Lengthy recovery period for airlines post coronavirus

56

International seat capacity dropped by 80% from a year ago and half the world’s airplanes are in storage, new data shows, suggesting the aviation industry may take years to recover from the coronavirus pandemic.

Carriers including United Airlines Holdings and Air New Zealand warn they are likely to emerge from the crisis smaller and there are fears others may not survive.

“It is likely  when we get to the other side of the pandemic, things won’t return to the vibrant market conditions at the start of the year,” said Olivier Ponti, vice president at data firm ForwardKeys.

“It’s also possible a number of airlines will go bust and uneconomic discounts will be necessary to attract demand,” he said in a statement.

ForwardKeys said the number of international airline seats fell to 10 million in the week March 30 to April 5, down from 44.2 million a year ago.

Data firm OAG said several years of industry growth were lost and it could take until 2022 or 2023 before flier volumes return to levels expected for 2020.

Cirium, another aviation data provider, said about half of the world’s airplane fleet was in storage.

“While many will be temporary, many aircraft will never resume service,” Cowen analyst Helane Becker said in a note to clients. “We believe the airline industry will look different when we get to the other side of this.”

Planemakers are looking at drastic cuts in wide-body production amid a slump in demand forlarge jetliners, manufacturing and supplier sources said.

Deliveries of long-range jets, such as the Boeing 777 or 787 and Airbus A350 or A330, are badly hit as airlines seek deferrals and many withhold progress payments.

“Governments need to ensure airlines have sufficient cash flow to tide them over this period,” said Conrad Clifford, Asia-Pacific vice president of the International Air Transport Association.

Support could include direct financial support, easing the way for loans and loan guarantees and backing for the corporate bond market, he added.

Polish national airline LOT is working on a rescue plan and will likely need state aid as air traffic is suspended because of the coronavirus, Jacek Sasin, the country’s minister of state assets said.

FLIGHTS CUT, STAFF FURLOUGHED

US domestic demand will remain weak into May, Vasu Raja, senior vice president of network strategy at American Airlines Group told Reuters, citing a lack of bookings.

The airline is cutting up to 75% of domestic flights in April and about 80% in May. For both months it is cutting 90% of international flights.

US Transportation Secretary Elaine Chao said government should not ground domestic flights during the crisis and it was up to airlines to make commercial decisions on flight destinations.

In Europe, budget carrier Ryanair Holdings expected to carry minimal if any traffic in April and May due to government flight bans and restrictions. It is operating fewer than 20 daily flights, 99% less than usual.

Ryanair expected to take a 300 million euro ($324.93 million) charge in the financial year starting April 1 on its fuel hedges now the oil price had fallen.

Hong Kong’s Cathay Pacific Airways said it would further cut passenger capacity after carrying 582 passengers one day this week, a load factor of 18.3%, compared to 100 000 customers on a normal day.

Air New Zealand carried 165 passengers on 89 flights on Thursday, underpinning its decision for further schedule cuts while the country is in lockdown, Chief Revenue Officer Cam Wallace said on Twitter.

Southwest Airlines intended to apply for US government aid to help it ride out the sharp drop in travel demand.

The stimulus package for airlines is worth up to $50 billion, half in loans and loan guarantees and half in payroll cash grants.

Democrats and airline labour unions urge US Treasury Secretary Steven Mnuchin not to demand equity or warrants in return for the grant portion to ensure carriers take the funds and pay workers.