The precipitous drop in air travel demand tied to the COVID-19 outbreak has airlines reeling. Around the globe schedules are slashed and aircraft grounded as companies and countries alike impose travel bans and general fears reduce leisure demand. And while airlines grapple with the immediate concerns of revenue shortfalls there are also longer-term considerations around ensuring they can resume operations once the health issues subside.
The world is facing a huge challenge to prevent the spread of COVID-19 while enabling the global economy to continue functioning. Airlines are on the front line of that challenge and it’s essential that the regulatory community work with us to ensure airlines are able to operate in the most sustainable manner, both economically and environmentally, to alleviate the worst impacts of the crisis.– Alexandre de Juniac, IATA’s Director General and CEO
At the world’s busiest airports, where airlines battle for access, the landing slots system controls who can schedule flights. It also creates a secondary market that can see landing rights traded for massive sums of cash. But retaining the slots once allocated also means using them 80% of the time, even if no passengers are on board. Such an approach makes sense when demand is high, but during a trough demand period running the flights is bad news at many levels. Still, airlines thinking long term must continue to run potentially empty flights in hopes of keeping the slots for next year.
IATA’s big ask
The International Air Transport Association (IATA) wants to help its airline members on this front. IATA is actively working to waive the 80% usage requirement at some 200 airports around the globe.
Given these extraordinary circumstances as a result of the public health emergency, the collective view of the airline industry is that the application the 80% rule during the upcoming season inappropriate. Flexibility is needed for airlines to adjust their schedules according to extraordinary demand developments.
Supporting its claim, IATA offers some harrowing statistics related to the drop in demand.
- A carrier experiencing a 26% reduction across their entire operation in comparison to last year
- A hub carrier reporting bookings to Italy down 108% as bookings collapse to zero and refunds grow
- Many carriers reporting 50% no-shows across several markets
- Future bookings are softening and carriers are reacting with measures such as crew being given unpaid leave, freezing of pay increases, and plans for aircraft to be grounded.
Individual airports are able to suspend the 80% rule and several, mostly in China, have already chosen to do so. But is the Coronavirus situation severe enough to warrant a wholesale move on a global basis? While the airlines believe the answer is a resounding yes not all regulators are as convinced.
Europe rejects IATA’s request
Just a day after the recommendation was made it was rejected by Europe’s Directorate-General for Mobility and Transport (DG MOVE) Director-General Henrik Hololei. Speaking at the Airlines 4 Europe Aviation Summit 2020 this morning in Brussels, Hololei suggests that “We need solid data” before declaring a blanket exemption for the industry.
Given that more than half of the slot-regulated airports globally sit in Europe that rebuff is a significant hit to the IATA request.
Lufthansa Group CEO Carsten Spohr, speaking at a later session, was blunt in his assessment of the situation, “Before we lose the slots we will fly the aircraft empty.” Spohr also acknowledged just how bad that would be from an environmental perspective. But the carrier is running the business first.
And so the industry is back to the challenge of long term planning versus short term obligations.
It is important to remember that IATA is a trade group representing the airlines, lobbying for changes that deliver benefits to the operators, not necessarily all industry players. Still, the ability to maintain a long-term outlook and adjust along the way is important to delivering growth in the market.
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> A hub carrier reporting bookings to Italy down 108%
You know you’re doing badly when you have fewer than zero bookings!
Seth Miller says
Indeed. I’m still not sure how they’re defining the math on that one, but I’m willing to accept that it is very bad.
It’s the % change in net new bookings, so “new bookings” minus “new refunds”.
E.g. if last TIMEPERIOD they took in 100 UNITS of net new bookings, this TIMEPERIOD they are down -8 UNITS of net new bookings.
Seth Miller says
Makes some sense, I guess. Thanks!