Summer bookings ‘crucial’ to avoid airline insolvencies

A pick-up in demand for air travel in Europe can’t be expected before Easter, say senior industry analysts, leaving many carriers in need of further financing and a risk of failures without summer bookings.

Stephen Furlong, senior airline analyst at Dublin-based Davy Research, said: “Airlines are in hibernation, but it is crucial there is a summer 2021 season. Without one we are going to have failures.”

Speaking on a CAPA Centre for Aviation webinar, Furlong said: “Traffic is very weak. January, February, March are not important for traffic [in Europe], but it’s an important time for bookings.

“If bookings don’t come in January, February, March, they have to come post-Easter.”

He warned: “At the end of the day, you can’t just keep adding debt upon debt.”

Bernstein Research managing director and senior analyst Daniel Roeska agreed, saying: “This is the most-important time for bookings, but the lockdown and uncertainty about when people will be vaccinated will keep people from booking.”

He forecast: “The key pick-up in demand will probably happen from Easter.”

Roeska noted European traffic remains about 90% down and said: “Anything will look like a ‘peak’.”

He said: “We think Easter will be similar to last summer when there was an opening of travel which contributed to the second wave [of the pandemic].

“It is likely the level of cases and the death toll will go down and governments may be amenable to relaxing lockdowns, so we may have a similar situation to last summer with some demand rolling in so yields are not a catastrophe and provide some positive cash flow.

“But only once we get more confidence that travel is possible and Covid won’t come back will it give confidence to advance bookings.”

Furling told the webinar: “We’re in a battle between rising infection rates and vaccination. The most hopeful [area] is short-haul in Europe, but for any meaningful revenue [to come in] governments have to remove quarantine [restrictions].”

He was cautious on the impact of testing on travel, saying: “I’m not sure about testing. Pre-departure tests are quite expensive in the context of travel.”

But Furling suggested major destination markets would be under pressure to open for the summer.

He said: “Italy and Spain will want markets opened up. The prospect of a second year of empty beaches is not good.”

Roeska agreed: “Short-haul leisure is the area we can be most hopeful about.”

But he warned: “Short haul includes a whole lot of business travel and a whole lot of leisure traffic connecting with long haul, so I’m not hopeful demand on short-haul leisure will translate into profits.”

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