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Travel Demand Endures as Airlines Return to Profit: IAT...

Business Maverick

Business Maverick

Travel Demand Endures as Airlines Return to Profit: IATA Update

Passenger aircraft, operated by British Airways, a unit of International Consolidated Airlines Group SA (IAG), taxi at London Heathrow Airport in London, UK, on Monday, June 13, 2022. Heathrow airport said its policy of carefully matching flight availability to resources as travel rebounds has been vindicated, citing a lack of disruption even as customer numbers reached their highest level since the start of the pandemic.
By Bloomberg
20 Jun 2022 0

After two years of unprecedented pain brought on by Covid, the airline industry should return to profitable times next year as pent-up demand for travel sustains bookings.

That’s the prediction of the International Air Transport Association, which Monday at its 78th annual general meeting in Doha said airlines have emerged “leaner, tougher and nimble,” having defied predictions for widespread bankruptcies and failures, according to Director General Willie Walsh.

“Industry-wide profit should be on the horizon in 2023,” Walsh told the gathering of airline chiefs. “We are rebounding. By next year, most markets should see traffic reach or exceed pre-pandemic levels.”

As carriers emerge from the pandemic, they’re facing critical labor shortages, elevated fuel prices and intensifying pressure to reduce emissions. But they’re also enjoying bumper sales as customers flood back following the lifting of Covid curbs, taking leisure trips and catching up with friends and family.

For more on Europe chaos: EasyJet Curbs Capacity to Ease Disruption

Other Developments:

Ryanair Reaches Pay Deal With Pilots (6:02 p.m. Doha)

Ryanair Holdings Plc’s British-based pilots accepted a new pay deal with the airline, avoiding any potential strike and giving the carrier some relief amid a wave of action from staff across Europe.

Ryanair members of the British Airline Pilots’ Association voted to accept a revised pay offer from the airline, a union spokesperson said Monday by email.

Ryanair Sees Some Relief as British Pilots Accept Pay Deal

BALPA had been in talks with Ryanair to restore pay after accepting so-called mitigation measures during the pandemic. Still, Ryanair faces a wave of strikes across Europe on June 25. Pilots and cabin crew in Italy, Spain, Portugal, France and Belgium are all seeking improved pay and conditions.

Airport Chaos May Get Worse This Summer (3:28 p.m. Doha)

The aviation industry needs to be prepared for staffing issues to get worse this summer, Deutsche Lufthansa AG CEO Carsten Spohr said during a roundtable in Doha on Monday.

Read more: London Heathrow Asks Carriers to Cut Flights as Air Chaos Reigns

The German airline group has also seen a strong rebound in corporate travel, Spohr said, adding that Lufthansa is considering whether to cancel more flights to build up more resilience in the system in coming months.

Ukraine, Oil Pose Demand Risk, Hololei Says (2:40 p.m. Doha)

The situation in Ukraine, along with rising oil prices and interest rates, is posing a real risk to demand for air travel, Henrik Hololei, director-general of the European Commission’s department for Mobility and Transport, says Monday at IATA’s annual meeting.

Rate Hikes No Match for Demand: Emirates (1:10 p.m. Doha)

Rising interest rates won’t kill the latent demand that’s built up for travel, Emirates President Tim Clark told Bloomberg TV.

“So long as there is a restriction of supply, and those quality companies, unable to supply because they have supply chain problems, demand will not shift,” said Clark, who added he’ll stay on at Emirates until it’s profitable again.

Asked about the delay of Boeing Co. 777X jets, Clark said Emirates couldn’t afford to have such levels of uncertainty and therefore was retaining its 777s and all its A380s until probably the mid-2030s.

Read more: Once-Spurned Superjumbos Return to Skies as Travel Roars Back

“I’m not sure the management had eyes where they should have had the eyes,” Clark said of Boeing. “They need help at the top level, they need to enmesh themselves in the workings of the business, at the shop floor level,” he said.

IATA Appoints Nane as Chair (12:50 p.m. Doha)

Pegasus Airlines Vice Chair Mehmet Tevfik Nane will assume the position of chair of the IATA Board of Governors for a one-year term, IATA said Monday, succeeding JetBlue Airways CEO Robin Hayes, who will continue to serve on the board.

RwandAir CEO Yvonne Manzi Makolo will serve as chair from June 2023, following Nane’s term. Makolo will be the first woman to take on these duties.

The 79th IATA AGM will be held in Istanbul from June 4-6, 2023.

Star Alliance Sees 75% Capacity This Year (12:38 p.m. Doha)

Star Alliance, the biggest partnership group of global airlines, expects its members to operate at about 75% to 77% of their pre-pandemic capacity this year, Chief Executive Officer Jeffrey Goh said. The optimism among airlines is “calibrated,” he said.

“Many of our members are looking to see how they can plan this in a way that you don’t put on too much capacity right now, just because the forward bookings look good,” Goh said. “The last thing I think they all want is once you put in the capacity, and then the demand goes down you’ve got a problem scaling down.”

Air NZ CEO Excited by Speed of Recovery (12 p.m. Doha)

The recovery is moving quickly as more people travel to and from New Zealand, though a degree of patience will be required given the various challenges facing the industry, including high oil prices, Air New Zealand Chief Executive Officer Greg Foran said in an interview with Bloomberg TV.

Fares generally in New Zealand up around 20% to 25%, Foran said.

Airbus Can’t Make Enough Single-Aisle Jets (10:50 a.m. Doha)

The planemaker is seeing record demand from airlines to replace aircraft, CEO Guillaume Faury said during an interview on Bloomberg Television. While demand for narrowbody jets will exceed supply in most scenarios, that’s not yet the situation for widebody jets because international travel hasn’t fully recovered, he said.

IATA Forecasts Profit in 2023 (10:10 a.m. Doha)

Walsh said that while “there is no way to sugar coat the bitter economic and political realities,” at the same time, “the desire to travel and the necessity of moving goods are both solid.”

Losses this year are likely to total $9.7 billion, IATA said, an improvement on the $11.6 billion deficit predicted at the previous gathering last October. IATA also said that 2021’s loss amounted to $42 billion, better than the $52 billion shortfall previously envisioned.

Demand Beating Capacity for Years: Qantas (9:35 a.m. Doha)

The current recovery in air passenger traffic is sustainable, Qantas CEO Alan Joyce said in an interview with Bloomberg Television on the sidelines of the IATA annual general meeting, adding that if he could “get more aircraft into the air, I’d be doing it tomorrow.”

Average international air fares are “easily” covering the higher fuel price and load factors — which reflect how full planes are — are “unbelievably” high, Joyce said. “We think that could be the case for some time. We may be in a situation in a year or two, where we have less capacity than we have demand,” he said.

Malaysia Airlines’ Airbus Fleet (8:20 a.m. Doha)

Malaysia Airlines is in discussions about the replacement of its Airbus A330s, according to the carrier’s chief executive officer, Izham Ismail. Most of the aircraft being ordered to replace the A330s would be leased as the airline looks to keep its “balance sheet lean,” Ismail said in an interview on the sidelines of the IATA AGM.

The company is in conversations with “interested parties” for its A380s, an aircraft that doesn’t feature in its fleet plans going forward, Ismail said. The carrier will only consider expansion after 2024.

Airbus Jets Wait for Engines (7:00 a.m. Doha)

The delayed arrival of aircraft engines is keeping Airbus from delivering some planes to customers as supply-chain problems weigh on the manufacturer’s recovery from the coronavirus crisis despite strong demand, Chief Executive Officer Guillaume Faury said in an interview.

Twenty narrowbody jets that were fully built by the end of May were still missing engines, which will lead to late deliveries. Faury said that aside from the engine delays, overall supply-chain challenges appear to have stabilized. Airbus plans to ramp up monthly output of its A320 series by 50%, and sees strong demand in coming years.

Air India Said to Consider Large Jet Order (4:40 a.m. Doha)

Air India Ltd. is considering ordering as many as 300 narrowbody jets, according to people familiar with the matter, in what could be one of the largest orders in commercial aviation history as the formerly state-run airline looks to overhaul its fleet under new ownership.

The carrier may order Airbus SE’s A320neo family jets or Boeing Co.’s 737 Max models, or a mix of both, the people said, asking not to be identified because the discussions are confidential. A deal for 300 737 Max-10 jets could be worth $40.5 billion at sticker prices, although discounts are common in such large purchases, and likely take years or even decades to deliver.

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