Airlines are keeping their jets firmly on the tarmac in a bid to slash their costs, as coronavirus and a corresponding slump in flight demand threatens the viability of the industry.
International Consolidated Airlines Group (IAG) said that it expects first quarter capacity, based on available seat kilometres, to fall 7.5 per cent compared to 2019. IAG, which includes British Airways in its roster and is impacted by the restriction of travel into the US along with suspended flights to China, will cut its capacity by at least 75 per cent for April and May. IAG will also cut its operating expenses through a number of measures including the grounding of surplus aircraft and deferment of capital spending. Chief executive Willie Walsh has delayed his retirement.
easyJet (EZJ), meanwhile, warned that the pandemic “could result in the grounding of the majority of the easyJet fleet”. The group said that aircraft groundings would significantly help to bring down its variable costs. Ryanair (RYA) expects to reduce its capacity for April and May by up to 80 per cent, and did not rule out grounding its entire fleet. It expects the majority of its fleet to be grounded over the next seven to 10 days.
The measures come as the Centre for Aviation warned that most airlines will be bankrupt by the end of May.
Over the weekend, Sky News has reported that airline Virgin Atlantic will seek a government bailout package for the industry worth up to £7.5bn this week. In its statement today, easyJet observed that “European aviation faces a precarious future and there is no guarantee that the European airlines... will survive.” The airline added that the industry’s existence “will depend significantly on European airlines maintaining access to liquidity, including that enabled by governments across Europe”.
The airline groups were keen to emphasise the strength of their cash positions. “They are going to be requiring all of that," said Peel Hunt transport analyst Alex Paterson, who observed that in the absence of ticket sales, all that airlines can do now is to ground jets and minimise their expenditure. “They just won’t be able to shed costs quickly enough... basically they’re just going to burn through cash.”
