The Covid-19 crisis may have created the circumstances for start-up airlines to enter the market, according to industry entrepreneur Steve Endacott.
Speaking on a ‘Pubcast’ video hosted with fellow travel sector investor Ian Brooks, Endacott said he was confident most major airlines would survive the crisis, though the future of Virgin Atlantic remains in doubt following its failure to secure government backing.
However, he predicted the future of flying could look very different as carriers dispense with their large A380s and 747s in favour of smaller aircraft they can run more economically.
Taken alongside planned capacity reductions from low-cost carriers of around 30% in 2021, he argued that created the ingredients for new entrants.
“The bigger you are the harder you’ve been hit by Covid and all the major airlines will have large debt mountains for the next three to four years,” he said.
“I would never normally advise this, but it might be time for someone to start an airline. You’ve got aircraft available, you’ve got low fuel prices, you’ve got cabin crew and pilots available.
“And, also, very unusually, you’ve got the ability to get slots. There are lots of slots available, which has never been heard of before. I would not be surprised to see a start-up airline come into the marketplace.”
Endacott also predicted consolidation in the airline sector, with one likely major merger between carriers in the UAE.
Although “politically difficult”, he said plans to link Dubai and Abu Dhabi airports with an underground hyperloop service would effectively create a single hub allowing Emirates and Etihad to merge.
Endacott, who co-founded Rebound Consulting at the start of the pandemic to advise travel firms, said the strength of the market this winter would depend on the extent of summer programmes.
He said people should not write off this summer and argued that a degree of normality was returning more quickly than anticipated as travellers became accustomed to new health and safety protocols.
He said: “When you’re coming from nothing anything is a surge. We’re born optimists.”
Endacott also advised travel firms not rely on assumptions about broad demographic groups when assessing their likelihood to travel, arguing the pandemic had hit everyone differently.
He argued young people may still be willing to travel but may not have jobs, whereas older people may be more vulnerable to Covid-19 but be more inclined to spend having felt they’d had a “brush with death”.
Endacott also said there was a “middle class” impact for those earning more than £36,000, arguing they might cut back on holidays having had to take pay cuts or significantly reduced salaries through the furlough scheme while retaining larger mortgages and other commitments.
He added: “What is clear is demand is going to be lower because capacity is going to be lower. The biggest threat is not Covid anymore, it’s the mother of all recessions we are about to walk into.
“You can’t get your head around that until you feel it happening. The redundancy wave is coming when furlough ends, or even now as furlough slows down.”
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