Airlines “horrified” by next years bookings need to change strategy now

Only aviation innovators with the must have aircraft will get through this crisis

The alarm bells are ringing. You’ll have seen, maybe even been on, some of these giant cruise ships. They can take anything from 900-8,000 passengers. The vast majority of the ships currently at sea average 4,000 passengers.

Why does that matter? 90% of passengers on a cruise ship fly to their embarkation port. Miami, Los Angeles, Hong Kong, Sydney, Portsmouth/Southampton (UK), Singapore, Brest in France, Hamburg and Amsterdam, Barcelona and Citavecchia (Rome) are all prime cruise ports. Never mind the hundreds of river cruise ships around Europe.

And the one thing the cruise industry is struggling with right now is a huge downturn in passengers. A typical cruise ships can take up to 20 flights worth of passengers – and cruise lines are cancelling cruise departures hand over fist. The early part of next year, certainly all of Q1 which is one of the busiest times for Miami based cruises around the Caribbean, is turning into a flop and cancellations are rife.

Ships are not even reaching break even point on many cruises, and by now they’d usually be booked solid. Thats led to cancelled sailings, and the options to shift passengers onto other ships to build up numbers to make the cruise viable.

The bookings for airlines – often made by cruise lines as part of the package, or by the passengers travel agent (many older passengers still prefer to use one), are down some 60% on 2019. Millions of passenger seats have been culled.

Can all of these airlines survive a bad winter?

Winter sun resorts are not doing well, booking for Mexico are down from Europe and the US – Mexico is mired in its own Covid crisis. In Europe and North America ski resorts are already looking at a dire winter season.

In the Far East, Bali in Indonesia remains a no-go. It’s a massive tourist destination, and Thailand to, a favoured destination for European winter travellers, is seeing minimal interest. The lack of Australian travellers, and the ability to travel to Australia has also had a severe impact on bookings.

Only yesterday, Southwest Airlines in the US announced a 40% cut in their winter planned schedules.

British and US airline majors are now trying to persuade the New York State and British Governments to allow the establishment of an “air bubble”, in a desperate ploy to restart the high profit trans-Atlantic New York routes for the pre-Christmas season, a favourite of many travellers.

Around the world major airlines are looking at the cash they raised and fast realising that any return to ‘normal’ – even post-Covid Vaccine is going to be nothing like 2019 and the years that lead to it.

Airlines rely entirely on advanced bookings to stay viable, what you pay today for a flight in six months or a year is spent in days, certainly weeks.

We’re looking at levels of air travel down to the late 1980’s and early 1990’s – and thats being optimistic according to some analysts. Some think we’ll see passenger numbers, at least during 2021, hit as low the late 1970’s. Its probably some point in between.

The problem for the airlines is they have too many aircraft, too many staff and not enough passengers or income. Even the low cost airlines are finding it hard to fill their seats, although they’re doing better than most.

The consequences of all of this are a real, profound change in the shape and make up of airlines. For example, the probability is that there will be far fewer of the convenience flights, almost more of a trans-Atlantic bus service, than there used to be.

Between United, British Airways, Virgin Atlantic, American Airlines and Delta there were nearly 36 daily departures for New York JFK and Newark Liberty, from Heathrow. That’s a preposterous figure when you think about it, on aircraft that were rarely more than 85% full (excepting peak times). The age of ‘convenience flying’ may well be over.

The irony of these convenience flights was smaller aircraft and higher frequencies. This time it’s likely to be a combination of bigger aircraft – A380’s for example – on peak flights and much smaller aircraft like A321’s and 787-8’s on the less desirable times of day. Even then frequencies won’t be even at a third of what they were until well into 2023, and probably longer.

It took years for airlines to build up flights to even two a day from say London to San Francisco. Virgin Atlantic only started with two after years of 1 744 a day, in late 2015. Building those levels back up is going to take a long time. BA and United were the same, although BA flew two sooner.

Destinations like New Zealand are now gone from Heathrow’s itinerary. Getting to Australia right now, requires flights via Dubai or Doha.

Heathrow is a prime example of how badly the aviation industry in general is doing – it’s shuttered the entire Terminal 3 and much of Terminal 4. Only Terminal 2 is in real use and many of the BA slots at Terminal 5 are being shared with American, Iberia, and Qatar – even China Airlines is using T5. Before Covid, T5 was rammed with British Airways and the occasional Iberia flight.

This leaves us with a huge predicament. Who is actually going to survive? Are some of them going to have to face the gruesome facts that they must, at least for the foreseeable future, become a pale shadow of their former selves?

Sooner or later these frozen fleets, costing millions, waiting for travellers to return and send them airborne are going to cost more than airlines can bare. The V shape drop and up-tick recovery the strategy needed isn’t happening. Everything is screaming to the airlines that what they hoped would happen isn’t going to. No matter how much bailout money and support they received, they’re burning through it, supporting vast fleets that are doing nothing and going nowhere – and by the looks of it won’t be any time soon.

Airlines need to change tack, they need to revisit their strategies, face facts and move on, before the time comes when the cash and bailouts have gone and there’s no more to be had – leave it too late to make drastic changes and they’re doomed.

Airlines have a way out, it may mean a very different aviation landscape for a few years, but that will change. Only the boldest and the bravest will make it through. The question is can they see it?