Welcome to London Air Travel’s Monday Briefing for the week beginning 16 March 2020.
“To be honest we’ve gone through all of this before. We’ve all seen it before.”
“We know what to do in a time like this. We know how to respond.”
The comments of IAG CEO Wille Walsh a little over two weeks ago.
Last Friday, British Airways CEO Alex Cruz sent a video message, ostensibly to employees only, which referred to BA as being in “a fight for survival”.
There is a kernel of truth that many airlines have been at pains to emphasise they have learned the lessons of 11 September 2001 and the 2008 financial crisis. Some airlines have claimed they could now be profitable in perpetuity, no matter what.
Arguably, no-one could have anticipated that many airlines could now be close to shutting down all international operations for a minimum of two months.
This is the most unprecedented situation for civil aviation since the Second World War.
Some of the tools airlines such as BA have used to get through downturns in the past, such as aggressive marketing activity in certain geographic markets or passenger segments, are simply not available now.
The “known unknown” is whether this is a period of significantly reduced demand for a few months which will soon rebound, or a fundamental reordering of global aviation.
The scale of capacity cuts and route suspensions is unprecedented:
airBaltic is to suspend all scheduled flights from 17 March to 14 April 2020, save for potential repatriation flights.
Air New Zealand is to cut long-haul capacity by 85%. London Heathrow – Los Angeles is suspended from 21 March to 30 June. Other suspended long-haul routes are Chicago O’Hare, San Francisco, Houston, Buenos Aires, Vancouver, Tokyo Narita, Honolulu, Denpasar and Taipei
Alitalia has asked all passengers to wear masks on board its aircraft in case passengers cannot be kept one metre apart.
American Airlines is to suspend virtually all long-haul flights outside of Central & North America. The airline will operate a skeleton service of one flight a day from London Heathrow to Dallas / Fort Worth and Miami and three flights a week between Dallas / Fort Worth and Tokyo Narita.
Delta is to suspend virtually all transatlantic flights. This is save for one daily flight to Atlanta from London Heathrow, Amsterdam and Paris Charles de Gaulle; one flight from Amsterdam to Detroit; and flight from London Heathrow to New York JFK.
Lufthansa now expects its group airlines to reduce capacity by up to 70%. The airline has drawn additional credit facilities of €600m. The group is also looking to secure financing against its aircraft which it claims have a book value of €10 billion.
Norwegian has issued an outright plea for state support and has admitted it will not be able to raise funds through conventional means. Even before the extension of the US travel ban to the UK & Ireland, the airline had announced it was to ground 40% of its long-haul fleet and cancel 4,000 flights to the end of May.
Qantas has made substantial cuts to its international network, including the grounding of all part two Airbus A380 aircraft until September.
SAS Scandinavian Airlines is to suspend almost all operations from today.
Singapore Airlines has suspended services from Barcelona, Dusseldorf, Frankfurt, Milan, Munich, Paris and Rome to Singapore until the end of May.
Shai Weiz, CEO of Virgin Atlantic and Peter Norris, Chairman of Virgin Group, a 51% shareholder in Virgin Atlantic, are reported to be writing to UK Prime Minister Boris Johnson this week to ask for liquidity support of up to £7.5bn for the entire industry.
Back to BA and IAG, the airline group will likely survive this without state support. It has €6 billion in cash and the means to raise additional finance.
Two weeks ago the group’s airlines were to continue with aircraft deliveries and refurbishments this year as planned. Now, nothing as far its structure, route network and fleet is now off the table.
IAG has announced in a stock exchange update this morning that its airlines will reduce capacity by up to 75% in April and May 2020. Willie Walsh will also defer his retirement from the group and remain as Chief Executive for the time being.
Measures announced by IAG this morning include “grounding surplus aircraft, reducing and deferring capital spending, cutting non-essential and non-cyber related IT spend, freezing recruitment and discretionary spending, implementing voluntary leave options, temporarily suspending employment contracts and reducing working hours.”
Finally, it would be remiss not to acknowledge the substantial human cost of Coronavirus and the impact this will have on employees throughout the industry. There are undoubtedly some very tough and uncertain months ahead, but the industry will eventually recover from this.
Also, a quick housekeeping note. As regular readers know, we publish an update on transatlantic travel every Wednesday. Given this is now close to complete suspension, it will be paused until schedules start to return to normal.
Late post publication updates:
[Reserved for updates throughout the day]
Cathay Pacific has reported a 64% year-on-year fall in passenger numbers in February. The airline will operate a skeleton schedule only during April with capacity reduced by 90%.
easyJet has announced it is to implement rolling cancellations that could result in the majority of its fleet being grounded. It has also called for Governments to support the aviation sector.
Finnair is to transition to an extremely limited network from 1 April to 30 June. The airline will operate a small number of domestic flights, short-haul flights to key European cities and one long-haul flight to Tokyo.
Lufthansa Group expects to operate just 10% of long-haul flights and 20% of short-haul flights in the coming weeks. Austrian Airlines will suspend operations entirely between 19 and 28 March.
Norwegian is to suspend 85% of its flying schedule with all short and long-haul flights from London Gatwick cancelled until Friday 17 April at the earliest. From late March, Norwegian will operate an extremely limited short-haul schedule in Northern Europe only. Norwegian is also temporarily lay off 90% of its 7,300 workforce.
Qantas Group has announce even further cuts to its network. Group international capacity will be cut by 90% up the end of May. This compares to a cut of 23% announced a week ago. Domestic capacity will be cut by 60%. This compares to a cut of 5% announced a week ago. 150 aircraft will be grounded, including almost all of its widebody fleet. Specific route changes will be announced in the coming days.
Virgin Atlantic is to begin substantial cuts to its flight schedule from Tuesday 17 March. 80% of flights will be cancelled and 75% of its fleet grounded by Thursday 26 March. 85% of its fleet will be grounded by April. Additional measures such as unpaid leave and voluntary redundancy will also be implemented. The airline has also permanently suspended Newark, it’s first ever route when it launched in 1984.
The three alliances, Oneworld, SkyTeam and Star Alliance have issued a joint statement calling for Governments and stakeholders to explore all possible means to support the industry. This includes waiving all slot usage rules, and waiving airport and overflight fees.
London Air Travel’s Monday Briefing is published every Monday at 06:00 BST. If you have any comments, suggestions or tips then please drop us a line at mail [@] londonairtravel.com You can follow us on Twitter for breaking news throughout the day.