Citing the slow rebound in international traffic and constrained business travel, Fitch Ratings now says it is expecting lower revenue passenger kilometers than previously stated for 2021 and 2022. The ratings firm said it expects increasing rates of vaccination, more coronavirus treatment options and easing border restrictions across more countries will support an accelerating pace of recovery through 2022 and into 2023, with a return to pre-pandemic levels in 2024.
“We expect adoption of endemic-style approaches to living with the virus, pent-up demand, global economic growth and supportive governmental travel policies to push air traffic back toward pre-pandemic levels over the next two years,” Fitch said. “However, new, highly contagious variants, such as Omicron, highlight the likelihood operating conditions remain volatile and the downside risk to forecasts. While it is too early to assess the effects of the Omicron, additional waves of infections and policy responses could lead to travel restrictions and stalled or temporary declines in traffic.”
Fitch said the downward revision to its expectations is neutral to airline ratings. Adequate liquidity enables most airlines to navigate continued volatility in the operating environment, but individual carrier performance will differ, due to varying levels of exposure to international routes and business travel.
Developments related to variants that cause revenue passenger kilometers to be lower than current forecasts could drive future negative rating actions for some issuers, Fitch said.
Global revenue passenger kilometers are projected to be approximately 55 percent, 30 percent and 10 percent below pre-pandemic levels in 2021, 2022 and 2023, respectively. Prior base case forecasts were approximately 35 percent, 15 percent and 5 percent below 2019 pre-pandemic levels.
