Travel Weekly Insight Annual Report: Industry experts discuss airline debt, Continued from page 48


for the next 12 months. The Covid virus will be with us for some time because it has such a reach and spread. We don’t know enough about the [virus] behaviour. We don’t know how long immunity lasts.” She added: “Scientists are


saying we’ll see more outbreaks. Maybe we’ll see mask wearing become culturally accepted, certainly for travel.” Taylor acknowledged


uncertainty about how many people will accept vaccination. She said: “Vaccine hesitancy


always exists. People are being asked to put a virus into their body [and] 5%-10% of people vaccinated won’t be immune to the virus. Then there are the anti-vaxxers. Hesitancy is understandable. But people are also saying ‘This is the right thing to do’, so I hope the hesitancy can be overcome. “We need strong, consistent


communication about the vaccine and its safety and efficacy.” Taylor insisted: “The most-


important thing is the outbreak has shown the importance of strong public health infrastructure. Many countries have not been investing in public health. Now we’ve built some great infrastructure, I hope all countries will prioritise public health. “While the vaccine is a


great step forward, it’s just one part of the armoury we need. It won’t work on its own. We need to continue the mitigation strategies. There are too many unknowns to be able to say with confidence what the next stage will be. “Rather than [talk about]


‘post-Covid’, ‘Covid under control’ is the way to look at it.”


Carriers left banking on summer, says Alderslade


Airlines need travel restrictions relaxed as soon as possible and a recovery in demand by the summer or government support will be needed to survive, Airlines UK chief executive Tim Alderslade has warned. The lockdown and travel bans


over Christmas heightened the difficulties for carriers despite the prospect of easing brought by the UK vaccination programme. Alderslade said: “The government


has been clear they don’t foresee an economic package of support. The chancellor promised us one in March, but then changed his mind. So the only way we can save aviation is to open up international travel. “We need a cash-positive summer.


If that doesn’t happen we’ll be back to having conversations with government about economic support.” Alderslade told a Travel Weekly


Insight Report launch event: “It’s impossible to overstate the importance of summer [2021].


‘Carriers must pay for debt before they can invest’


Carriers face increasing difficulties servicing the levels of debt they have taken on to survive the pandemic, a leading consultant on restructuring has warned. Deloitte partner David Gard


told a Travel Weekly Insight Report launch event: “The level of debt is now very high. [Aircraft] sale and leaseback deals have increased airline debt. The effective interest


46 7 JANUARY 2021 Tim Alderslade


I’m not saying airlines are writing off winter, but the vast majority of revenue is going to come in the second half of next year and until that point airlines are going to have to borrow significant amounts.” He noted airlines have taken on


“colossal amounts of debt”. Citing Airlines UK member easyJet as an example, Alderslade said: “EasyJet has taken on £3 billion in debt since March and that has been replicated across my membership.” Alderslade described the test


rate on [aircraft] lease rates is a lot more expensive. “Airlines have accepted


government borrowing; they’ve accessed extra debt. They need to service that debt before they can invest. At the moment, we have historically low yields on debt. But airlines’ ability to access cheap debt has to be more challenged because the community [the aviation sector] is becoming more risky.” The danger is that the debt


becomes unsustainable and “a company becomes a zombie”, he said, explaining: “It doesn’t have the ability to grow because it’s spending too much on servicing debt.”


£3bn


Debt taken on by easyJet since March


to release scheme, introduced on December 15, as a “first step” to reopening travel. But he said: “The problem is that until the government specifies that antigen tests are acceptable, the time to get the result for a PCR test is one or two days. So, in effect, quarantine is still a week. “We hope pre-departure testing


can be introduced in the first half of 2021. I suspect [the government] are looking to the trial data coming in from British Airways, Virgin Atlantic and a number of overseas carriers. “It may be we can move towards a


lateral-flow or Lamp test regime and a five-day or three-day quarantine. “Ideally, we get rid of quarantine


altogether – that is where the industry needs to get to.”


David Gard Gard said: “For many airlines,


there is going to have to be an adjustment between debt and equity. Airlines are either going to have to go after equity [issue shares] to contribute money or ask for debt to transfer to equity.”


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