In these times of the coronavirus that we have had to live in, it is increasingly difficult to see the condensation trails of airplanes fly through the skies. Spain and France began the weekend with 75% less air traffic, while in Italy or Poland the planes have practically disappeared from the sky. According to data published by Eurocontrol, last Sunday 11,859 flights were scheduled in Europe, Israel and Morocco, 61% less than the daily average registered in 2019.
The goods, the rescue flights and the minimum services are the vestiges that remain today of an industry that moves more than 1,100 million passengers a year in Europe and that without knowing when it will be able to recover the verve of before the health emergency.
Not surprisingly, airlines such as easyJet calculate that the bulk of the rescues will have been completed between Monday and Tuesday while the Foreign Ministry urges Spaniards in countries with air connections to return now, which will further reduce passenger traffic and it will make April a month with almost no flights. And, most airlines plan to operate with between 5 and 10% of their capacity in the coming weeks.
The aviation sector reduces its commercial offer by up to 95% and Ryanair stops flying
For example, Ryanair, which transports more than 154 million passengers a year and operates some 2,400 daily flights, will stop flying on March 25 with no scheduled return date. Air Baltic has canceled all its connections until April 14 and Volotea has suspended its activity until April 8 “for now”. For its part, Air France-KLM has announced the cancellation of 90% of its flights over the next two months and is already working to operate with only 5% of its capacity before the closure of France. Iberia, , has assured that it will maintain a minimum operating capacity, while easyJet announced on Friday that it will leave the majority of its fleet on the ground as of March 24 and that it will operate with the usual 10% capacity to provide minimum essential services in the United Kingdom. United.
Likewise, Lufthansa will reduce its operations by 95% as of Tuesday, 91% of its fleet made up of 763 aircraft has left the ground and is ready to stop altogether. “We work with the scenario of having the planes on the ground for up to three months and with the option of having to stop flying completely,” said the president of Lufthansa, Carsten Spohr, who has acknowledged a 64% drop in reservations in mid-2020. March and a lack of visibility on when the airline sector will recover.
“We are very far from recovering the current levels of operation and from thinking about benefits. It is too early to estimate when we will return to normality”
“We are very far from recovering the current levels of operation and from thinking about benefits. It is too soon to estimate when we will return to normality. First we must find solutions to respond to the crisis and then we will see how to face the future,” explained Spohr during a conference call with journalists.
Given that uncertainty is maximum and that the crisis is spreading rapidly throughout the Americas, where, for example, the Colombian government has closed the country and Avianca operates with ten aircraft, Asia, where Cathay Pacific has reduced its capacity by 96% to April and May or the Middle East, where Emirates has canceled its flights, the European air sector is already giving up the summer and does not expect the industry to return to normal for several months since demand will be weak.
“It is difficult for normality to recover in the short-medium term. Summer is already considered lost and the sector is expected to begin to reactivate at the end of May”
“It is difficult for normality to recover in the short-medium term. The summer is already considered lost and the sector is expected to begin to reactivate at the end of May. But it will take years until we return to the current levels of activity and profitability” say industry sources.
In this sense, from ALA they calculate that the summer season will start in Spain with at least 7,500 cancellations, according to the forecast made with the data accumulated between March 1 and 15, and IATA has already recorded 430,000 canceled flights until July. . Figures that are already out of date as the scenario changes from one day to the next.
Thus, to the proliferation of cancellations as a result of the growing restrictions, is added the radical fall in reservations for the coming months and the difficulty of reactivating an industry that is going to be practically stopped for more than a month. Not in vain, the airlines are already announcing the reduction of their fleets with the .
“There is a lot of uncertainty about how long the crisis will last. We do not have plans beyond May. A recovery is not expected in the summer season. There will be special programming, much less than current levels since a total reactivation is impossible industry,” explains Spohr.
From IATA they also assume that the sector will not begin to recover, at the earliest, until the next winter season, which starts in November. Thus, the international association of airlines has asked the European Union to extend until October, at least, the suspension of the use it or lose it rule (use it or lose it) of exploitation of slots. And it is that, Brussels has exempted airlines from using 80% of the capacity of the slots only until June so that they do not lose the assigned time to operate a route due to cancellations. A term that they consider insufficient.
In the case of Spain, in addition, it is added that the United Kingdom, its main international market, has resisted taking measures against the spread of the coronavirus and it was not until Friday of last week when its Prime Minister Boris Johnson decreed the closure of bars and theaters and began to limit the movement of the population. As published by Bloomberg, citing a report by a British government advisory team, the peak of infections in the United Kingdom is expected to take place in June and that citizens should need to be isolated for most of the year to contain the advance of the outbreak. This panorama completely touches any hope of recovering normalcy in the short term in our country.
The tourism sector estimates that there will not be a recovery of activity until the end of October
Thus, the tourism sector estimates that there will not be a recovery in activity until the end of October and some Spanish airlines assure that a good scenario would be to reach March 2021 with 25% less pre-crisis operations. And it is that, although the airlines managed to recover their offer in record time, the coronavirus crisis will bring weak demand until the end of the year. “The crisis will reduce the size of the economy and the aviation sector is affected twice as much. It will take time to recover,” explain sources in the sector.
At this point, other business sources assure that the coronavirus crisis will have an impact between three and four times greater than the 9/11 attacks and that the industry will take up to a decade to fully recover.
“We are now focused on getting the planes to fly again and rebuilding the industry. We have no plans beyond the end of May,” Sporh said in this regard.
Rescue the air sector?
Thus, before thinking about recovering customers, who neither can nor want to travel, the airlines are focused on surviving the first blow of the health emergency: the liquidity crisis. The companies are not only stopping selling tickets, but the cancellation of flights due to air restrictions are forcing them to return the money from the reservations, which implies a strong cash outflow.
In order to maintain liquidity and , the airline sector has implemented radical adjustments to keep its cost structure at the essential minimum, which implies temporary suspension of jobs, leaving planes on the ground, returning those that are on lease, delaying investments, suspend advertising spending, postpone or cancel aircraft orders,
Despite these measures, the sector, which employs 1.2 million people, is still under great threat, which is why it has not hesitated to ask governments and the EU for specific measures to help them curb cash outflows, while airlines With a more compromised liquidity position, they are already negotiating direct aid with their governments.
Alitalia, bankrupt for three years, while . Along these lines, Lufthansa has recognized the possibility of receiving state aid and has applauded Angela Merkel’s commitment to inject the airline with all the liquidity it needs to survive. For its part, Air France is already negotiating with Emmanuel Macron’s team an aid package so as not to go bankrupt.
“With average cash reserves of two or three months in Europe, airlines face a liquidity crisis”
And it is that, according to IATA, the world aviation sector will need emergency aid of up to 200,000 million dollars. At this point it should be remembered that only the North American airlines have requested a rescue of 50,000 million. “With average cash reserves of two or three months in Europe, airlines face a liquidity crisis. Support measures are urgently needed,” says the airline association.
IAG and Ryanair are among the few airlines that have not requested any type of direct aid from governments, which have one of the best liquidity positions in the market. Ryanair, with a very agile cost structure, has cash of 4,000 million euros, while euros between cash and credit lines. Some sources in the sector calculate that the holding company could survive up to 10 months without earning anything. “It has been very good for IAG not to buy Norwegian to face this crisis with solvency since it would have 4,000 million less and one more airline to take over, which also has financial problems,” explain sources in the sector.
“Specific measures are needed to ensure that as many airlines as possible survive”
But, beyond direct aid, the industry associations IATA, ALA and A4E insist to the EU and the governments of the importance of taking another series of specific measures that allow them to “guarantee that the greatest possible number of airlines survive” and “Help drive economic recovery when restrictions are lifted,” says Thomas Reynaert, CEO of A4E.
Among the measures urgently requested by the airlines and that, unlike Brazil, the European governments or Brussels are not taking, is the flexibility in terms of late payment without penalty of airport and air navigation taxes, the temporary reduction of the budget to pay for accommodation and food for passengers whose flight back home is cancelled, delays in paying taxes, suspension of payment due to planes being stopped, access to lines of credit and, above all, .
The EU…
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