Amid concern about oil prices and the effect of the Ukraine conflict on consumer confidence, plus an Omicron variant stubbornly refusing to vanish, airlines around the world remain upbeat – though there are exceptions. China’s continuing zero-Covid policies continue to clobber carriers there, and the aviation sector in sanctions-hit Russia faces an existential threat bigger than the pandemic.
Delta chief executive Ed Bastian said this week the airline had just had its busiest day for bookings – not since 2019, but ever. Meanwhile, the international travel industry got a boost as New Zealand’s government – a long-time hold-out against relaxing Covid-19 restrictions – brought forward plans to open its borders: to Australians from 12 April and other vaccinated tourists from 1 May.
In Europe and Latin America, airline victims of the crisis have come back to life. A new incarnation of regional operator Flybe – which collapsed in March 2020 – has named Birmingham, and now Belfast City, as its new UK bases, and will start selling tickets within days. In Latin America, Aeromexico has emerged from an almost two-year Chapter 11 restructuring process.
Canada – like New Zealand, looking to ease many of its travel rules – sees WestJet reinstate several routes to Europe and the Atlantic provinces as it anticipates a strong summer season. The budget carrier expects to be flying 94% of its pre-pandemic services in the coming months. These include London Gatwick, Dublin, Glasgow, and Paris from its Halifax, Nova Scotia hub.
On the other side of the pond, however, another carrier hoping to offer low-frills flights to North America has delayed its launch, blaming the Ukraine impact. Start-up Norse Atlantic, which plans to serve a number of US destinations from Norway and London Gatwick with Boeing 787s, is now scheduling its first departure for June.
In Asia, the situation remains mixed with airlines faring better where travel rules are looser and cargo demand strong. Taiwan’s China Airlines and EVA Air have reported full-year profits. However, the big three mainland airlines – Air China, China Eastern, and China Southern – had a disappointing start to 2022 despite February’s Lunar New Year holidays, which normally see a travel surge.
As we have noted many times, very few airlines actually went to the wall during the past two years. In fact, the Lazarus-like abilities of Alitalia/ITA, Flybe, Norwegian, and South African Airways to resurrect themselves has been remarkable. In some ways, the pandemic allowed them to step back, stop spending money, and restructure or refinance in the absence of competition.
Similarly, the promise of a resurgent air travel market has seen no slowdown in the number of start-ups, with more than a dozen new names emerging in the past year or so in Europe and North America. As always, many of them will fail, but the appeal to entrepreneurs and investors of owning an airline never seems to fade.
However, could the harsh realities of operating in a ruthless airline market drive consolidation? The merger of US low-cost rivals Frontier and Spirit continues apace with an aim to close the deal in quarter two. Meanwhile, Paulo Kakinoff, chief executive of Brazil’s Gol, hints that code-sharing and interlining are not enough to “capture available synergies” in airline markets.
Finally, to Russia, where the international response to President Putin’s attack on his neighbour is seriously impacting the ability of airlines to operate, even internally. Moscow moved this week to effectively seize more than 500 aircraft leased from Western companies and operated in the country. The lessors themselves will be offered rapidly depreciating rubles rather than US dollars.
However, many of these aircraft are registered in Bermuda and the tiny island nation has this week invalidated Russian pilots’ licences on these aircraft, meaning crews would be flying illegally. The transport ministry will ignore that and authorize the pilots itself, but each move drags Russia further from aviation’s international rules-based system, and intensifies its pariah status.
Putin has said he regrets the demise of the Soviet Union. With bans on sales of aircraft, parts and training and insurance services adding to the problems the sector faces, Russian air travelers may soon be flying not on the modern Airbus and Boeing jets they are used to, but on creaking Tupolevs and Ilyushins – just like being back in the USSR.
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