Global airline capacity dipped to 39 million seats as of 6 April,
with further cuts expected to be made by carriers around the world next week,
according to OAG, but analysts think the industry could be “reaching the bottom”.
OAG’s data shows weekly capacity is now just above one-third
of that originally scheduled, and further cuts are being advised by airlines through
the end of May. The majority of this week’s reductions came from the North
American market, where cuts equated to the loss of some 5.5 million seats,
while the Southwest Pacific and Lower South America both saw nearly half of
their scheduled capacity wiped out in one week in response to the Covid-19
pandemic.
However, OAG senior analyst John Grant said during a webinar
on Wednesday: “If there is any glimmer of hope in those horrible headline
numbers, it is that many of these countries have now reached a point in the
available capacity that they cannot go any lower. Many airlines have made 90
per cent-plus cuts in their capacity in the last couple of weeks.”
Schedule reductions vary by market, with Europe leading at an
83 per cent cut – though Grant pointed out that four of the region’s major
markets are down 90 per cent or more. With large carriers such as British
Airways axing the majority of their flights and Easyjet grounding all of its
aircraft, this statistic should come as no surprise.
Grant pointed out that in a typical week pre-coronavirus,
there would be a number of Western European countries in the top ten global
markets in terms of capacity, but this week there were none.
Around 89 per cent of flights being operated today are domestic
services, as opposed to 71 per cent three weeks ago. Grant said this could be
an indication that the first phase of recovery when the pandemic is over will
be driven by the return of consumer confidence in the domestic market, with
international traffic slower to follow.
Webinar moderator Dierdre Fulton, partner at MIDAS Aviation,
said that while corporate travel will likely be a key driver for a return to
air travel, there are questions being raised about the long-term impact on the
level of business trips that will be made in the future, with many companies
learning how to conduct more client meetings remotely as people continue
working from home.
And Grant said the landscape of air travel could look very
different in instances where governments consider taking stakes in or
nationalising airlines to bail them out during the crisis. With more countries
setting strict environmental targets, he said now would be the time for governments
to impose conditions on an airline’s future sustainability – whether that be
through higher ticket prices to reflect the environmental impact of aviation or
rules on the use of sustainable fuels – in exchange for a rescue deal.
Grant also pointed out that in some markets, such as Europe,
the airline industry is much more fragmented and we could see governments
having to make difficult decisions about which carriers to help based on their
pre-crisis financial stability. “It will be hard to justify committing taxpayer
money to an already failing airline,” he said.
In a second webinar later on Wednesday, aviation-related
competition law and regulation specialist Jeremy Robinson, partner at Watson
Farley Williams, said even the fragmented approach to financial help for the aviation
industry that is being seen around the world will impact how the future looks. “Different
countries have different views on the value of aviation,” he added, and said
this is especially apparent in markets like the EU, where member states have
offered varying levels of protection. “I think there’s a chance we’ll see fewer
airlines at the other side of this crisis.”
When will we start to see a real return to pre-crisis levels
of flying? Grant said he believes it could be a year or more. “By the time we
come out of the pandemic it could be the start of the winter season, which is a
difficult season for airlines in normal circumstances. A lot of airlines burn
through cash during that time anyway, so I don’t think any of them will be so
bold as to re-introduce a large amount of capacity right away. I think that
means it could be this time next year before we see anything like pre-crisis
capacity. And if more airlines follow Lufthansa in permanently cutting planes
from their fleets, I think it could potentially be even longer.”