The recovery in air travel across Europe has been a turbulent and two-speed affair, with the low-cost carriers leaving pandemic-related troubles in their wake while so-called flag carriers struggle to get back off the ground.
Intra-European travel, which was still around 30 per cent below pre-pandemic levels in the first quarter of the year, closed last week just 13 per cent lower than in 2019, according to the European Organisation for the Safety of Air Navigation, known as Eurocontrol.
Low-cost, short-haul carriers are making the biggest gains. Ryanair (IE:RYA), Europe’s biggest airline, is currently operating 8 per cent more flights than it did in 2019 – averaging 2,532 per day for the year to 29 August. Its capacity schedule for the third quarter is at 112 per cent of 2019 levels, according to BofA Securities.
Wizz Air (WIZZ) is continuing to grow its capacity – in part through a push into the Middle East through a joint venture with an Abu Dhabi government fund, ADQ. Its third quarter capacity stands at 135 per cent of pre-pandemic levels, and it has operated an average of 640 flights a day – an 11 per cent increase on 2019. Jet2 (JET2) is also operating 11 per cent more flights than it did pre-pandemic levels and the company said seat capacity for its summer season was 14 per cent higher than in 2019.
This bounceback compares even more favourably when set against the performance of former national airlines such as Intercontinental Airlines Group’s (IAG), British Airways, Germany’s Lufthansa (DE:LHA) and Air France (FR:AF). Flights operated by this trio are down by 34 per cent, 31 per cent and 23 per cent, respectively, on 2019 levels.
Ryanair has been a stand-out performer because it took the decision not to lay off staff during the pandemic – agreeing reduced pay deals for pilots and crew instead. They did so “at no insignificant cost to themselves” in anticipation of taking more market share themselves, said John Strickland, owner of aviation consultancy JLS Consulting.
In general, the low-cost carriers’ model, particularly their ‘point-to-point’ route operations, made it easier for them to scale up quickly as demand has rebounded, he added.
Things have been slower for the major legacy carriers in part because of the weaker long-haul market. European long-haul capacity is still only running at 73 per cent of 2019 levels, according to UBS.
Many of the inter-European flights operated by flag carriers are used to ferry passengers into their respective global hubs/ But if fewer long-haul flights are taking off, they will operate fewer feeder flights.
The uncertainty surrounding the long-haul market, with restrictions on international travel only gradually being eased in China, made it difficult for flag carriers to assess demand levels for this year, Strickland said.
“A lot of decisions to truly open things up didn’t come until February or March, which, even in a normal year, is well past the planning timeframe for many airlines in terms of working out manpower, doing training, recruitment and so on,” he added.
Flag carriers have also been cautious about reopening because of the need to conserve cash, given the level of debt incurred to stay afloat over the past couple of years. As of the end of June, IAG was carrying net debt of around €11bn (£9.5bn), Lufthansa €13bn and Air France/KLM had net debt of €6bn after completing a €2.26bn rights issue in June to pay back loans provided by the French state. All three continue to be lossmaking, but at substantially lower levels than were seen a year earlier.
Even airlines that have been able to operate at full capacity have faced constraints and one-off charges as a result of staffing problems at airports. Several of Europe’s biggest airports, including Heathrow, Gatwick, Frankfurt and Amsterdam Schiphol, have limited the number of people transiting through them as they struggle to recruit enough staff after thousands of workers left the industry during pandemic-related periods of inactivity.
Capacity at the five major listed airport operators in Europe for September is still 16 per cent below pre-pandemic levels, according to data provider Cirium. Airline bosses have been scathing, with Ryanair’s Michael O’Leary blaming disruption to its schedule on an “abysmal performance” by airport traffic control operators and airport staffing shortages.
Ryanair returned to profit in the three months to June 30 but told investors it could not give guidance for its full-year profit given the “fragile” nature of air travel and the prospect for new Covid variants.
Its low-cost competitors are still playing catch-up. EasyJet (EZJ) reported a £114mn loss for its June quarter, hampered by a £133mn charge as it was forced to cancel flights due to a “tight labour market” and the caps imposed at Gatwick and Amsterdam. The number of flights it operates are still more than a fifth below pre-pandemic levels, according to Eurocontrol data.
Flight congestion at airports should eventually ease, providing relief for airlines and passengers alike, but this could take time.
Gatwick Airport recently said it would remove its capacity cap after recruiting more than 400 new security staff but Heathrow and Amsterdam have both extended restrictions until the end of October.
