Business

Latin America will be the travel market that will take the longest to recover from COVID-19

That's what a new report from ICF International consultancy shows

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  • The study segments the recovery of the industry into three phases;
  • The third phase of recovery, in its turn, will take several years and will depend on two factors: the depth of the economic recession, as well as the health of the airlines that survive the crisis, two areas where Latin American companies are vulnerable.

It will take airlines in Latin America 5.9 years to register the same levels of traffic seen before the COVID-19 pandemic, making this market the one that would later recover worldwide. That’s what a new report from ICF International consultancy shows.

Although the region has strengths such as large domestic markets and an infrastructure that favors the airline industry (there’s no alternative for long-distance travel), there is also an economic environment that it was already weakened before the coronavirus and the combination financial fragilities with the lack of greater support from governments.

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The study segments the recovery of the industry into three phases. The first phase, quarantine, could last up to three months with only essential operations, such as cargo and repatriation, while the second phase, a pre-recovery phase, which will take six to 18 months, will have measures of social distancing and widespread fear of people for traveling.

Source: COVID-19 air passenger recovery phases and forecast / ICF International.

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The third phase of recovery, in its turn, will take several years and will depend on two factors: the depth of the economic recession, as well as the health of the airlines that survive the crisis, two areas where Latin American companies are vulnerable.

Globally, the study predicts that the industry will recover in 4.1 years, a more pessimistic estimate than other studies such as the one recently published by the International Air Transport Association (IATA), which expects the recovery to begin in 2023.

Both estimates, however, forecast a slower recovery in the international market, 5.4 years according to ICF, and until 2024 according to IATA.

ICF says that the report it’s not a death sentence, but a call-to-action
for companies to take some steps. Among the consultancy’s suggestions for the pre-recovery phase, are the network realignment and fleet optimization to serve market segments likely to prove most resilient during a pre-recovery with the lowest cost; a 360-degree assessment of cost savings opportunities that prioritize bigger-ticket items with the biggest near-term cost savings (e.g., crew productivity, distribution fees and sales commissions, onboard product, MRO supply chain needs, and inventory levels, facility downsizing, and remote work); and the development of a communication strategy, backed by concrete and effective health safety measures, to win back customer confidence (including actions to ensure cleanliness and relaxed ticket restrictions to give passengers more peace of mind).