The summer offer will be almost similar to that of 2019, but an uncertain autumn is seen due to the crisis and more expensive fuel that could lengthen the path of losses
A happy summer, an uncertain autumn and a year that may leave the recovery desired by airlines after the pandemic blow just one step away. The first thing that is already close to equaling is its offer -on a world average, a capacity of 92% of seats on its planes is expected for August compared to 2019 and in Spain it will reach 94%-; the next thing that is expected to be achieved is traffic, but there is still a long way to go.
According to the International Air Transport Association (IATA), the demand for air travel increased by 78.7% in April compared to the previous year. However, it was still 37.2% below pre-covid levels (measured in passengers per kilometer transported), that is, the volume of airline traffic barely reached two thirds (62.8% ) compared to what they reached in April 2019.
“The risk of increasing capacity is that the market does not follow the available supply and the load factor falls below the profitability margins per trip,” warns Romà Andreu, aviation expert and professor at EAE Business School. That could happen in the medium term, closer to the winter campaign, but not this summer except for surprise. “The entire sector hopes that it will be confirmation of the return to the path of recovery,” he asserts.
In fact, what happened a few weeks ago is just the opposite. A “sudden” influx of travelers at European airports has been a “challenge” for airlines and airports themselves, argues ACI Europe, the association that groups the latter. The pandemic, he notes, “greatly reduced the resources of aerodromes and the ground handling of companies.” Now they are trying to recover that human potential, but due to training and security accreditation issues, it would take between three and four months to achieve it.
255.7 billion euros have been received by airlines, according to IATA. 40% corresponded to business debt payments
In Spain, subsidies to the sector are close to 1,300 million; the latest beneficiaries are Air Nostrum and Volotea
In London, Berlin, Frankfurt and Amsterdam are the aerodromes that suffer the most cancellation problems – Lufthansa, Air France-KLM and British Airways (IAG) have canceled hundreds of flights – due to lack of personnel. In Spain, the long queues are no longer something isolated since Easter and have forced the cancellation of more than 1% of the planned routes. The Association of Air Lines (ALA) -which expects a “very good summer”- asks the Government for more agents and technical means for customs, because with the ‘brexit’ the influx to non-community steps (slower) has multiplied by the sum of the British.
Despite these problems -Iberia has denounced that more than 15,000 of its customers have lost their connecting flights since March due to delays-, Aena has just raised its estimate of passenger traffic for this year from the previous 68% to a range of 75 %-85% compared to the figures for 2019, a “record year for the tourism sector”, points out Javier Gándara, president of ALA, to give real value to the comparisons made. In the first five months of the year, according to the airport manager, 80.1% of that previous level had been reached -in the Canary and Balearic Islands it is expected to exceed it this summer-, while flights managed from Spain (Enaire data) have already They accounted for 95.1% in May compared to the pre-covid result.
Profitability “damaged”
“In 2023 we hope to recover the figures of 2019,” says Gándara, although they are not clear at what time of the year because facing the autumn-winter period – he admits – “there are still many uncertainties.” Vicente Segura, Deloitte’s operations consulting partner, points out a few: “fundamentally inflation, the energy crisis, the war in Ukraine and the economic environment”, factors that “can modify” the trend of a sector whose profitability “is still very harmed”. And it is that at the end of the first quarter their income was still -on average- 31% lower than that of the pre-covid course.
In 2020, the airlines lost 130,000 million euros, in 2021 they were 48,500 million and this year they hope to leave their red numbers below 15,000 million to recover profitability at the end of 2023 or well into 2024. The first to achieve it would be the operators of low cost, according to David Hoh, aviation partner of KPMG Spain, because the flagship airlines (‘legacy’) “depend more on long-haul flights” and business trips, “those that leave more money and are more costing to recover”, points out Pere Suau, Professor of Economics at the UOC.
Another headache, more in the medium term than in the short term due to fuel consumption coverage contracts (between 60% and 70%), is the rise in the price of kerosene, which costs twice as much as a year ago. If it does not give in, IATA estimates that it could increase the sector’s losses by 20%. Coupled with skyrocketing inflation, airlines plan to raise their fares, which until April were on average 14% lower than in 2019.
The crisis does not postpone the challenge of decarbonisation, but it complicates it
The economic crisis aggravated by the war in Ukraine has not postponed the decarbonisation objectives that the European Union has set for air transport –net zero emissions in 2050 and reducing them by 55% in 2030–, but it does complicate them. “The fight against climate change continues to be a priority,” says the president of the Airline Association (ALA), Javier Gándara.
To this end, it advocates promoting sustainable aviation fuels (SAF), either through biofuels –based on raw materials such as used oils or non-food crops– that can reduce CO2 emissions by up to 80% during their life cycle, or through fuels synthetic – still in the experimental phase and that mix hydrogen with carbon captured from the atmosphere – that could cut them by up to 100%. The problem is that the production of SAF is today very small and its cost is still quite high (between three and four times more on average than normal kerosene), so the sector asks the EU and national governments for help.
Air transport is responsible for 3% of global greenhouse gas emissions. In the EU, it will be required that at least 63% of its fuel consumption in 2050 be via SAF (in 2025 it would be 2%), but that would imply a world production of 450,000 million liters compared to just 200 million today. Intermodality with the high-speed train to reduce journeys –although flights of less than 500 kilometers in Europe only account for 4.3% of emissions– and once and for all to implement the Single European Sky to optimize flight management –would reduce 10% emissions – would help the goal.