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Airline sector could take three years to recover

Top executives at Emirates and Etihad say 85% of carriers could face insolvency this year without government intervention and passenger demand may not return to pre-crisis levels until 2023.

Most of the world’s airlines could face insolvency by the end of 2020, without government intervention, and it could take until 2023 for passenger demand to return to pre-crisis levels, according to the top executives at UAE carriers Emirates and Etihad.

In joint video conference hosted by the US-UAE Business Council, Emirates Airline president Tim Clark and Etihad Aviation Group CEO Tony Douglas expressed strong confidence that the challenges posed by Covid-19 will be overcome, especially with regard to the airline and travel industry.

But the two reiterated that until an effective vaccine becomes widely available, how passengers fly in the future will be very different, with lasting restrictions like 14-day quarantines, testing, and social distancing impacting demand and operations.

Both executives commented that 85% of the world’s airlines could face insolvency by the end of 2020, without government intervention. Emirates and Etihad said they believe that it could take until 2023 for passenger demand to return to pre-crisis levels. 

In the meantime, the speakers said that their respective airlines continued to safely provide repatriation flights to and from the UAE, as well as cargo operations aimed at ensuring vital imports and delivering critical supplies for combatting the pandemic. They also noted the steps Emirates and Etihad are taking to preserve jobs and retain staff during this difficult period.

Their warnings come as further airlines this week announced major redundancy programmes in addition to the furlough measures they had already taken. IAG, parent of airlines including BA, Iberia and Aer Lingus, announced that “in light of the impact of COVID-19 on current operations and the expectation that the recovery of passenger demand to 2019 levels will take several years, British Airways is formally notifying its trade unions about a proposed restructuring and redundancy programme”. It said the proposals remained subject to consultation but it was likely that they may result in the redundancy of up to 12,000 staff.

The announcement came as IAG posted preliminary first quarter financial results, including an operating loss of €535 million compared to a profit of €135 million in the same quarter of last year. It also came just a month after BA placed 30,000 of its 42,000 employees on the UK government-backed furlough scheme.

IAG has reduced has passenger capacity in April and May by 94% compared to last year, only operating flights for essential travel and repatriation. To make up for some of the loss of cargo bellyhold capacity, between 22 March and 26 April IAG Cargo undertook around 350 additional cargo-only return flights, primarily on long-haul routes with passenger widebody aircraft.

IAG said passenger capacity from June will depend on the timing of the easing of lockdowns and travel restrictions by governments around the world. Although BA has not applied for UK government backed loans, its Spanish subsidiaries Iberia and Vueling this week accepted Spanish government-backed loans for €750 million and €260 million, respectively, on five-year terms.

Other major global airlines have made similar levels of capacity cutbacks, with some also already announcing or likely to announce redundancy programmes in addition to furlough programmes for staff, as carriers increasingly anticipate only a relatively slow recovery of airline passenger activities. In the meantime, dozens of airlines have launched or are launching cargo-only flights on passenger aircraft, although cargo observers note that this capacity only makes up a fraction of the previously available cargo bellyhold capacity that has been lost.

Source: Lloyds Loading List



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