It would be an understatement to say it has been a bad week for the travel sector– or at least the part of it which relies on international travel. New restrictions on travel were expected, but neither the industry nor many of its customers anticipated the warning from Tánaiste Leo Varadkar that not only was international travel unlikely during the summer, but it might not be possible by next Christmas either.
The statement has sent many people’s plans into a spin – including those who had moved summer bookings forward from 2019. But as borders tighten across the world and travel is restricted, it is clear that the risk of the spread of new variants has changed the game for international travel, for now anyhow. With the new Biden administration even considering making it mandatory for people on internal flights to have been vaccinated, and some discussion at EU level about banning tourist travel, the story is moving very quickly.
The Republic may yet be pushed to tighten policy further. It looks like folly right now to try to forecast when we might be travelling again with any freedom. We simply don’t know and won’t for a while.
Visibility out the cockpit window for the months ahead is now close to zero. Airlines, who had been hanging on for the key summer season, now have to reconsider – and more cutbacks and route cancellations seem certain. The industry is still hopeful of some return to flying by late 2020, but at this stage nobody knows. Much will depend on vaccine rollouts and what they achieve – in particular to what extent they lower the risk of people transmitting the virus and whether they work as well against new variants. Meanwhile, the Irish tourism sector, which had hoped there might be some travellers in the second half of 2021, is facing a very difficult year.
1. The data
2020 was an annus horribilis for aviation, but the sector had hoped to be on the path to recovery from the second half of this year. Now this is in doubt. Airlines internationally lost $140 billion (€116 billion) last year according to the International Air Transport Association (IATA) and without government support many internationally would have gone bust. The number of passengers flying fell from 4.5 billion in 2019 to 1.8 billion, IATA estimates.
For Ireland, CSO figures show a 75 per cent fall in passenger numbers handled by Irish airports in the first nine months of 2020 to 7.5 million. The Irish Tourist Industry Confederation said tourism revenues collapsed 85 per cent last year. Plans to start a major marketing campaign in March to attract people to Ireland in the second half of the year have been put on ice.
IATA had hoped that passenger numbers would rise to 2.8 billion this year, cutting losses to less than $40 billion. But this was based on a reopening which would accelerate in the second half of this year. On the basis of what has happened this week, this looks unlikely, given that most countries will not have everyone vaccinated until the Autumn, at best. And clearly the new variants bring a further uncertainty. IATA is calling for a plan for reopening when possible. But right now nobody knows when the “when” might come.
2. The policy debate
The tightening of travel rules has been driven by rising virus numbers in some countries and more recently by the emergence of new more transmissible variants. Fear that at least some of these might be resistant to vaccines has accelerated this move over the past 10 days, with travel bans on countries from which some of the new variants are emerging. Countries are responding in different ways, but the move is only in one direction – close borders to tourists or restrict movement very severely.
As vaccine numbers rise in the months ahead, will the data and the outlook start to look different? The key issue for the sector now is what strategic approach countries take as more of their populations become vaccinated.
The zero-Covid approach, as pioneered in countries such as New Zealand and Australia, involves severe restrictions on inward travel, controls on numbers arriving and, as has been much discussed, mandatory quarantine on arrival. This is not the measure to get numbers down – that depends more on domestic factors – but it is a key part of the zero-Covid strategy in keeping numbers down once they reach low levels. And it also allows for keeping out new variants. New Zealand has announced that it is likely to keep international travel restrictions tight for "much of this year".
The Government here has argued that a zero-Covid strategy wouldn’t work as well in Ireland, give the interconnected nature of the economy with the UK and Europe and movements of essential workers and hauliers, including many coming over the Border. However like other European governments, the Irish one will face a key call when numbers do get to lower levels.
Do they start to open up international travel, as well as the domestic economy, or do they fear this is too risky, as least until everyone who wants gets vaccinated? It will be a big call and a vital one for the travel sector. Right now the indicators are of caution. It is hard to see any more generalised move to reopen international travel until the autumn, at the earliest, and forecasting how this might play out is impossible for now.
3. Back to flying?
Will there be a way to fly safely as the world finds its way gradually out of the pandemic? IATA has made a number of proposals based on the need for global standards in areas such as vaccine passports or digital travel certificates and international agreements on testing. With uncertainty over whether vaccines stop transmission and guard against variants, it is unclear how these kind of plans might develop. However the industry is arguing that governments now need to start planing on how travel might be restarted to have methodologies in place when this is possible. The previous Irish government mandated a task force, chaired by businessman Chris Horn, to look at the issue last year, but there are few signs of more recent policy development.
4. Policy implications
There are a few key policy implications for Ireland. The first is the obvious one – supporting the sectors which depend on international travel, which delivers up to three quarters of the tourist industry's revenues. Elaina Fitzgerald Kane of the Irish Hotels Federation told the Irish Times Business Podcast this week that the sector needed clarity on the extension of the wage subsidy scheme, due to expire at the end of March, as well as on rates waivers and measures to help the industry deal with bank debt. Restarting the sector will be a huge policy challenge.
The second key issue will be restoring connectivity internationally, a point underlined by the Aviation Task Force in a report completed last summer before the full extent of the pandemic became clear. The Irish airline industry carried 38 million passengers in 2019 to 200 destinations in 42 different countries. This has now slowed to a trickle of flights. While airlines will not automatically lose slots – for now anyway – restarting and reconnecting will be a slow and difficult business, not only within Europe but also on the key routes to North America which have been vital for tourism and also for inward investment. Significant State support is likely to be needed to get routes restarted, when possible, given the wider economic benefits of this interconnectivity.
All this is within the context of significant uncertainty about the future of travel. We hope, when vaccinations spread, that travel can restart and some analysts foresee a surge in demand as people rush back to the airport. But there must also be questions about how quickly this will happen. And about the structure of the sector in future and how it will operate if parts of the pandemic threat drag on, notably the risk of new variants. Rebuilding the spider’s web of Ireland’s international connections post-pandemic – vital for holidaymakers and business – will be a huge task. As an economy which depends on globalisation – via trade and investment – this is a huge strategic issue.