News

Carriers need ‘sufficient cash to survive to 2022’

The extent of confidence among travellers will be key to how quickly leisure air traffic returns to more normal levels.

That is the view of Deloitte partner David Gard, who warned: “Airlines face a very substantial challenge.”

He told a Travel Weekly Insight report launch event: “We’ve had a substantial decline in passenger volumes, approaching 80%, and a huge loss of revenue. If we don’t get decent international travel next summer, the challenge for many airlines will be to have sufficient cash to survive through to the spring of 2022.”

Gard argued: “The attitude of passengers, how quickly they want to come back, is going to be critical to the recovery for airlines. Many surveys suggest passengers are particularly concerned about travel through airports and want to see how things work [before they travel], which suggests a six-month delay before we get decent travel [numbers].

“Despite the vaccine [news], all the scenarios suggest aviation will not recover to pre-Covid levels until the end of 2023, if not into 2024. That is a substantial period of time.”

He said: “Many airlines still have a high fixed-cost base, primarily around the cost of aircraft. They’re going to have to address that.

“Iata has suggested airlines probably have to reduce their cost base by 40%. Furlough has helped, but they’re going to have to address the cost of aircraft and that is going to require some difficult conversations with lease holders.”

Gard said: “That is starting to happen and we’re starting to see airlines give back aircraft, which is not great for lease holders. But it’s going to be a real challenge for many airlines to deal with their aircraft costs. We have quite a journey to get back to anything like normal.”

Share article

View Comments

Jacobs Media is honoured to be the recipient of the 2020 Queen's Award for Enterprise.

The highest official awards for UK businesses since being established by royal warrant in 1965. Read more.