Aviation recovery will ‘be long and painful’ warn analysts

Leading aviation analysts have knocked hopes of “a wave of leisure travel” sweeping Europe this summer, warning the recovery will be “long and painful”.

They forecast bankruptcies among airlines if governments don’t prop them up and suggested “prices will be low”.

Daniel Roeska, managing director and senior analyst at Bernstein Research, said: “We’ve seen airlines consecutively taking scheduling off the table and that will continue.

“I’m not a proponent of the idea there will be a wave of leisure demand sweeping air travel. It will be a long and painful recovery.”

Roeska told a CAPA Centre for Aviation online summit: “Our expectation of Q3 [July to September] is that we may get to 50% [of Europe’s 2019 traffic] on short haul and 40% on long haul if all goes well. But we won’t get anywhere near 2019 levels until mid-2022 for leisure and 2024-25 for business.”

He noted: “Mallorca opened to Germans at Easter and Eurowings tripled its flights but only reached half the traffic of 2019 when Mallorca was the only beach and sun region Germans could go to.”

Albert Muntane Casanova, aviation advisory director at Japanese bank MUFG, agreed saying: “Planned schedules for Q4 this year and Q1 next are at the levels of 2018-19. That does not make sense at all – 2018-19 were the best years ever in demand.

“It’s completely unrealistic and that is a big concern.”

Both analysts forecast a wave of bankruptcies. Casanova noted: “So far, many airlines have managed to survive because they could adjust operations and not lose slot rights at congested airports.

“Now we see regulation creeping back and it will prevent airlines being flexible. They will have to preserve cash and lose slots or preserve slots and burn cash.”

Roeska agreed “slot regulation is the number-one issue.” He added: “We’ll also have furlough schemes running out [and] connecting passengers and business traffic will be a lot smaller.

“So there will be pressures to fly more and more seats available for leisure. It may be great to fly because prices will be low, but it will endanger medium-size airlines. I would not worry about the big six – Air France-KLM, Lufthansa, IAG, Ryanair, easyJet, Wizz – but for everyone else it will be hunting season.

“If slot waivers and furlough schemes are extended to March 2022, then winter can be OK and airlines at risk may survive. Then we’ll see a wave of bankruptcies in winter 2022-23.”

The alternative, he said “is for Europe to end up with a bunch of Alitalias”.

Roeska forecast: “There is a two-to-three year runway for low-cost airlines to hit the gas pedal while bigger airlines fix their balance sheets. Wizz and Ryanair will take new planes and start growing.”

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