It’s a sign of our times and the devastation that Covid, it’s subsequent lockdowns, it’s seemingly permanent change of perspective on the need for business travel, has left in its wake.
The world has changed so much that the once mighty aviation industry has been kicked to the floor and scrambles around wondering how it’s going to get by.
Just yesterday, Finnair joined a growing number of airlines in cancelling almost half of the flights it was planning to operate in September. It’s transfer hub at Helsinki has nobody to move and it’s European routes are suffering, like so many others from underwhelming demand. It’s a story repeated around the world.
Not one airline knows when this saga will improve. Most expected a summer boom in the northern hemisphere, but it’s been more of a loud spluttering that quickly died back.
The cause? The reluctance of the 18-38 age group to control their behaviour – infection rates amongst them in Europe and especially the US, have led to them taking infections home to parents and grand parents.
And mask wearing has become a massive issue, American Airlines yesterday banned anyone wearing the next to useless masks with valves, which allow air out of the mask unfiltered, permitting Covid infections to spread. They also banned neck masks that pull up and thin single ply masks, because they provide zero protection.
Virtually all airlines in the US and Europe simply ban – permanently- those who refuse to wear masks in flight.
Last week 68% of Europeans and 63% of Americans said they simply would not fly for any reason – even a family funeral – under current health circumstances.
Business travellers were at 90% in refusing to fly unless it was absolutely essential and mandated by their employer.
Zoom, Microsoft Teams, FaceTime, have all rendered the non-essential air travel for business, even personal leisure travel to a far lesser extent, as unnecessary. The public have seen the benefits, time saved, pollution reduced. Business has seen costs cut.
Bearing in mind that airlines from United to BA and Lufthansa to EVA, all rely on the highly profitable business class seats they spend fortunes competing for, to make their profits, (only late booked and high end economy and premium economy make any money, some 60% of economy seats operate at cost or a small loss), they have a problem of huge proportions.
And that is why just three – THREE – publicly traded airlines are being recommended by investment agencies like S&P, as worth investing in.
Southwest, Ryan Air and easyJet. Those are the three. And they all have one thing in common; ultra or low cost air travel.
Just think for a second what this means. IAG, United, Delta, Lufthansa, Qantas, Singapore, and every other major group in the world, is simply seen as a basket case. Don’t invest, don’t take the risk.
That’s the damning consequence of Covid. Is it realistic, no. People will invest, because the risk is worth the possible returns if you have money to burn.
Yet while nobody knows yet when the crisis over the winter in the northern hemisphere will be even more devastating, or show drastic improvements, the cause may be Covid, but the reason isn’t. The reason is debt.
Airlines are borrowing billions from anywhere they can, selling assets, raising share sales, mortgaging buildings, aircraft, landing slots. And bailouts from governments come with strings attached and ownership stakes.
Getting out of that debt, paying off everyone, will take years. Profits will be hard to find. Inevitably some are going down.
And the worst scenario, is that this all goes on for another year, and public perception and need to fly will be permanently altered . If it does big names, unthinkable names, are going to vanish.
Change comes at a cost. What might well come out of this is an environment positive reduction in aviation use, acceptance of simple travel over luxury, new technology and fuels allowing greater profits and returns on low cost travel fares. Whatever comes next, it’s not going to be the same as it was in 2019.