U.K. Holds Off on Travel Restart in Latest Setback for Airlines

(Bloomberg) -- The government told Britons to hold off on planning foreign holidays this summer, deflating the hopes of an airline industry desperate to get flying again before another high season slips by.

While confirming that restaurants, pubs and shops will reopen next week, Prime Minister Boris Johnson said it’s not yet clear that non-essential international travel can resume safely as planned on May 17. The move extends the uncertainty facing an airline industry reeling from over a year of Covid-19 restrictions that have shaken balance sheets and forced carriers to raise cash to stay afloat.

Speaking at a press conference on Monday, Johnson said he was hopeful that foreign travel could resume by the target date, if virus surges in other countries can be contained.

“But I do not wish to give hostages to fortune or to underestimate the difficulties we’re seeing in some of the destination countries people might want to go to,” Johnson said. “We don’t want to see the virus being re-imported into this country from abroad.”

Traffic Lights

When the U.K. does reopen, a “traffic-light” system will be used to classify countries into green, amber and red based on factors such as virus infection rates and vaccination levels. More details will be set forth when Johnson’s task force on global travel publishes its report later this week.

Category decisions for specific destinations will be made based on data and evidence “closer to the time,” the government said.

Travelers from green countries will still have to take virus tests before departing and after arriving, Johnson’s office said. Quarantine and self-isolation rules will apply to passengers entering the U.K. from places on the red and amber lists.

“Today’s announcement does not provide the clarity we were seeking on the roadmap back towards normality,” said Tim Alderslade, chief executive officer of Airlines UK, a trade group including British Airways, Ryanair Holdings Plc, EasyJet Plc and tour operator TUI AG’s airline unit. “We await further details but the measures indicated, including the potential for multiple tests for travelers even from ‘green countries,’ will prevent meaningful travel even to low-risk destinations.”

Summer at Risk

One key question is the formula used to create the tiers. The risk ratings will take into account a country’s vaccination program, infection rate, virus strains, and sequencing capacity, the government has said. The fine print could prove crucial for places like France, which has air, rail and ferry links to the U.K. that are essential to trade as well as travel.

A second summer lost to the coronavirus crisis would likely trigger a spate of airline failures and bankruptcy filings, alongside a repeat of 2020’s bailouts, job cuts, and jetliner deferrals and cancellations, according to consultants IBA Group. European carriers especially have felt the pain that’s set in because of rising cases and fresh lockdowns.

Leisure-focused airlines usually take in cash from summer bookings during the first three months of the year, as they gear up operations. Summer is also when revenue typically bulges from people going on annual holidays.

“Any prolonged closure of U.K. airports’ key destinations in Europe in particular will have major financial impacts that the government will need to mitigate,” Karen Dee, CEO of the Airport Operators Association, said in an emailed statement.

Testing Costs

The two-test requirement will drive up travel costs for tourists from green countries, the industry groups said.

Digital Covid passports, based on proof of a vaccine, a negative test or immunity for those who have recovered, could eventually eliminate the need for the assessments, but the idea is controversial and implementation is months away.

The industry headed into the new year expecting to be running at close to full steam by Easter, typically the start of the region’s busiest season. Then a fast spreading new virus strain forced the U.K. to declare most international travel off-limits. The government followed up in March with a fine of as much as 5,000 pounds ($6,950) for anyone flouting the rules.

Trans-Atlantic Trade

Carriers have lobbied for a firm reopening date, while pushing for a tiered system with clear guidelines they can use to plan schedules in advance.

London Heathrow airport, IAG SA-owned British Airways and Virgin Atlantic Airways Ltd. are planning a briefing for Tuesday to focus attention on the return of long-haul flights, a profitable segment of the market.

Falling infection rates and world-leading vaccination programs in both the U.K. and U.S. could help reopen trans-Atlantic travel earlier than expected if a bilateral agreement can be reached, a Virgin Atlantic spokeswoman said.

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