BA buckles as passengers surge back

For many months there have been negative headlines about US airlines’ inability to cope with the return to pre-pandemic demand, with the blame put squarely on shortages of pilots and security staff. Now, it seems, Europe is facing the same growing pains, as airlines, as well as airports that have been largely ghost towns for much of the past two years, struggle to cope with a rush of returning passengers.

The UK’s Manchester airport has been singled out by the media as particularly dysfunctional, with images of stressed passengers queuing outside the terminal to check-in and pass through security. This week British Airways parent IAG admitted the flag-carrier would be scaling back on its planned summer flight schedules at London Heathrow in a bid to keep its operations viable. It expects capacity to be at 80% of 2019 levels this year, lower than the 85% it had been targeting.

With the Ukraine crisis likely to drag on for months or years, it looked as if lessors had written off the value of aircraft leased to Russian airlines, after Moscow sequestrated them following the imposition of sanctions. However, Air Lease, founded by leasing guru Steven Udvar-Hazy, thinks some aircraft could be recovered from private airlines with which the firm has had decades-long relationships. Russian customers were paying Air Lease $18 million each quarter in lease fees.

The wider aviation industry continues to be affected by ripples from the conflict. This week European regulator EASA released a list of 20 concerns arising from the invasion, ranging from the added burden on air traffic control from flights avoiding Ukrainian and Russian airspace to the heightened risk to the safety of the Russian fleet after the withdrawal of airworthiness certificates and maintenance support by Western companies and authorities.

At least one airline is committing to help Ukraine restore its air connections to the world. Air Baltic chief executive Martin Gauss said this week that the carrier would restart flights to the country the day after the war finishes. Air Baltic is based in Latvia – which borders Russia and was part of the Soviet Union until 1991 – and Gauss says that, because of this geography and history, “we fully understand what it means to have such a situation”.

The other area of the world causing headaches for the industry – for very different reasons – is China. Beijing’s refusal to relax its zero-Covid policy has reversed the prospects of what was once aviation’s most promising market. While domestic air travel has continued falteringly, the one-time armies of affluent Chinese tourists keen to see the world, not to mention business people looking to invest their yuan overseas, are confined to the country.

For the past couple of decades, Chinese airlines have accounted for up to a quarter of all jets delivered globally. Boeing and Airbus were desperate to win the favours of the likes of Air China, China Eastern and China Southern. When or if China returns as a major aviation market depends largely on decisions that will be made by the Communist Party. It has staked so much of its reputation on being able to control Covid that a U-turn in policy any time soon seems highly unlikely.

One part of the industry that is flying high – and has for much of the pandemic period – is business aviation. As airlines began grounding aircraft and negotiating airports became a nightmare of rules and paperwork in 2020, many premium passengers turned to private jets to ensure that they could still travel from A to B. As a result, charter operators are enjoying their highest demand in years, sales of new jets are increasing, and availability of used aircraft has virtually dried up.

One of the companies benefiting is Bombardier. The Canadian company has gone through years of turmoil after accumulating debts it could not pay back developing the CSeries (now the Airbus A220). It has been forced to shut or divest all its units except one: its Global and Challenger business jet ranges. But demand for those is soaring for the manufacturer, whose order backlog is growing as business jet flight hours increase – they are up a fifth on the pre-pandemic period, says Bombardier.

Bombardier’s status as the most troubled aircraft maker looks to have been taken by Boeing, which, pandemic aside, has problems with all three of its aircraft families – the 737 Max, the 787 and the 777X. The Max was grounded for almost two years after a brace of fatal accidents and Boeing is still manufacturing more than it is delivering; technical problems have stopped 787 production, and entry into service of the 777X flagship has been delayed another two years.

This has meant that Boeing’s top executives have been spending much of their time in the factories instead of the corporate headquarters in Chicago, where the company moved in 2001 to be independent of its main production site in Seattle. Now Boeing is relocating again, to Arlington, Virginia, close to the US government and hub of its defence business. Analysts say they are unsurprised as the Chicago-centred structure was not working for the challenges the firm now faces.

However, some think the senior managers should have gone west instead of east – back to Seattle, where they would have given a clear signal to investors and stakeholders that they were totally focused on solving Boeing’s deep-rooted problems with its commercial business.