Effects Of Novel Coronavirus (COVID‐19) On Civil Aviation .

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Effects of Novel Coronavirus(COVID‐19) on Civil Aviation:Economic Impact AnalysisMontréal, Canada8 April 2021Economic Development – Air Transport Bureau

Contents Executive Summary:Economic Impact in Brief Scenario Building– Analytical consideration– Shapes of EconomicRecession and Recovery– Indicative Scenarios andPaths Forward Estimated 2020 Resultsand 2021 Outlook:Global Estimated 2020 Resultsand 2021 Outlook:Regional Breakdown– Africa AppendixA. Overview of Early ImpactB. Scenario Assumptions inDetailC. Estimated Results atRoute Group LevelD. Summary of Analysis byOther Organizations– Asia/Pacific– Europe– Latin America/Caribbean– Middle East– North America2

Executive Summary: Economic Impact in Brief2021 figures and estimates herein are subject to substantial changes, and will be updatedwith the situation evolving and more information available.3

World passenger traffic collapses withunprecedented decline in historyWorld passenger traffic evolution1945 – 2021*‐41 to ‐51%decline in world totalpassengers in 2021* vs. 2019‐60%decline in world totalpassengers in 2020Source: ICAO Air Transport Reporting Form A and A‐S plus ICAO estimates.4

Year 2020 results:World total passenger trafficThe COVID-19 impact on world scheduled passenger traffic for year 2020 (estimated actualresults), compared to 2019 levels:–Overall reduction of 50% of seats offered by airlines–Overall reduction of 2,699 million passengers (-60%)–Approx. USD 371 billion loss of gross passenger operating revenues of airlinesInternational passenger trafficDomestic passenger traffic–Overall reduction of 66% of seats offered byairlines–Overall reduction of 38% of seats offered byairlines–Overall reduction of 1,376 millionpassengers (-74%)–Overall reduction of 1,323 millionpassengers (-50%)–Approx. USD 250 billion loss of grossoperating revenues of airlines–Approx. USD 120 billion loss of grossoperating revenues of airlines5

Year 2021 outlook:World total passenger trafficThe COVID-19 impact on world scheduled passenger traffic for year 2021 (preliminaryestimates), compared to 2019 levels:–Overall reduction of 31% to 38% of seats offered by airlines–Overall reduction of 1,823 to 2,265 million passengers (-41% to -51%)–Approx. USD 267 to 329 billion loss of gross passenger operating revenues of airlinesInternational passenger trafficDomestic passenger traffic–Overall reduction of 52% to 63% of seatsoffered by airlines–Overall reduction of 16% to 20% of seatsoffered by airlines–Overall reduction of 1,143 to 1,384 millionpassengers (-62% to -75%)–Overall reduction of 682 to 881 millionpassengers (-26% to -33%)–Approx. USD 203 to 247 billion loss ofgross operating revenues of airlines–Approx. USD 64 to 82 billion loss of grossoperating revenues of airlines6

Year 2021 outlook:Due to uncertainty, consider 4 different pathsScenarios for passenger seat capacityOutlook 2021 (compared to 2019 levels)0%‐20%‐40%ActualScenario 1Scenario 1aScenario 2Scenario ‐50%Jan 20Feb 20Mar 20Apr 20May 20Jun 20Jul 20Aug 20Sep 20Oct 20Nov 20Dec 20Jan 21Feb 21Mar 21Apr 21May 21Jun 21Jul 21Aug 21Sep 21Oct 21Nov 21Dec 21‐80%Scenarios for passenger number0%‐20%‐40%ActualScenario 1Scenario 1aScenario 2Scenario 2aReference‐60%‐70%‐80%Jan 21 Feb 21 Mar 21 Apr 21 May 21 Jun 21 Jul 21 Aug 21 Sep 21 Oct 21 Nov 21 Dec 21Seat capacity (Low)Passenger number (Low)Seat capacity (High)Passenger number (High)‐60%‐80%Jan 20Feb 20Mar 20Apr 20May 20Jun 20Jul 20Aug 20Sep 20Oct 20Nov 20Dec 20Jan 21Feb 21Mar 21Apr 21May 21Jun 21Jul 21Aug 21Sep 21Oct 21Nov 21Dec 21‐100%The actual impacts will depend on duration and magnitude of the outbreakand containment measures, the degree of consumer confidence for air travel,and economic conditions, etc.7

Moderate recovery in domestic travelwhile international travel remained stagnantMonthly passenger numbers in 2020‐21 vs. 2019450Passenger Numbers (million)400350300250200150100500Jan 20 Feb 20 Mar 20 Apr 20 May 20 Jun 20 Jul 20 Aug 20 Sep 20 Oct 20 Nov 20 Dec 20 Jan 21 Feb 21 Mar 21InternationalSource: ICAO estimatesDomestic2019 total8

Regional difference in resilience andspeed of recoveryComparison of total seat capacity by region(7‐day average, YoY compared to 2019)40%Africa20%Asia/PacificEurope0%Latin America/CaribbeanMiddle East‐20%North America‐40%‐60%‐80%‐100%Source: ICAO ADS‐B9

Estimated impact on passenger traffic andrevenues by region for 2020Capacity:‐58%Capacity:‐43%Passenger:‐769 millionPassenger:‐599 millionCapacity:‐45%Revenue (USD):‐100 billionRevenue (USD):‐88 billionPassenger:‐921 millionRevenue (USD):‐120 billionCapacity:‐53%Passenger:‐199 millionRevenue (USD):‐26 billionCapacity:‐58%Passenger:‐78 millionRevenue (USD):‐14 billionCapacity:‐60%Passenger:‐132 millionRevenue (USD):‐22 billionNote: Compared to 2019Source: ICAO estimates10

Global impact of COVID‐19 onaviation, tourism, trade and economy in 2020 Air passenger traffic: An overall reduction of air passengers (both international and domestic)ranging from 60% in 2020 compared to 2019 (by ICAO) Airports: An estimated loss of approximately 64.6% of passenger traffic and 66.3% or overUSD 125 billion airport revenues in 2020 compared to business as usual (by ACI) Airlines: A 65.9% decline of revenue passenger kilometres (RPKs, both international anddomestic) in 2020 compared to 2019 (by IATA) Tourism: A decline in international tourism receipts of USD 1.3 trillion in 2020, compared to theUSD 1.5 trillion generated in 2019 (by UNWTO) Trade: A fall of global merchandise trade volume by 5.3% in 2020 compared to 2019 (by WTO) Global economy: An estimated -3.3% to -4.3% contraction in world GDP in 2020, far worsethan during the 2008–09 financial crisis (by IMF and World Bank)11

Scenario Building12

Scope of analysis Analysis focuses on simultaneous supply shock and drop in demand– in a near-term, i.e. monthly profile from January 2020 to December 2021– in terms of scheduled passenger traffic globally Taking into account the heterogeneity, distinction is made:– between international and domestic– by month (seasonality)– by six (6) geographical region and/or 50 route groups used in ICAO’s long-termtraffic forecasts (LTF) Analysis is based on forward-looking scenarios, which will be continuouslyadjusted and updated13

Analytical Consideration Geographical disparity of international-domestic passenger traffic mix Difference in market size among regions Potential difference in resilience and speed of recovery Outbreak timing that impacts when traffic would bottom out Gap between what is scheduled and actual operations14

International share of passenger trafficdecreased in all regions in 2020 vs. 2019Share of international‐domestic passenger traffic by region(2020 vs. 2019, based on from/to State)Source: ICAO long‐term traffic forecasts, ADS‐B and estimates15

Europe and Asia/Pacific accounted for around70% of the world international traffic in 2020Number of international passengers by region(2020 vs. 2019, based on from/to State)2020shareSource: ICAO long‐term traffic forecasts, ADS‐B and estimates16

China overtook North America with 30% ofworld domestic passengers in 2020Number of domestic passengers by Route Group(2020 vs. 2019)2020shareSource: ICAO long‐term traffic forecasts, ADS‐B and estimates17

Domestic passenger traffic often exhibits moreresilience than internationalAsia/Pacific and North America have experienced 20% to 25% less decline indomestic passenger traffic than internationalInternational seat capacity reduction(7‐day average, YoY compared to c seat capacity reduction(7‐day average, YoY compared to 2019)Africa40%Europe20%Latin America/CaribbeanMiddle East0%North America‐40%‐60%Asia/PacificLatin America/CaribbeanMiddle EastNorth America‐20%‐40%‐60%‐80%‐100%Source: ICAO ADS‐B operation data‐80%‐100%18

Domestic passenger traffic is recoveringahead of internationalDomestic passenger traffic in China exceeded 2019 level from Autumn 2020 but sloweddown in January 2021 and again exceeded 2019 level after Chinese New YearSource: ICAO ADS‐B operation data19

The outbreak timing impacts when domestictraffic bottoms out in each regionCapacity evolution of two largest domestic marketsChina and United States since January 2020Source: ICAO ADS‐B operation data20

For international passenger traffic, share ofIntra‐Region traffic decreased in 2020Share of Intra‐Region and Inter‐Region passenger traffic by region(2020 vs. 2019, based on from/to State, share of international traffic)Source: ICAO long‐term traffic forecasts, ADS‐B and estimates21

A large gap exists between what isscheduled and actual operationsAirlines announced/planned resumption of flights, however, over half ofwhich were subsequently withdrawnInternational schedulesDomestic ‐2018‐May‐2027‐Apr‐20150100Number of seats scheduled (millions)Number of seats scheduled (millions)200502502001500Apr 2020Source: �May‐2027‐Apr‐20May 2020Jun 2020Jul 2020Aug 2020Sep 2020Oct 2020Nov 2020Dec 2020100Apr 2020May 2020Jun 2020Jul 2020Aug 2020Sep 2020Oct 2020Nov 2020Dec 202022

Shapes of Economic Recession and RecoveryInformal classification to describe different types of recessions: V-shaped: normal shape for recession, a brief period of sharp economic declinefollowed by quick/smooth recovery U-shaped: prolonged contraction and muted recovery to trend line growth L-shaped (depression): long-term downturn in economic activity, steep dropfollowed by a flat line with possibility of not returning to trend line growth W-shaped: a double-dip recession, “down up down up” pattern before full recovery “Nike swoosh”-shaped*: bounce back sharply but blunt quickly (* Brookings Institution/WEF)23

What “recession shape” can be assumedgiven uncertainties surrounding the outlook?World’s GDP Projections (by IMF) How long will the pandemic last and whatwill be the severity levels? How deep and how long will the globalrecession be? How long will lockdowns and travelrestrictions continue? How fast will consumer confidence in airtravel be restored? Will there be a structural shift in industryand consumers’ behaviors? How long can the air transport industrywithstand the financial adversity?Source: IMF Word Economic Outlook (January2021)24

Previous outbreaks/pandemics had a V‐shapedimpact on air transport in Asia/PacificThe impact ofCOVID-19 hasalready surpassedthe 2003 SARSoutbreak which hadresulted in reductionof annual RPKs by8% and USD 6billion revenues forAsia/Pacific airlines.The 6-monthrecovery path ofSARS might notapply to �impact‐assessment/Source: IATA COVID‐19 Updated Impact Assessment (dated 24 March 2020)25

9/11 and global financial crisis had a U/L‐shapedimpact on air transport in United ‐covid19‐data‐updates/Source: A4A Tracking the Impacts of COVID‐19 ‐ Some Early Indicators (updated on 19 January 2021)26

Indicative Scenarios and Paths ForwardAs overall severity and duration of the COVID-19 pandemic are still uncertain, four (4)different recovery paths under two (2) indicative scenarios are developed: Baseline: counterfactual scenario, in which the COVID-19 pandemic does notoccur, that is, originally-planned or business as usual Scenario 1: two (2) different paths (similar to Nike swoosh- and W-shaped) Scenario 2: two (2) different paths (similar to U- and L-shaped) Reference: information only, based on latest airline schedules (similar to V-shaped)27

What does Scenario mean? Notwithstanding the elevated uncertainty surrounding the outlook, a scenarioanalysis could help gauge potential economic implications of the pandemic Scenarios are not forecasts of what is most likely to happen. Given rapidlychanging circumstances, they are merely indicative of possible paths orconsequential outcomes out of many The exact path (depth, length and shape) will depend upon various factors,inter alia, duration and magnitude of the outbreak and containment measures,availability of government assistance, consumer confidence, and economicconditions With the situation evolving and more information available, scenarios will beadjusted as necessary28

Key assumptions International and domestic passenger traffic has separate scenarios/paths Scenarios/paths are differentiated in terms of supply and demand, i.e.– Scale of output or seat capacity change– Degree of consumer confidence that can be translated into demand or load factor as a proxy Supply and demand are influenced by:– Different timing and speed of recovery by region, international/domestic, and intra-/inter-region– Global economic contraction No consideration is made to social distancing requirements on aircraft, etc. Detailed scenario assumptions are summarized in Appendix B29

Baseline & Reference Baseline: originally-planned or business as usual– Counterfactual hypothesis that are expected to occur in the absence of COVID-19 pandemic– Supply: airlines’ originally-planned schedules supplemented by trend line growth– Demand: trend line growth of demand from 2019 (pre-COVID-19) level Reference: V-shaped– Information-only scenario that reflects airlines’ most recent expectation or a “signal” of airlines’plan to the market (not necessarily realistic)– Supply: based on latest update of airline schedules filed, which are adjusted weekly by airlinesaccording to the expectation of the evolving situation (quite often managing capacity for a shortperiod due to the uncertainties)– Demand: quickly returning to Baseline level30

Scenarios 1 & 2Scenario 1: Nike swoosh- and W-shapedScenario 2: U- and L-shaped International International– Path 1: Smooth capacity recovery by picking up pent-updemand but at a diminishing rate of growth– Path 2: Accelerating the return to trend growth afterslow progression of capacity recovery– Path 1a: Capacity to start with smooth recovery butthen turn back down due to over-capacity– Path 2a: Capacity recovery at diminishing speed dueto respite and continuous demand slump Domestic Domestic– Path 1: Swift capacity rebound pushed by pent-updemand but at a diminishing rate of growth– Path 2: Gradual capacity recovery, followed by theacceleration of growth– Path 1a: Capacity to start with smooth recovery butthen turn back down due to over-capacity– Path 2a: Capacity recovery at diminishing speed dueto sluggish demand growthIn the following analysis, international and domestic scenarios having the same path number are linked witheach other, although different combination of scenarios/paths would be possible31

Estimated 2020 Results and 2021 Outlook: Global2021 figures and estimates herein reflect the latest operational data and schedules filed by airlinesbut are subject to substantial changes, and will be updated with the situation evolvingand more information available.32

Three (3) key impact indictors Three (3) key impact indicators under four (4) paths of two (2) scenarios:– Change of passenger seat capacity (supply, %)– Change of passenger numbers (demand)– Change of gross passenger operating revenues of airlines Comparison to:– Baseline scenario– 2019 level– 2020 level (for 2021 estimates) Break-down by:– International and domesticEstimation based on actualresults of January 2020 toFebruary 2021 are used for thekey impact indicators.– Month, quarter and year33

Estimated impacts compared to 2019 & BaselineCompared to 2019Seat capacity (%)Passenger number (thousand)TotalPassenger revenue (USD, esticTotal1Q 2%‐29,389‐16,5382Q 7‐81,9933Q 8‐82,0024Q ‐69,608‐26,028Total 2020‐49.5%‐65.7%‐37.9%‐2,698,6501Q 17‐47.4%‐92,710‐65,5582Q 2021‐41.8% to ‐41.0%‐70.1% to ‐68.7%‐20.8% to ‐20.5%‐27,151‐634,655 to ‐604,443‐55.7% to ‐53.1%‐390,566 to ‐378,381‐82.0% to ‐79.5%‐244,089 to ‐226,062‐36.8% to ‐34.1%‐91,462 to ‐87,484‐68,425 to ‐66,121‐23,038 to ‐21,3633Q 2021‐33.6% to ‐23.6%‐57.9% to ‐41.9%4Q 2021‐26.1% to ‐12.1%‐47.5% to ‐24.4%‐15.0% to ‐9.5%‐562,900 to ‐375,474‐46.1% to ‐30.7%‐370,840 to ‐267,016‐70.3% to ‐50.6%‐192,060 to ‐108,458‐27.7% to ‐15.6%‐82,103 to ‐55,801‐63,980 to ‐45,475‐18,123 to ‐10,326‐11.5% to ‐3.7%‐418,818 to ‐197,239‐38.2% to ‐18.0%‐268,648 to ‐143,801‐61.4% to ‐32.9%‐150,170 to ‐53,437‐22.8% to ‐8.1%‐62,738 to ‐31,010‐48,657 to ‐25,924Total 2021‐37.6% to ‐31.2%‐62.5% to ‐52.2%‐14,081 to ‐5,085‐19.7% to ‐16.2%‐2,264,522 to ‐1,825,305‐50.5% to ‐40.7%‐1,383,786 to ‐1,142,930‐74.8% to ‐61.8%‐880,736 to ‐682,375‐33.4% to ‐25.9%Compared toBaselineTotalInternationalDomestic1Q 08,095‐25.3%‐171,8212Q �478,427‐96.8%3Q 68,004‐85.7%Seat capacity (%)‐329,013 to ‐267,004 ‐246,620 to ‐203,079 ‐82,394 to ‐63,925Passenger number (thousand)TotalPassenger revenue (USD, 5.2%‐121,503‐85,312‐36,1914Q ‐27,715Total �262,390‐129,0001Q ‐339,994‐1‐101,491‐70,193‐31,2982Q 2021‐45.0% to ‐44.2%‐72.0% to ‐70.6%‐24.8% to ‐24.5%‐708,874 to ‐678,662‐58.4% to ‐55.9%‐423,311 to ‐411,126‐83.2% to ‐80.8%‐285,563 to ‐267,537‐40.5% to ‐38.0%‐101,393 to ‐97,415‐74,465 to ‐72,161‐26,929 to ‐25,2533Q 2021‐37.9% to ‐28.5%‐60.7% to ‐45.7%‐20.5% to ‐15.3%‐656,117 to ‐468,691‐49.9% to ‐35.6%‐409,572 to ‐305,748‐72.3% to ‐54.0%‐246,544 to ‐162,943‐32.9% to ‐21.8%‐94,449 to ‐68,147‐71,218 to ‐52,713‐23,232 to ‐15,4344Q 2021‐30.2% to ‐17.0%‐50.5% to ‐28.7%‐16.3% to ‐8.9%‐490,735 to ‐269,156‐42.0% to ‐23.1%‐296,665 to ‐171,818‐63.7% to ‐36.9%‐194,070 to ‐97,337‐27.7% to ‐13.9%‐72,750 to ‐41,022‐54,582 to ‐31,849‐18,168 to ‐9,173Total 2021‐41.2% to ‐35.3%‐64.8% to ‐55.1%‐24.3% to ‐21.0%‐2,575,296 to ‐2,136,079‐53.7% to ‐44.5%‐1,509,124 to ‐1,268,268‐76.4% to ‐64.2%‐1,066,171 to ‐867,810‐37.8% to ‐30.8%‐370,083 to ‐308,074 ‐270,456 to ‐226,916 ‐99,626 to ‐81,15834

Seat capacityWorld (International)0%‐20%‐20%‐40%‐40%‐80%Jan 20Feb 20Mar 20Apr 20May 20Jun 20Jul 20Aug 20Sep 20Oct 20Nov 20Dec 20Jan 21Feb 21Mar 21Apr 21May 21Jun 21Jul 21Aug 21Sep 21Oct 21Nov 21Dec 21‐100%ActualScenario 1Scenario 1aScenario 2Scenario 100%‐100%Jan 20Feb 20Mar 20Apr 20May 20Jun 20Jul 20Aug 20Sep 20Oct 20Nov 20Dec 20Jan 21Feb 21Mar 21Apr 21May 21Jun 21Jul 21Aug 21Sep 21Oct 21Nov 21Dec 21ActualScenario 1Scenario 1aScenario 2Scenario 2aReference‐60%World (Domestic)0%ActualScenario 1Scenario 1aScenario 2Scenario 2aReferenceJan 20Feb 20Mar 20Apr 20May 20Jun 20Jul 20Aug 20Sep 20Oct 20Nov 20Dec 20Jan 21Feb 21Mar 21Apr 21May 21Jun 21Jul 21Aug 21Sep 21Oct 21Nov 21Dec 21World (Total)0%Seat Capacity (thousand) ‐ World Total International ,948470,011498,340497,416466,668469,535431

Economic Impact Analysis Montréal, Canada 17 March 2021 Economic Development –Air Transport Bureau. Contents Executive Summary: Economic Impact in Brief Scenario Building – Analytical consideration – Shapes of Economic Recession and Recovery – Indicative Scenarios and

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