1 percentage points to 63.6 percent, highest among the regions for a sixth straight month.
  • African airlines’ traffic sank 73.7 percent in March versus March two years ago, marking a deterioration compared to a 72.3 percent decline recorded in February compared to February 2019. March capacity contracted 61.8 percent versus March 2019, and load factor fell 22.3 percentage points to 49.0 percent.

MARCH CARGO TRAFFIC

SIA, like other carriers, has seen its cargo business grow, but bellyhold cargo is troubled because of the cut in passenger flights. (PHOTO: Singapore Airlines Cargo)

IATA said data for global air cargo markets showing that air cargo demand continued to outperform pre-COVID levels (March 2019) with demand up 4.4 percent. March demand reached the highest level recorded since the series began in 1990. Month-on-month demand also increased albeit at a slower pace than the previous month with volumes up 0.4 percent in March over February 2021 levels. Because comparisons between 2021 and 2020 monthly results are distorted by the extraordinary impact of COVID-19, unless otherwise noted all comparisons to follow are to March 2019 which followed a normal demand pattern.

Download the IATA Cargo Market Analysis here.

Global demand, measured in cargo tonne-kilometres (CTKs), was up 4.4 percent compared to March 2019 and 0.4 percent compared to February 2021. This was a slower rate of growth than the previous month, which saw demand increase 9.2 percent compared to February 2019. A weaker performance by Asia-Pacific and African carriers compared to February contributed to softer growth in March. Global capacity, measured in available cargo tonne-kilometres (ACTKs), continued to recover in March, up 5.6 percent compared to the previous month. Despite this, capacity remans 11.7 percent below pre-COVID-19 levels (March 2019) due to the ongoing grounding of passenger aircraft. Airlines continue to use dedicated freighters to plug the lack of available belly-capacity. International capacity from dedicated freighters rose 20.6 percent in March 2021 compared to the same month in 2019 and belly-cargo capacity of passenger aircraft dropped by 38.4 percent.

“Air cargo continues to be the bright spot for aviation. Demand reached an all-time high in March, up 4.4 percent compared to pre-COVID levels (March, 2019). And airlines are taking all measures to find the needed capacity. The crisis has shown that air cargo can meet fundamental challenges by adopting innovations quickly. That is how it is meeting growing demand even as much of the passenger fleet remains grounded. The sector needs to retain this momentum post-crisis to drive the sector’s long-term efficiency with digitalisation,” said Walsh.

March Regional Performance

  • Asia-Pacific airlines saw demand for international air cargo drop 0.3 percent in March 2021 compared to the same month in 2019. The slight weakness in performance compared to the previous month was seen on most of the trade lanes connected with Asia. International capacity remained constrained in the region, down 20.7 percent versus March 2019. The region’s airlines reported the highest international load factor at 78.4 percent.
  • North American carriers posted a 14.5 percent increase in international demand in March compared to March 2019. This strong performance reflects the strength of the economic recovery in the US. In Q1, US GDP rose by 6.4 percent in annualized terms, up from 4.3 percent in Q4 bringing the country’s economy close to pre-COVID levels.  The business environment for air cargo remains supportive; the new export orders component of the PMI rose to its highest level since 2007. International capacity grew by 1.8 percent compared with March 2019.
  • European carriers posted a 0.7 percent increase in demand in March compared to the same month in 2019. Improved operating conditions and recovering export orders contributed to the positive performance. International capacity decreased by 17 percent in March 2021 versus March 2019.
  • Middle Eastern carriers posted a 9.2 percent rise in international cargo volumes in March 2021 versus March 2019. Month-on-month, Middle East carriers posted the strongest growth of all regions, up 4.4 percent. Of the region’s key international routes, Middle East-North America and Middle East-Asia have provided the most significant support, rising 28 percent and 17 percent respectively in March compared to March 2019. International capacity in March was down 12.4 percent compared to the same month in 2019.
  • Latin American carriers reported a decline of 23.6 percent in international cargo volumes in March compared to the 2019 period; this was the worst performance of all regions. Drivers of air cargo demand in Latin America remain relatively less supportive than in the other regions. International capacity decreased 46.0 percent compared with March 2019.
  • African airlines’ cargo demand in March increased 24.6 percent compared to the same month in 2019, the strongest of all regions. Robust expansion on the Asia-Africa trade lanes contributed to the strong growth. March international capacity decreased by 2.1 percent compared to March 2019.

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