‘Flying’s return will be slow amid consumer caution’

Consumers have grown more cautious about flying, making the return of air travel “slow and shallow”, according to Iata. A majority of air travellers will

wait six months or longer before taking a flight, research by the airline association suggests. Brian Pearce, Iata chief

economist, warned: “We are going to see a relatively slow and shallow return of air travel until we see either a vaccine or easily available tests. Consumers have grown more cautious in the last month. A majority say they are going to wait six months or more.” Pearce said: “Consumers

have also changed their booking

Brian Pearce

‘Americans’ resistance to airport Covid measures will hit rebound’

behaviour, which makes it difficult for airline network planners. They are booking much, much later.” He noted: “There are some

positive signs. We are starting to see some bilateral arrangements of travel bubbles and travel corridors.” But he warned: “It’s going

to be some time before we see a widespread opening of borders. “It’s going to be particularly

difficult for long-haul travel. Bookings are very low and late. Visibility is almost zero. Airlines are going to be a lot smaller.”

US airports will struggle to apply Covid-19 safety measures consistently due to resistance among many US travellers, a leading aviation analyst has warned. Confusion and inconsistency

over anti-Covid measures in the US will make a rebound “very tough” despite many US states relaxing restrictions, said Lori Ranson, senior analyst for the Americas at the Centre for Aviation (Capa). Speaking on a Capa webcast,

Ranson said: “There are different attitudes to social distancing and wearing masks [in the US]. I’m not sure the airport experience here is going to be universal for the foreseeable future because of differing passenger attitudes. It’s

much easier to enforce wearing a mask on an aircraft than at an airport. How do you enforce it if there is a difference of opinion?” Ranson said: “Personally, I don’t

want to travel, not because I don’t trust what airlines are doing, but because for airports it’s so much tougher to control behaviour.” Iata and other aviation bodies

have pushed for international coordination on health measures to ensure consistency. But Ranson said: “In the US,

social distancing is sort of hit and miss, as is wearing masks. It’s going to be very tough for international travel to rebound until there is global coordination of what passengers can expect.”

Airline debts rocket to $550bn Ian Taylor

Airline debts have ballooned to $550 billion and the industry “could see a lot of failures” this autumn without government aid. That is the view of airline

association Iata which estimates the value of airline refunds owed for cancelled flights in the three months to June alone at $35 billion. Iata chief economist Brian

Pearce warned: “We will see a wave of mergers or airlines exiting [the market], particularly if European and US airlines don’t get a summer for the airlines to bulk up cashflows. We will likely see consolidation in the fourth quarter [of the year].” He noted: “The industry has

taken on a lot more debt. We estimated the total debt in 2019 at five times [airlines’] cashflow [on We expect losses

[across the industry] of $84bn this year – we’ve not seen losses on this scale before

average]. In 2021, it will be 17-18 times cashflow. The situation is probably not sustainable. You could see a lot of failures, or we could see a lot more government ownership.” Pearce said: “We estimate there

is $35 billion worth of tickets due to be refunded in Q2. Not many airlines have sufficiently strong credit lines or cash reserves to do that.” Iata estimates total government

aid to carriers to date at more than $120 billion, “to a large extent in loans but also in wage support, equity,

tax deferrals and cash injections”. Pearce said: “This has kept

the industry on life support, but it comes with a problem. About $66 billion will have to be repaid. The economics of recovery are going to be tricky. Airlines have to service their debts and pay variable costs, while pricing to stimulate demand.” Covid-19 safety measures will

add to the costs of operating, he said, adding: “A lot of measures risk slowing down turnaround times and will cut aircraft utilisation. In some jurisdictions we see a requirement to keep middle seats empty and that will reduce seat use. We expect losses of $84 billion this year and we’ve not seen losses on this scale before. “Given the combination of debt

and a slow recovery, it’s inevitable we will see failures unless governments are going to own airlines.”

Lufthansa warned a

€9 billion bailout by the German state is in jeopardy after a leading

shareholder requested detail on alternative funding. The carrier said it would be forced into insolvency if the deal was not signed off by June 25.

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