Air travel demand post COVID

Consumer intentions for travel spend. Source: BCG.

Air Travel Demand Post COVID

A number of people have conducted surveys in recent weeks on the intentions of consumers to take flights or travel more or less than before the crisis. What do they tell us about the likely level of demand over the next year?

I was triggered to take a look at this by this article in today’s FT (apologies if you are hit by the paywall). It references a survey conducted by UBS in mid May of 1,000 UK consumers, which showed that 31% of people were intending to fly less over the next year for travel to Europe, with 10% intending to fly more. That sounds quite alarming, but even if you assume a halving of the travel of the “fly less” group and only a 20% increase in those keen to make up for lost time, that would equate to a 14% drop in demand compared to pre-COVID levels. That is actually somewhat better than the 20% drop most airlines are expecting for next year.

Interestingly, the results for “worldwide” travel were no different from those for Europe. Many commentators have predicted that long haul travel will be hit harder. This might still be the case of course, if government restrictions are lifted on European travel but not on other long haul destinations.

BCG have also been posting the results of their consumer sentiment surveys on their incredibly useful Travel Recovery Insights portal. For UK consumers, they are a little more pessimistic, with 38% of consumers intending to travel “a lot less” and 24% “somewhat less”. Assigning a 50% drop to the “lot less” group, “20%” to the “somewhat less” and equivalent increases to those planning to spend more, gives a drop in demand of 21%, much closer to the current consensus. Maybe this tells us that airlines are more likely to believe consultants than investment bankers?

It should also be noted that the BCG survey asked people about their spending plans for travel over the next 6 months, rather than intention to fly in the next year. You would expect people to be more cautious nearer term and the two sets of figures could be consistent with a 21% drop over the next 6 months followed by a 7% drop in the 6-12 month timeframe. A much rosier view for the level of demand next year than most commentators are expecting.

What is also clear is that there are going to be some fantastic deals on offer once the travel industry is allowed to get going again. So even the 62% of consumers who expect to spend less on travel may be able to achieve that objective without reducing the actual number or duration of their trips. Whilst that won’t be good for airline yields, maybe the volumes will recover faster than people are thinking.

One final caveat: all this is based on consumer intentions. It all relies on people being allowed to travel and on the flights being there for them. Which fits with the current focus of the industry on getting governments to lift restrictions on travel and to get on with allowing travel to resume where this can be done safely. The survey evidence suggests that the consumer demand for travel will be there if they do.