Aviation: the comeback starts now

If you looked at the statistics tumbling out of the airline sector, you would probably conclude that the golden age of aviation had gone into a nosedive. The numbers tell the story of how a

global industry supporting nearly 90 million jobs and operating about 24,000 aircraft crashed to Earth. On March 12 — the day after the World Health Organisation declared a pandemic —

Eurocontrol recorded 23,879 flights across Europe. A month later that number had fallen to 2,099. By then Easyjet and Ryanair had grounded their entire fleets, and within a fortnight British

Airways had announced plans to cut 12,000 jobs and Virgin Atlantic was asking for a £500 million government bailout. By June, with borders sealed and passenger terminals locked across vast

parts of the world, it became clear that the short-haul hop to recovery many had predicted was in fact a long-haul struggle for survival. With demand down 86.5 per cent, Alexandre de Juniac,

chief executive of the International Air Transport Association (Iata), warned: “We are still in a very deep crisis. And it does not appear that it will end any time soon.” A return to 2019

air-traffic levels would not be achieved before 2024, he said. By then, as Luis Gallego, the Iberia boss, put it, the world would “have fewer planes, fewer flights and fewer destinations”,

with 193 out of 740 airports in Europe alone facing closure according to the airport lobby group ACI Europe. So is the golden age really over? Are we heading back to the 1980s, with high

fares and limited choice? In the short term at least, airlines are preparing for a price war aimed at snatching back market share and making flying attractive again. “One thing we’ve learnt

from previous downturns is that people will always be attracted by value,” said Easyjet chief executive Johan Lundgren. “Our starting prices now are actually lower than when we launched in

1995.” Ryanair’s Michael O’Leary said the war would start in earnest in the spring. “Ryanair will discount prices, the hotels will discount prices; we will all discount to try to recover the

business we have lost,” he said. Barcelona is a popular city-break spot DAVID RAMOS THE SHORT-HAUL RECOVERY “We know for sure that the short-haul sector will recover faster than long-haul,”

said Easyjet’s Lundgren. “The industry is in survival mode now, but as soon as we have either a vaccine or a reliable testing protocol we will move straight into recovery mode. So we need

to be prepared to scale up our operations fast in order to deal with pent-up demand.” Will city breaks benefit from that pent-up demand? Easyjet, Ryanair and their fellow low-cost carriers

built their businesses by exploiting 1993’s deregulation of European airspace and tempting us to spend weekends in cities such as Barcelona, Berlin and Budapest, which were much less visited

then. But the thriving hospitality industries that low-cost flights created in such spots also led to overtourism and local resentment. Add a Covid-induced aversion to crowded places and

the once-dependable market of stags, hens and culture-loving couples can no longer be relied upon. Advertisement It is a conclusion already reached in Spain, where urban hotel chains

including Only You and Sercotel have shifted their focus away from tourism to providing services for locals and business travellers. What happens from June onwards, when the dust from the

price war has settled and airlines rejig the algorithms to respond to new levels of demand, is not yet known. One option is to reduce frequencies to less-popular destinations, or even cancel

the route. The other is to drop fares to such places in order to spur demand. The carriers that have invested in greener, more efficient aircraft, such as Ryanair’s Boeing 737 Max — the

accident-prone plane recertified last week to fly in the US and awaiting the all-clear from the European Union Aviation Safety Agency — and Easyjet’s Airbus A321neo, will be getting the

savings on operating costs to make that possible. “In terms of fuel cost, an Airbus Neo is around £700 an hour cheaper to run than the old Airbus 320,” said Rob Morris, global head of

consultancy at Ascend by Cirium. “That can equate to a saving of £1.1 million per aircraft per month, and airlines will pass these savings on in order to remain competitive.” So while 2021

flight prices to the most popular destinations — Malaga, Palma, Faro and Corfu, for example — on the most sought-after dates are no cheaper than they were in November 2019, you could find

peak-season bargains on less-obvious routes. Here’s the quandary: if you wait for the price war to begin you might not get the flights you want. Easyjet return fares to Malaga in the first

week of the summer holidays are currently on offer at an average of £307pp — and they’re selling out fast, as are Ryanair’s £280 returns to Corfu the same week. But if you pay top dollar now

you might kick yourself if the threatened price war kicks off in March. City breaks are likely to recover faster than long-haul MATTEO COLOMBO PROSPECTS FOR LONG-HAUL Despite the euphoria

surrounding vaccine developments, it could be a decade or more before we regain the global connectivity we enjoyed this time last year. Then, BA flew direct to 30 North American cities, with

12 flights a day to New York alone. Today, after making a £1.14 billion operating loss in just the three months to September, our flagging flagship carrier flies to a mere seven, and there

are only two daily flights to New York. KLM has reduced long-haul frequencies by about 55 per cent. Recovery, says Andrew Charlton of the consultants Aviation Advocacy, “will be constrained

by travel corridors, entry restrictions and in some cases bilateral agreements between nations”. A New York air corridor still hasn’t got off the ground, and the rabbit-in-the-headlights

response of global governments to the pandemic stands in stark contrast to responses following previous threats to aviation. The Aviation and Transportation Security Act was brought in by

the Bush administration less than six weeks after 9/11, and body scanners were up and running at Heathrow and Manchester only 40 days after the thwarted shoe-bomber attack on Christmas Day

2009. Advertisement In 2020 it has been left to the airlines to try to show indifferent governments the road to recovery. Next week BA launches a pre- and post-flight testing trial on

flights from Dallas and New York in a bid to persuade Grant Shapps that testing is a viable alternative to the quarantine and stop-start regimes that Sean Doyle, the new BA boss, says are

fuelling the uncertainty among the travelling public. “Though the vaccine is welcome news this week, the details of its roll-out, scale and impact on the economy is unclear,” he said last

week. “We’ve got an immediate crisis to deal with in the industry and we think testing in lieu of quarantine is a solution that’s staring us in the face. We just need clarity of policy.”

Airlines also need to cope with a long-term slump in corporate flying. Charlton believes it’s not dead, but “the good old days” have gone. “Procurement managers aren’t going to ban business

travel. They’re going to say, ‘You’ve got one flight per quarter so make them count,’ forcing once-frequent flyers to travel like Australians: you don’t fly from Sydney to London for one

three-hour meeting.” According to analysis of the world’s busiest airline routes by the consultancy OAG, only one leisure route makes it into the European top ten, so don’t think for a

minute that the likes of BA introduce direct flights to places such as Nashville, Tennessee, and Dammam in Saudi Arabia for the sake of tourism — in those cases airlines were serving the

healthcare and oil industries. If business travellers aren’t travelling, then business routes aren’t viable, and that, again, will lead to a reduction in choice. But one positive outcome of

the pandemic is its effect on fleets. The collapse in demand accelerated the retirement of about 800 aircraft this year, and most of them were big: four-engine Boeing 747s, Airbus A380s and

340s, and gas-guzzling Boeing 767s and 777s. Advertisement As with the short-haul sector, long-haul fleets are being equipped with new-generation, super-efficient, single-aisle jets such as

the Airbus 321XLR, with a range of 5,400 miles; and the Boeing 737 Max, which runs on 20 per cent less fuel than its predecessors and raises the uneasy prospect of flying transatlantic in

low-cost-carrier-style discomfort. The upside, says Morris, is that these smaller, more economical aircraft can be used on so-called “long thin” routes, allowing direct connections at lower

volumes between second-tier cities rather than conforming to the traditional hub-and-spoke model. “In other words you could fly from Stansted to Savannah without changing planes in hub

airports like JFK or Atlanta,” he said. Long term that promises a more connected world, but at a price: Covid could well have stifled the dream of low-cost long-haul flights — struggling

Norwegian’s £159 direct flight to Puerto Rico from Gatwick in 2016 was the apotheosis, or perhaps nadir, of that era — and we’ll be expected to pay more for the convenience of the long thin

alternative. In the meantime, if you’re considering splashing out on premium economy or even business class flights in the new year, think again: planes are so empty now, you can have four

seats to yourself in economy. Norwegian is just one of the airlines struggling ALAMY WILL AIRLINES GO BUST? Despite the grounding of most of the world’s 24,000-odd commercial jets, only 20

airlines operating ten aircraft or more have gone bust in 2020. Of these, Air Italy, AtlasGlobal and FlyBe were moribund before the pandemic and, of the remainder, the only casualty

potentially affecting British travellers is that of the Antigua-based puddle-jumper LIAT. Even zombies such as Alitalia and South African Airways are still clinging on, so the crisis can’t

be that bad, can it? Advertisement The numbers suggest otherwise. From July 1 to September 30, BA owner IAG was burning, on average, £26 million per day; Singapore Airlines, £14.6 million;

and Delta £18 million. You don’t need to be an economist to see that with all that going out and almost nothing coming in, long-term survival is unlikely. Indeed, it was only state aid that

kept many carriers from flatlining earlier in the crisis: Germany gave Lufthansa £8 billion in return for 20 per cent of the company. The French government loaned Air France £6.28 billion,

and, in the UK, BA, Easyjet and Ryanair borrowed £1.5 billion between them from the Bank of England. “Because airlines went running to governments for money, states have regained ownership —

at least in part,” said Andrew Charlton. “The consequence is a resurgence of the nationalisation of aviation that we’ve been trying to get rid of for decades, and that will mean less choice

for passengers.” The industry has already seen the effect of protectionism on cargo flights, and there are fears that if populist governments get a grip on airlines the same could happen to

human freight. “Protectionist rhetoric — fuelled by isolationist policies — has swept several major economies in recent times and this has translated into a dismantling of established

open-trade relationships and regimes,” warned Angela Gittens, of Airports Council International, in 2019. No one knows if governments will put their hands in their pockets again when the

current loans have been spent, but as we go into what are traditionally the hunger months for airlines, Norway has already refused to help ailing Norwegian. The airline has seen its share

price crash from £28.92 in April 2018 to just over 4p last week and says it will need “ventilator support” to survive the winter. Advertisement Iata is calling for continued government

support and while not all industry leaders agree with the Wizz Air chief Jozsef Varadi’s assertion that “between a third and a half of the airlines in the world may go bust”, many

acknowledge that the worst is yet to come. “There are going to be carriers that don’t make it,” agreed Easyjet’s Lundgren, but it could take them months or even years to die. “State aid

might prop them up, but the debt burden will cripple them, leaving them unable to expand or invest.” Brian Pearce, Iata’s chief economist, says the average airline has just eight months of

cash remaining at current burn rates, and there are no more costs that can be practically cut. Put simply, the amount an aeroplane can earn is nowhere near enough to meet its operating costs

and because airlines need to be ready to meet demand when the world starts flying again, selling currently redundant passenger aircraft is not an option. Yet in terms of projected demand in

2021 and beyond, the fact is that, as with the cruise industry, there’s too much capacity in the market. Cirium’s Morris estimates this at 3,000 aircraft — for context, that’s 155 more jets

than the combined fleets of BA, Easyjet, Ryanair, Air France, Alitalia, Austrian, Iberia, KLM, Lufthansa, SAS, Swiss, TAP, Turkish and Wizz Air. Such oversupply will make it hard to sell

the seats to reach the load factors — 70 per cent in Europe; 59 per cent in the USA — necessary to break even. The widely expected collapses will therefore come as a consequence of the price

wars in the recovery stage, when the weakest will be elbowed over the precipice. The Dubai skyline GETTY IMAGES THE ONBOARD EXPERIENCE Polycarbonate dividers; air vents in headrests; folded

cardboard headguards from British designers; and rather more ambitious Infection Defence Capsules from Germany. All have been mooted for Covid mitigation as we return to the skies, but the

reality is somewhat more pragmatic: airline interiors will simply be cleaned more often; masks will remain; inflight service will be stripped right back (an economy disguised as a

precaution); movement around the cabin will be restricted; and crews will parade in varying layers of PPE — Qatar Airways’s Chernobyl-chic is especially disturbing. Expect to see big

reductions in first and business — one demographic now flies privately and corporate budgets are forcing the other to fly economy — and an increase in the size of the premium economy cabin.

In the airport, shopping could become history, believes the Dubai Airports chief executive, Paul Griffiths. “Online retail has done really well due to Covid,” he said. “Airports now need to

rethink their model. It takes 24 minutes to consider a duty-free purchase. Let’s use that eight- to ten-hour flight before people arrive at the airport to select from a digital catalogue,

then pick up their purchases when they land.” Griffiths said that landing fees at these Argos-style airfields would be quashed in return for the custom, and the acres of glitzy retail estate

would be replaced with entertainment venues such as cinemas. WHAT ABOUT BREXIT? Under the European Common Aviation Area (ECAA), UK airlines are part of the European Aviation Safety Agency

system and enjoy the romantic-sounding nine Freedoms of the Air, including the right to fly from the UK to a foreign country and fly over a member country without landing. Unless there is

confirmation that the agreement still stands come January 1 — or the old, pre-EU bilateral air transport agreements are dusted off — there is a possibility that flights between the UK and EU

could be grounded. Grant Shapps is on the case. At the virtual Abta conference in October the transport secretary acknowledged that “time was tight”, saying that negotiations were

continuing with Brussels to keep Britain flying. “We’re seeking arrangements that will maintain connectivity,” he said. “We expect the EU to bring forward contingency measures, as they’ve

done before, to ensure flights will continue if negotiations are unsuccessful. Of course we would look to reciprocate that.” In the event that doesn’t happen, safety regulation will pass to

the Civil Aviation Authority. There will be no mutual recognition agreement for aviation licences and certificates and the EU will treat UK airlines as so-called Third Country Operators.

Last month Inmarsat asked 9,500 respondents from 12 nations if, all risks considered, they would be prepared to fly tomorrow. The UK came second only to Hungary for positive responses,

proving our enthusiasm to be airborne once more. The skies we find post-pandemic, though, may look very different. ▶ WHEN WILL YOU NEXT FLY? _Are you raring to go or feeling cautious? Email

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