Up in the air

It’s impossible to dress the numbers up: the equivalent of 1.72 billion passengers lost in 2020. Close to 7,000 routes gone – a decrease of 55%. Some €30bn in lost revenue for European airports. A wider aviation ecosystem down almost €160bn, according to EUROCONTROL.

Olivier Jankovec, director general for ACI EUROPE, provides a blunt assessment of 2020: “We went back to the traffic volumes of 1995.” Largely overnight, 25 years of growth had disappeared. Even in 2021, estimates have passenger traffic down between 56% and 64% compared with 2019.

Karen Dee, CEO of the UK’s Airport Operators Association (gh), commissioned an analysis in late 2020 of the best, medium and worst-case outlooks. “What is my view of the situation at the moment? Pretty dire – we are somewhere worse than our worst-case scenario.”

The air travel industry does not expect to see a full recovery before 2024 or even 2025. Some airports will take longer to recover than others – many won’t recover at all. Risk-averse airlines are expected to favour larger, more affluent markets that are not generally served by smaller, regional airports.

Until things recover, airlines have been relying on government support, but governments won’t be able to help indefinitely. Airlines are downsizing their fleets, culling their route maps and focusing on cash-positive sectors, but that can only buy them so much time.

“There’s a golden rule in aviation: less than a million passengers a year and you won’t be profitable,” says Andrew Charlton, an analyst at Aviation Advocacy. “A lot more airports will fall below that number and I think those airports are in trouble.”

The view from Europe

With Heathrow, the UK’s premier airport, suffering a serious decline in passenger numbers in 2020 – 22.1 million passengers compared with 80.9 million the previous year – the numbers were bound to be bleak for other airports. ACI Europe’s 2020 Airport Industry Connectivity Report found all EU-UK routes were severely impacted, with sharp decreases in activity at leading international airports, including Madrid-Barajas (-71%), Rome-Fiumicino (-70%), Munich (-68%) and Frankfurt (-67%), based on September 2020 figures. In line with Charlton’s analysis, though, it was worse for smaller airports, which were unable to tap into the few key routes that had been sustained: Linz (-96%), Treviso (-95%), Vaasa (-91%), Quimper (-87%), Newquay (-86%), Shannon (-83%) and Burgas (-82%).

To help redress these figures and rebuild a strong post-Covid-19 aviation network, ACI Europe is pushing for the European Commission and tourism organisations to allow governments to establish air connectivity restart schemes. These would incentivise airlines over the next three years to expand their route maps and, in particular, return to servicing smaller airports.

However, the EU and national governments need to go much further than this in support of airports, Jankovec says. “US airports have received financial support from their government that is seven times what has been made available so far to European airports,” he notes. “And while European airlines have received more than €32bn in financial support, Europe’s airports have only been extended €2.3bn.”

With revenues still low, most airports are financing operations through loans and their debt level has ballooned. They will need to be compensated for damage caused by lockdowns and travel restrictions, Jankovec says. “Close to 200 airports in Europe are presently at risk of insolvency. This is about fairness, and this is about protecting and safeguarding vital transport infrastructure for the future.”

The kingmakers

As more legacy carriers pull out of routes or consolidate, Charlton sees budget carriers like easyJet and Ryanair becoming “kingmakers” – choosing which routes and airports live or die.

There may be opportunities to change the entire dynamics of some routes. “If you offered flights into Heathrow, at the right price, to easyJet or Ryanair, they would bite your hand off. EasyJet could be right back in there with Heathrow for negotiations on the assumption of available capacity. I think there’s every chance that the whole slot regime will get thrown up in the air,” says Charlton.

An immediate problem hindering decision making is that the move towards recovery is out of airports’ hands until governments lift Covid-19 restrictions. “[As long as] governments keep banning non-essential international travel and keep imposing quarantines for whatever essential travel is allowed, air connectivity will not recover,” Jankovec states.

When routes do open, however, he expects a spike in demand. “No one has a crystal ball to see the future, but the need and desire for travel is very strong, and that should not be underestimated,” he says of both business and leisure travel.

While long haul for leisure will remain difficult, the VFR (visiting friends and relatives) market will quickly bounce back as people scramble to see relatives, Charlton agrees. Elsewhere, his outlook is bleaker. He expects most business meetings will remain online and that business people will start taking one major work trip a year rather than shorter, more frequent trips. “Remember, most airlines make their money in international services and in business class. The business market is going to be hit.”

Furthermore, the end point isn’t necessarily in sight. “There’s a certain amount of cautious optimism around in terms of vaccines and vaccine passports,” Charlton notes. “I’m much more pessimistic. We seem to be in a race between the vaccines and the variants.”

At the UK AOA, Dee is also worried about variants and says there is a need for strong messaging in terms of the science of Covid-19. She suggests there is a risk of aviation being made a scapegoat for not just the spread of Covid-19, but also the proliferation of variants. The UK variant, officially known as the ‘Alpha variant’, illustrates that new strains can develop and spread anywhere.

“I am slightly concerned about a narrative that seems to be developing, which suggests that variants only occur in other countries, and therefore can only get here by plane,” she says. “My basic understanding of viruses is that that’s not the case.”

Border problems

The nationalistic approach to Covid-19 that has arisen over the past year or so risks a metaphorical wall going up around Europe, prolonging the international cut-off. National borders have become a greater point of contention than they have since 1991, when the single European aviation market was first established.

The holiday market will be reshaped from within Europe as a result, with short-haul travel coming at the expense of longer journeys until global vaccination numbers align. “That’s good news for countries like Greece and Croatia, but it’s terrible news for places like France because Paris is the most visited city on Earth – and they’re not Europeans coming to Paris, mostly they’re Chinese, Japanese and Americans,” Charlton points out.

Jankovec believes that everything hinges on travel restrictions and the vaccines rollout, as well as on testing. The focus should be on exempting vaccinated and Covid-19-negative passengers from travel bans and quarantine in order to open routes.

Again, Dee says much will depend on travellers getting clear messaging from governments. “Passengers will be looking for destinations that give them greater certainty. We can’t be in a position where we keep closing and opening again,” she adds.

“I think one of the challenges for government and the industry is that this is a slightly moveable feast. Things that we have to manage this summer we will hopefully not have to manage next summer, but we do need to have flying and a decent summer to help get the industry going again.”