Aviation: COVID-19 and new travel restrictions cause chaos
Many travel industry participants now fear that the UK aviation industry could be facing unconquerable challenges after UK Prime Minister Boris Johnson enforced the toughest peacetime rules airports and airlines have ever seen.
Industry leaders have been forced to pigeonhole new projects due to the coronavirus crisis, lay-off staff, reduce flights and ground fleets to hedge their losses.
Boeing, which was once the world’s largest aerospace company, reported a net loss of USD 11.9BN in 2020, compounded by the 737 MAX grounding and COVID-related travel restrictions and bans, which has depressed demand for international travel.
The ADS Group’s chief executive, Paul Everitt, said that even if passenger demand returns to pre-pandemic levels, aerospace companies will fail to meet consumers’ needs due to a lack of capital.
Global aviation made a tentative recovery in the second half of 2020 as many countries introduced travel corridors. However, new challenges lie in wait for the industry amid calls to crack down on travel due to the spread of more lethal COVID-19 mutations.
Days after imposing a ban on all travel to and from the UK, British Prime Minister Boris Johnson told the House of Commons that all arrivals, including British nationals travelling from 30 “red list” countries would be required to isolate in designated quarantine hotels.
The ban meant flights from high-risk countries, which included South Africa, Portugal and the entire South American continent were subjected to the travel restrictions, which aimed to prevent new COVID variants from entering UK borders.
The UK Prime Minister said that staff at airports and ports would be questioning travellers about their reason for travel and those without a valid reason would be instructed to return home.
The UK government has since declared that holidays abroad will be illegal and result in a GBP 5,000 fine unless a valid reason is stated. Current restrictions state that the earliest people in the UK could go on a holiday abroad is 17th May, but there is still great uncertainty surrounding this.
The possibility of vaccine passports is also being discussed, meaning that UK citizens would not be able to travel unless they have received the coronavirus vaccine. Whilst many countries are in favour of this, there are still a significant amount of people which believe the rule to be discriminatory.
Aviation leaders warned new rules would cataclysmic for industry
Aviation bosses have described the travel quarantine rules as a “death knell for UK tourism and travel” and said that questioning travellers will not only cause mass delays at airports but could result in an increase in compensation claims.
It comes as Priti Patel said that anyone wishing to travel outside of the UK would have to provide a “written declaration” detailing their reason for travel, which will be inspected by border control.
However, airlines and airports have warned the government that the lack of guidance on acceptable reasons for travel would create new issues for the industry.
EasyJet chief executive Johan Lundgren said: “We will have to be asking ‘What is the purpose of your trip?’ which adds another layer of complexity at the airport.”
It comes as EasyJet reported losses of GBP 400M for Q4 of 2020 and an 88% decline in Q1 revenue for this year, which has forced the low-budget carrier to reduce its flight programme to 10% until March.
EasyJet flew just 18% of its standard flight programme in the final three months of 2020. With UK lockdown restrictions set to continue until June, Britain’s busiest short-haul carrier could continue to limit its flight availability for the majority of 2021.
The company said that its cost-cutting efforts have helped reduce its cash burn to GBP 160M a month should they have to ground all aircraft; albeit at the cost of 1,400 jobs and the sale or leaseback of almost half its fleet.
EasyJet has insisted that it has enough liquidity to survive a prolonged period of reduced passenger demand and sees a release of pent-up demand on the horizon once lockdown restrictions are lifted. Still, the outlook for the aviation industry remains mostly uncertain.
Wizz Air is another airline that is convinced it can survive a prolonged period of reduced capacity.
Wizz Air confident that it has enough liquidity to stay afloat in Q1 of 2021
Wizz Air suffered a loss of EUR 149.9M or -76.5% in the last three months of 2020, but the company remains optimistic about its prospects in 2021.
With rapid COVID vaccine rollouts thought to be the way out of the pandemic, Wizz Air is focusing on strengthening its market position to ensure a sharp rebound as the world turns the tide on the virus.
Wizz Air Chief Executive, József Váradi, said the ultra-low-cost airline is better “able to deal with COVID-19 headwinds now.”
“As a result, Wizz Air should stage a swift recovery as seen during the summer of 2020 when the firm operated the same capacity in the UK as it did pre-pandemic.”
The company has also expanded its network amid the coronavirus crisis from 25 bases to 40 bases and secured a EUR 500 million bond on “favourable terms” earlier this month, furthering its position for growth.
However, not all airlines are as confident about their futures as Wizz Air and EasyJet, and several organisations including CityJet, Cathay Dragon and the UK’s Flybe have already lost to the pandemic. Albeit Flybe is due to be resurrected as Flybe 2.0.
Future of global aviation uncertain due to the impact of COVID-19
The International Air Transport Association (IATA) had estimated that global airline revenues slumped by more than USD 118BN in 2020, with another USD 40BN expected to be lost in 2021.
Several airlines have already sought bankruptcy protection, and with the pandemic still taking its toll on the globe, growth is likely to remain constrained over the long-term.
According to a new report from global consultancy, Oliver Wyman, international fleets will be smaller than pre-pandemic projections due to the impact of COVID-19, and reduced demand means less activity which will weigh on profits.
Meanwhile, passenger demand is expected to remain depressed for several years, which analysts at Oliver Wyman say will likely result in a loss of USD 95BN between 2021-31.
The UK will also suffer the repercussions of Brexit, as Britons will need to obtain visas for long-stay visits in the EU.
Business chiefs from UK aviation and aerospace industries have already written to Prime Minister Boris Johnson, urging for more financial support and a recovery plan for the sector to prevent further redundancies and maintain Jet Zero commitments.
ADS Group’s chief executive, Paul Everitt, told ministers that the Coronavirus pandemic limits airlines’ abilities to meet Jet Zero ambitions, which requires significant investments into new technologies and infrastructure.
Mr Everitt stressed that for net-zero commitments to remain operational, the aviation industry will need a sizable financial package “to mitigate the current shortfall in revenues and costs that need to be met.”
Even though COVID vaccines appear to be the light at the end of the tunnel for global aviation and other parts of the economy, growth for the industry is likely to be stunted for the next ten years at least.
It’s no exaggeration to say that airlines and airports have never faced such a substantial list of challenges as coronavirus has created. That being said, several entrepreneurs appear to see the crisis as an opportunity to launch new airlines.
Uber co-founder launches new airline in 2021
Despite the unprecedented times, Uber co-founder and computer programmer, Garrett Camp, launched his own airline in 2021, called Aero.
Garrett Camp said the idea behind his new venture was to offer “a travel service inspired by the golden age of aviation, designed for modern life [with] semi-private jet flights to the world’s most in-demand destinations”.
The first flight took place at 11 AM on February 4th from Van Nuys airport to Aspen’s Colorado ski resort, with fares for the flight starting at USD 990 (GBP 730).
American Airlines is offering the same flight just half an hour later at USD 341 (GBP 250) – a fraction of the cost. However, Mr Garrett said his airline is a cut above, boasting “crowd-free private airports and lounges” together with “spacious cabins” for a “low-contact getaway“.
Nonetheless, travel rules and restrictions will still apply to passengers flying with Aero, and they will be required to show proof of a negative COVID test taken within 72 hours of departure.
Unlike most commercial flights, Aero also has a three-piece baggage limit totalling 68kg, and hand luggage, meaning travellers can take a considerable amount of their belongings with them.
Although most governments are imposing stricter travel restrictions, which could see airlines ground more of their fleets, some tourism-hungry countries will be keeping their borders open to vaccinated travellers.
The World Health Organization (WHO) has also come under pressure to encourage governments to allow vaccinated travellers to fly abroad without quarantining.
According to the IATA, having the WHO’s backing would be a crucial step towards developing a global “digital travel pass” or vaccine passport.