Restrictions are being eased and the world's airlines are trying to restart their engines. But the journey upwards could take many years, and companies will have to try their hand at the new reality.
”"There is no template that says how to do it," says Jean-Marie Skoglund, analyst at the Swedish Transport Agency, to TT.
When the world went into lockdown, it didn't take long for air travel to come to a standstill. On February 21, there were just over 109,330 commercial flights, according to statistics from Flightradar24. Two months later, the figure was just under 29,440.
But during May, a recovery has slowly gained momentum and on May 21, 38,377 commercial flights were operated.
”As communities open up, there will likely be a need for traffic,” notes Jean-Marie Skoglund.
Several airlines have confirmed that they plan to increase capacity in the coming months – including Finnair, Ryanair, Wizz Air and Lufthansa. In recent days, several countries have also reported that they are opening up to tourists during the summer.
But it will be some time before the entire industry is ready for take-off and reaches the same volume of traffic as before the pandemic.
”"The fear of traveling is the hardest thing for airlines and the entire industry. It is linked to the fact that we do not yet have full knowledge of the virus and that we lack a vaccine," says Skoglund.
According to Skoglund, it could take between two and five years before passenger volumes are back to 2019 levels.
”Society has been shut down to a degree that has never happened before. This is what makes it so complicated, because there is no template for how to do it.”
”"It is clear that it is difficult to go from this to opening up, because aviation is very sensitive to both political and economic changes. Therefore, we can probably expect a global reduction in air traffic of 50 percent compared to 2019 passenger figures," he continues.
How the development continues is governed by demand and profitability, along with various countries' restrictions, according to Hans Jørgen Elnæs, aviation analyst at Winair.
”"Experience from Asia shows that airlines test how markets respond to more capacity and capacity is quickly cut if the market does not respond positively," he tells TT.
On average, airlines need to fill their planes to just over 65 percent to make a positive profit, while low-cost airlines likely need more than 80 percent.
”It is not possible if, for example, it is not possible to sell the middle seat in the aircraft, which reduces the saleable capacity by between 30 and 50 percent, depending on the aircraft type,” says Elnæs.
Although several companies have already started to prepare for the start, he believes that the industry will be hit by several bankruptcies in the coming months, for both large and small airlines, all over the world. Some airlines that find themselves in a difficult financial position will be bought up, restructured or merged with others.
So far, around $92 billion has been provided in government loans or loan guarantees that include airlines worldwide, according to Elnæs. The new debts will negatively affect airlines' costs and lead to higher prices. At the same time, prices cannot be increased more than the market is willing to pay.
”"I believe we will see a reduction in the offer of routes and destinations, when airlines have to focus one hundred percent on profitability. This will be noticeable on all types of routes and it will last for two to four years to come," says Hans Jørgen Elnæs.
Source: TT
