Airlines continued to suffer in Q3 as fleet capacity returning outpaced demand: IATA

Initial third-quarter financial results from airlines show airlines have had low revenues due to weak travel demand caused by the coronavirus pandemic as global fleet capacity has increased, the International Air Transport Association said in their monthly airlines financial monitor on Oct. 21.

"Both passenger and cargo demand continued to recover in August. However, the pace of recovery remains gradual and passenger demand continues to lag the rise in seat capacity. Global base passenger yields declined in August as airlines sought to improve weak travel demand with price stimulation in the economy cabin," IATA said.

Lower revenue due to poor passenger demand would continue until 2022, IATA said.

Revenue passenger-kilometers, a measure of the amount of revenue an airline receives per passenger per kilometer traveled, had risen for the fourth consecutive month in August but were still 75.3% lower than a year earlier, IATA said.

Although demand had grown somewhat in Q3, global fleet capacity had increased too, reducing revenue, they said.

"As the end of September, the commercial fleet in service rose to c.22,630 aircraft which is up c.8,900 from the lowest level in April. Nevertheless, this is still well below the 2019 average (28,900) as c.30% of commercial aircraft remain in storage. The return of the fleet to service has outpaced the recovery in travel demand."

IATA added that most of the returning fleet is being used on short-haul travel and this market will likely recover fast than long-haul which will "be a challenge for airlines to keep fleet costs under control."

However, the report noted airlines have reduced losses in the quarter with cost cutting measures and pointed to robust cargo revenues as supportive.

"Air cargo demand also improved for another month (up 1.6% month-on-month) but the pace of increase slowed. Although the recovery in manufacturing activity supports air cargo demand, the rebound in air cargo volumes is hampered by capacity constraints."