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Airlines desperate for state support ahead of ‘hard winter’

Airlines desperately need government relief measures to see them through a “hard winter” as the Covid-19 crisis continues.

The warning from Iata came as it revealed new research showing that only 45% of travellers intend to return to the skies within a few months of the pandemic subsiding.

A further 36% said that they would wait six months – a significant shift from April when 61% said that they would return to travel within a few months of the pandemic subsiding and 21% responded that they would wait about six months.

The survey findings from early June are corroborated in key passenger trends demonstrating continuing market uncertainty:

  • Overall bookings are down 82% year-on-year compared to June 2019.
  • Long-haul forward bookings for the first week in November 2020 are 59% below normal levels. Historical trends show about 14% of airline tickets are sold 22 weeks in advance of travel. Current bookings for November 1-7 show that tickets have been sold to only 5% of the 2019 number of passengers.
  • Passengers are booking closer to the time of travel. Bookings for travel 20 or more days in the future accounted for 29% of those made in May, down from 49% in 2019. Similarly, 41% of bookings made in May were for travel within three days, more than double the 18% in May 2019.

Airlines are expected to post a loss of $84.3 billion in 2020 and government financial relief is a lifeline to many, according to Iata.

The bulk of airlines make their money in the northern summer season, while the winter season is a struggle to remain profitable.

The 2019 net profit margin for European airlines followed the normal seasonal pattern and was 9% and 17% respectively in Q2 and Q3 (northern summer).

But it started at -1% in Q1 and finished the year at 2% in Q4 (northern winter).

“The winter season will be even more challenging amid the recovery from Covid-19,” Iata added.

Director general and chief executive Alexandre de Juniac said: “People are returning to the skies but the horizon of uncertainty of the Covid-19 crisis is extending.

“Forward bookings are down, and people are hedging their travel bets by booking closer to the time of travel.

“Airlines in the northern hemisphere rely on a strong summer season and a predictable booking curve to get them through the lean months.

“But neither of these conditions are in place and airlines will need continued help from governments to survive a hard winter.

“Airlines will need much more flexibility to plan schedules around these changing consumer trends. Financial and operational flexibility equals survival.”

He added: “Each day sees more people travelling. That’s good for the economy. The numbers are moving in the right direction, but we are by no means anywhere near normal or sustainable levels of activity.

“Financial relief measures are still desperately needed. And policy-relief measures like a slot usage waiver remain critical.

“Governments need to grant that by no later than the end of July to provide at least that certainty for this beleaguered and battered industry.”

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