The COVID-19 pandemic has devastated the global aviation industry. Never before in the history of aviation has the sector seen such a substantial and persistent decline in global passengers, cargo, and revenue. The crisis is also unique because it impacts every airline and airport worldwide, and will continue to do so until some form of ‘herd immunity’ is achieved through effective vaccination programmes.
As the agency tasked with the promotion of international tourism, trade and investment in the Cape, we felt first-hand the profound impact of this on so many of the Western Cape sectors. With route connectivity, airline capacity and air traveller confidence key to the recovery of international air travel, our Cape Town Air Access team - a collaborative project dedicated to promoting, developing and maintaining air routes in and out of the Western Cape – foresees the following key trends that will shape Cape Town and the Western Cape aviation industry recovery in 2021.
Government procedures eclipse airline strategies
The past year has seen a global pandemic, but also prolonged containment measures including lockdowns, border closures, travel restrictions and testing regimes implemented by governments across the world. This has left many carriers relying on air cargo and repatriation flights during the hard lockdown, and quickly resuming service as soon as any type of passenger flight was allowed.
This current operating environment is not sustainable. Even those airlines that received government bailout or private sector cash injections have implemented strict cost-containment measures, rationalising their workforces and reducing their fleet sizes to survive. A sobering statistic by the Lufthansa Group reveals the airline is losing more than USD 1 million every two hours during the global pandemic.
Government regulations and protocols will be the principal driving force behind passenger air services for 2021. For example, the extra travel restrictions imposed by the Netherlands on 23 January 2021 has forced KLM to cancel its services to South Africa and some other inter-continental destinations. This curtails any strategy or plan the airline had in place for the upcoming months, and will place a heavy burden on its financial resources.
Foreign government measures such as these will have a profound negative effect on international travel to and from South Africa, and will dampen supply of air services and traveller demand for at least the first half of 2021.
Testing and not the vaccine will remain a requirement to travel internationally… for now
The start of mass vaccinations in many countries will hopefully be the kickstart that global tourism desperately needs, although the International Air Transport association (IATA) cautions that things might get worse before they get better, as travel restrictions will persist until effective roll out is achieved.
Because of this, governments will be forced to stick to systematic testing approaches, and other proven health and safety protocols for much of 2021, and possibly thereafter.
The hope is that by the second half of 2021 as more people are vaccinated globally, we will start seeing a renewed appetite for international travel. With Cape Town and the Western Cape well positioned for travel in a COVID-19 world – boasting an affordable world-class travel offering underpinned by wide open natural spaces - we remain confident that the destination will remain high on the “bucket list”. South Africa and the Western Cape were cited this past month as number 15 out of 20 places to visit in March 2021 by the International Condé Nast Traveller.
In the longer term we should see a coordinated effort from global policy makers to establish the use of vaccination certificates when travelling and the implementation of common, harmonised digital related travel principles, protocols and documents that countries can follow.
A response that is currently being trialled is the International Air Transport Association (IATA) Travel Pass, a global and standardised solution to validate and authenticate all country regulations regarding COVID-19 passenger travel requirements. IATA states that “The main priority is to get people traveling again safely. In the immediate term that means establishing confidence in governments that systematic pre-departure COVID-19 testing can work as a replacement for quarantine requirements. And that will eventually develop into a vaccine program.” Etihad and Emirates are the first major carriers that have partnered with IATA to trial the Travel Pass.
The domestic passenger market will only recover to pre-COVID levels in 2022
The domestic passenger market reached 50% of 2019 levels by December 2020, with aircraft occupancy levels, or load factors, at just above 70%, showing the return of passenger confidence and offering a glimmer of hope and positivity for the holiday period. Unfortunately, the stricter lockdown measures implemented over the festive season halted any further recovery in the market, putting a dampener on expectations for the first quarter of 2021.
As local restrictions ease over the coming weeks with the expected drop in infections, we will see a gradual rise in domestic passenger movements, initially driven by local business travel and then leisure and VFR (visiting friends and relatives) travel over the Easter period.
Cape Town Air Access estimates that passenger numbers will reach around 60% of 2019 levels by April, and slowly increase to 80% of 2019 levels by the end of the year. This would translate into around 330 000 domestic passenger arrivals for Cape Town International Airport (CTIA) in December 2021.
As international travellers return, many of them will connect domestically on their onward journeys - historically this accounted for over 20% of total passenger numbers for CTIA in 2019.
International connectivity and capacity will realistically only return in the last quarter of 2021
According to CAPA – Centre for Aviation, over a third of the global aircraft fleet remained grounded at the start of 2021, with more than half of the European fleet inactive. This obviously does not bode well for the Western Cape as, historically, 45% of our international inbound passengers are from Europe. We therefore expect suppressed international travel numbers for the remainder of the South African summer period due to a combination of factors, including continued foreign government travel restrictions as previously mentioned, limited aircraft supply and low traveller confidence.
Northern hemisphere destinations are hoping that their approaching summer season will lead to a resurgence in air travel with people keen to visit foreign countries. This will obviously still be fraught with many challenges as re-opening of borders and relaxation of restrictions will differ from country to country.
During the approaching winter months and our usual low tourist season, we will still have residual travellers wanting to visit the Western Cape and we predict that the usual year-round airline services will continue during this period, although at a reduced capacity. The major positive is that connectivity to our usual source markets will return over this period in anticipation of the summer season, which will be further bolstered by the return of the usual seasonal services during the last quarter of the year. We except international passenger numbers to reach 60% of 2019 figures by December.
The pandemic will continue to drive air cargo demand
During the development of the pandemic air cargo has been the shining light for airline revenue generation. At the start of the pandemic, many airlines converted and retrofitted passenger aircrafts to handle air freight - as passenger movements were mainly limited to repatriation flights. When commercial passenger traffic resumed, the belly-cargo carried in the hold of the aircraft contributed to bottom lines, in many cases replacing the loss of significant business class traffic. Pre-COVID estimates from IATA were that the cargo business is responsible for 12% of airline revenue and the 2021 estimate suggests this could rise to as much as 33%.
The Western Cape export offering is very suitable for movement by air with perishables making up almost 70% of air cargo exports. Cape Town is also seen as the leader in e-commerce on the African continent, and this market is set to grow even further during 2021 with digital technologies and online platforms boosting demand for parcel delivery services. The massive effort needed to distribute the COVID vaccine will put additional pressure on the system and will need to be managed.
The Western Cape and Cape Town air cargo offering is unfortunately not sufficiently developed and will not be able to capitalise on the expected growth if immediate reforms are not implemented and investment in infrastructure realised. As 98% of air cargo is moved in the belly of passenger aircraft for CTIA, all dedicated international air freight moves through OR Tambo International Airport. New cargo infrastructure such as a temperature-controlled perishables centre would enhance the Western Cape product offering and increase export competitiveness. This could also have assisted with storage and distribution of vaccines, which will now have to be transported by road from Johannesburg.
The importance of developing air cargo capabilities for the Western Cape and South Africa cannot be understated and should receive immediate attention to assist in the economic recovery effort.
What counts in our favour is that we are well positioned to welcome back international airlines as soon as possible. The Cape Town International Airport is well prepared for increased flight and passenger numbers and all health protocols and safety measures have passed stringent tests, showcased by the awarding of the Airports Council International (ACI) global health accreditation presented to Airports Company South Africa in December 2020.
The Cape Town Air Access team is in constant contact with the airline network planning teams, and through this proactive approach, and the extended partnerships it has formed with the private and public sector, the Cape will be well positioned to welcome back travellers as they start to return this year.