Explained: How Airlines Are Preparing For A Slow Global Takeoff
For many travelers, November 8 was Freedom Day. This is the day the United States finally began allowing entry of fully vaccinated foreigners – with approved vaccines – after being shut down for more than 18 months for the European Union, the United Kingdom, the Brazil, China and India. For airlines, full transatlantic planes were an optimistic sign that global travel was finally returning to some form of normal before the pandemic. While US carriers are heavily invested in their country, a number of major European airlines are particularly dependent on lucrative North Atlantic services. Air France-KLM generates 40% of its sales there, while Lufthansa generates 50% of its sales.
Yet even before the coronavirus hit, the airline industry was reeling from two Boeing 737 MAX crashes that killed nearly 350 passengers. China was the first country to tie up its fleet and a total global ban followed. When 737 MAX flights resumed in many locations in December 2020, airlines did not need them as unused planes were parked around the world awaiting passengers.
Just months after the coronavirus was first announced, many countries closed their borders, imposed closures and quarantines on travelers in the spring of 2020. Aircraft manufacturers have slowed down or halted production. Airlines have put jets on hold and employees on leave. Some have canceled aircraft orders or attempted to postpone delivery or payments. Others even packed and sold their in-flight meals to nostalgic non-travelers.
West Asian Hope
This week at the five-day Dubai Airshow, some airlines are once again making big plans. The exhibition is the first major trade show since the start of the coronavirus pandemic and is seen as a good indicator of things to come. Big manufacturers have a lot to prove and a lot to lose. Airbus said it had received a bulk order from a privately funded consortium of airlines for 255 of its A321s, without revealing the price. Of this total, 102 will go to the Hungarian low-cost airline Wizz Air, 91 to the American airline Frontier Airlines, 39 to the Mexican Volaris and 23 to JetSMART in Chile. In addition, the Kuwaiti company Jazeera Airways has reached a provisional agreement for the purchase of 28 new A320neo.
Guillaume Faury, CEO of Airbus, is optimistic for the future, even if the company has not returned to what it was in 2019. From Dubai, he said Bloomberg Television that the industry begins to “see the light at the end of the tunnel” as traffic increases. As older planes are phased out and replaced with more fuel-efficient planes, he expects sales of small business jets to recover faster than large, wide-body, long-haul planes. .
For its part, Boeing said that the Indian startup Akasa Air had ordered 72 of its 737 MAXs. The aircraft manufacturer also has a contract to convert 11 of Iceland’s 737 passengers into cargo planes. In total, manufacturers announced more than 500 orders at the West Asia Airshow. That’s a positive signal, but most of the orders are for smaller, cheaper planes instead of impressive wide-bodied jets like the double-decker Airbus A380 or the Boeing 777.
Little by little return to normal
One bright spot over the past year has been the growing importance of freight planes. With fewer paying passengers, these planes have been a lifeline for many airlines. With the shipping industry strained and the recognition that global supply chains are not functioning properly, this could remain a growing business for airlines. The other big lifeline for airlines around the world was government generosity. Many American airlines have taken advantage of the country’s multibillion bailout funds. Other countries have helped their airlines in the form of loans, credit guarantees or cash injections.
On November 12, Europe’s largest airline, Lufthansa, announced that it had repaid all aid received during the outbreak ahead of schedule. The company had been offered a bailout package of 9 billion euros by a group of European governments. In the end, the company took only 3.8 billion euros. Although these aid programs and massive borrowing mitigated some of the shock, the airline industry’s losses for 2020 amounted to $ 138 billion (€ 121.9 billion), according to the commercial organization of the International Air Transport Association (IATA), which represents 290 airlines representing 83% of global air traffic. The group expects losses for this year to be around $ 52 billion and $ 11.6 billion in 2022.
From bad to not so bad
Overall, for September, the last month with complete data, total demand for passenger air travel was down 53.4% from September 2019. This was an improvement from August , but nothing like the growth before the pandemic. Dividing the numbers, international passenger traffic in September fell 69 percent. The number of domestic passengers was better, but still down 24% at the same time.
“But in general, domestic markets are doing well, which further strengthens our view that once travel restrictions are lifted we see high passenger demand,” IATA boss Willie Walsh said at the meeting. of a press conference on November 3. This year, he expects 2.3 billion passengers and 3.4 billion next year, well below the 4.5 billion of 2019. Yet despite the increase, he admitted that a sudden rebound is unlikely. “It will take time to recover. Nevertheless, the trends are positive,” he added.
How quickly airlines and manufacturers get back on their feet depends on multiple and mostly unpredictable factors: rising fuel costs, fewer business flights, or a fourth or even fifth wave of COVID-19 with over travel restrictions. Ultimately, passengers will decide when and how they want to travel to visit family or do business. Airlines can only hope to quickly fill as many seats as possible, which will give them a reason to buy more new planes.