Will Oil Take Off When Air Travel Returns?

Travel restrictions imposed by COVID-19 have had a devastating impact on oil demand, with the global pandemic shutting down international air travel and slashing demand for crude. While there are hopes an easing of international restrictions in 2021 will revive the oil industry, a recent press release from the International Air Transport Association (IATA) warns the aviation sector may not return to normal for years to come.

“Passenger volumes are not expected to return to 2019 levels until 2024 at the earliest, with domestic markets recovering faster than international services,” reads the press release issued by the IATA.

In 2019 the IATA estimated around 4.5 billion people travelled via air. In 2020 this number plummeted to 1.8 billion because of international and domestic travel restrictions. While IATA analysts expect passenger numbers of around 2.8 billion in 2021, the figure doesn’t come close to the pre-pandemic levels.

IATA pins hopes on domestic travel in North America

Revenue Passenger Kilometers (RPK), a figure used to record the total distance travelled by passengers, also took a significant hit in 2020. While the IATA expects a recovery of around 50% next year, RPK will remain 50% lower than 2019 levels. The majority of the air travel recovery will be fuelled by the North American market, with the IATA expecting an increase in travel between states. The domestic Asian market will also play a major role in reviving the aviation sector.

European market devastated by COVID-19 travel restrictions

In comparison, Europe is heavily reliant on international travel as it’s relatively small and has an excellent train network. With international travel still off the cards for many countries, long-distance flights between the northern and southern hemispheres will remain on hold. The IATA forecasts devastating results for the continent, with airlines set to lose around US11.9 billion in the face of a 70% drop in passenger traffic.

“Our projections for this year and next are little short of a disaster for European air transport,” says IATA Regional Vice President for Europe, Rafael Schvartzman. “Border restrictions and quarantine measures have brought demand to a halt and the region has been affected even worse than most other parts of the world.” Schvartzman stresses European governments must take immediate action, suggesting a focus on “rapid testing of passengers so that quarantine can be eliminated, and borders safely opened.”

With profits severely hit by travel restrictions, maximising efficiency and productivity is now front of mind for producers. Find out more in ‘Global Collaboration and Development of the Latest Engine Oil Standards.’