A struggle for basic survival and for new money to burn.
The summer of 2020 may have been unexpectedly grim for Europe’s airlines, but winter could be worse. The slow recovery in passenger air traffic that began in early June is already over. At the high point of that recovery, in late August, air traffic was still down 51%. But by then, covid cases were once again surging in many countries, prompting the governments of other countries to reintroduce travel restrictions and impose quarantine measures.
In the first two weeks of September, air traffic was down 53% compared to the same period in 2019. Intra-Europe flow remains 50% down compared to 2019 while all other flows are down 70%. Passenger traffic has also started to fall from the dismally low levels in mid-August, with almost all major airports reporting a decrease: Madrid was down 16% from mid-August, Barcelona and Paris 14%, Athens 13%, Paris CDG 12%, Amsterdam 9%, London/Heathrow 7%, Frankfurt 6%, and Munich 5% from mid-August.
They are many reasons why this is happening. As the International Air Travel Association (IATA) says, “stop-start quarantines are having much the same effect as lockdowns”, dissuading potential travelers from boarding a plane. Many people are choosing not to fly anyway, often out of fear of catching the virus. According to the U.S. Center for Disease Control, as many as 11,000 people may have been infected with the coronavirus on flights. Weak consumer confidence, unemployment, and surging business closures are also taking their toll.
Another major problem for the industry is the collapse of the premium market (first and business class combined), which last year generated 30% of airlines’ international revenues. Many businesses right now will not send workers half way across the globe for a meeting that can be done remotely, at a tiny fraction of the cost and with none of the risk attached. Also, premium travel has lost some of its allure as many of its perks have been traded away for safety.
Commercial airlines’ big loss has been a big boon for private aviation companies, which offer comfort, flexibility, and most importantly isolation — for those who can afford it. The rapid recovery of private aviation in recent months clearly suggests that some customers are willing and able to splash out to be travel more safely. According to the Times of London, one operator, PrivateFly – which charges £10,000 for flights between France and the UK – saw its bookings triple in August.
Meanwhile, commercial airlines have had to ground a large part of their fleets. Revenues, cash flows and earnings have all been obliterated, while costs, particularly for maintenance, remain high. Most airlines are in a struggle for basic survival.
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