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Welcome to London Air Travel’s Monday Briefing for the week beginning 8 August 2022.
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Aviation Faces The Prospect Of A Recession
When airlines announced their second quarter results, they were been keen to trumpet strong demand and, for the most part, a return to profitability.
They had much less to say about the prospects for 2023. The Bank of England did, however.
When it announced a rise in interest rates by 0.5 percentage points to 1.75% last week the Bank of England forecast the UK would enter recession this year.
This is expected to last for five quarters and will be as deep as the recession of the 1990s. Inflation in the UK is expected to peak at 13% will stay at close to 10% for most of next year.
If a recession does happen, airlines will face very different circumstances compared to the past.
Airlines don’t have the capacity to meet current demand, but they would enter a recession with balance sheets severely weakened by COVID-19. Scope to raise new capital will be limited.
History has shown that a decline in business travel, still yet to return to pre-COVID levels, is one of the first indicators of a downturn. Corporate travel budgets are an easy target for cuts. Many employees would rather not be out of sight at a time of possible redundancies.
The levers airlines have deployed in the past may not assist this time. Readers may recall after the 2008 financial crises many special premium leisure deals. The rationale being that Britons will give up many things, but not a holiday. This may be different when all households face rising energy costs and increased mortgage rates.
The “never let a good crisis go to waste” option of structural labour cost savings will also not be available at a time of labour shortages.
After the 2008 financial crisis many airline CEOs were convinced they had made the structural reforms to withstand any crisis and state intervention was a thing of the past. COVID-19 proved otherwise, and airlines are not out of the woods yet.
BA Long Haul Route Network Updates
Here are a couple of speculative BA long haul route network updates:
Following slot allocation reports for winter season, there was speculation BA may add new destinations at Gatwick as “tag on” flights from Antigua.
Last week BA retimed inbound flights from Antigua on days without tag-ons to arrive at Gatwick more than four hours earlier. This suggests no new routes will launch.
BA flights to mainland China are only on sale on a full fare basis from the summer 2023 season.
Last week BA changed its timetables for flights to Beijing and Shanghai to resume from 11 & 10 January 2023. Both are scheduled to operate three times weekly with timings changed for extended journey times. Whether these actually operate is another matter entirely.
Also of interest this week:
Boeing could resume deliveries of 787 Dreamliner aircraft as soon as this week, subject to formal approval by the Federal Aviation Administration. (Bloomberg)
A profile of BALPA leader Martin Chalk:
“On my last job, we took 350 tonnes of aeroplane and 180 tonnes of kerosene 12km into the air, where it was minus 70C, often 300mph winds – we flew for 14 hours and landed on the other side of the world with 550 [sic] people. The safety aspect doesn’t come by chance.” (The Observer)
“I took eight flights in four days and it was fine”.
Stephen Bleach flies Heathrow – Palma – Manchester – Alicante – Gatwick – Faro – Bristol – Malaga – Stansted:
“Amid justified anger at disruption and cock-ups, nobody seems to have noticed that the vast majority of flights are operating normally. As a result, we’ve missed a wider story: for millions of Britons, after three long years, proper summer holidays are finally back — and they’re ‘brilliant'”. (The Sunday Times)
All is not well in the lounges, however.
Tyler Brule bemoans their clientele and yearns for the era of the more exclusive Concorde set of Joan Collins, John McEnroe and Henry Kissinger:
“passengers are confusing the BA lounge with a branch of M&S, an adult daycare centre and their living rooms. Buffets are raided and carry-ons filled with cans and bottles, grown men and women are wandering around in what they think is chic athleisure but is really just synthetic jammies, trainers are propped up on tables and every other passenger seems to be suffering from an overheating crotch as legs are splayed wide open.” (The Sunday Times)
What’s it like to stay at an all-inclusive resort?
“One night I asked Tolga, one of the resort reps, why people go to all-inclusive resorts. Without skipping a beat he replied, ‘They want to get drunk’, making the international hand gesture for drinking, then adding in a lower voice, ‘Some people, they start before breakfast.'” Just like at the airport then. (Financial Times)
Late post publication updates:
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