Airline recovery stalls, sinking summer

Stock image. Photo: Niall Carson/PA

John Mulligan Twitter Email

April 22 2021 02:30 AM

Europe’s airlines will have to wait until mid-August for any material improvement in their business due to a renewed surge in Covid infections and slow vaccination progress, ratings agency Moody’s has warned.

It effectively torpedoes another summer season for airlines reeling from more than a year of restrictions.

"We have lowered our expectations for a recovery in air travel in Europe because passenger traffic for European airlines is lagging behind our global market forecast of November 2020," said Stanislas Duquesnoy, a senior vice president at Moody's, in a report yesterday.

"Unless there is a timely recovery in their operating performance and free cash flow generation, airlines may face intensifying pressure to raise capital and dispose assets to avoid getting more debt and to protect their balance sheets,” he said.

The International Air Transport Association, which represents most airlines and is headed by former IAG boss Willie Walsh, said yesterday that it expects carriers to record net losses of $47.7bn (€40bn) this year. That’s better than the $126.4bn they lost last year, but still underscores the challenges facing airlines.

Mr Walsh said the crisis is “longer and deeper than anyone could have expected”.

“Losses will be reduced from 2020, but the pain of the crisis increases,” he said, adding that domestic markets have provided some optimism.

“Government imposed travel restrictions, however, continue to dampen the strong underlying demand for international travel,” he said. “Despite an estimated 2.4 billion people travelling by air in 2021, airlines will burn through a further $81bn of cash.”

“Effectively restarting aviation will energise the travel and tourism sectors and the wider economy,” said Mr Walsh. “With the virus becoming endemic, learning to safely live, work and travel with it is critical. That means governments must turn their focus to risk management to protect livelihoods as well as lives.”