The intelligence specialist reports that major legacy airlines, which are dependent on both international connecting traffic and premium business demand, are suffering from decreasing passenger numbers as secondary Covid-19 spikes are seen in many countries (notably France, Spain, Germany and Italy in Europe, although most countries are witnessing spikes) as well as the fact that their usual corporate travellers are working from home and avoiding flying.
Additionally, point to point carriers - normally capable of stimulating demand via low fares - are unable to kindle any real interest as no traveller seems willing to book more than six weeks in advance.
OAG has identified that half a million seats are being dropped from airline inventories each week as the industry prepares itself for perhaps the most telling six-week period in the Covid-19 recovery phase.
It notes that "with the possibility of increasing travel lockdowns, airlines seeking rights issues, airline CEOs returning to investors for 'fireside chats', Government support programmes expiring, winter 2021/2021 slot usage issues and of course nervous consumer demand, the next six weeks will probably shape the next 12 months capacity plans for many airlines." It warns: "The early indications are not looking good, are they?"
Airlines are still adjusting schedules at short notice and will likely continue to make such changes for quite some time. The vicious circle of travellers booking flights that are subsequently cancelled at short notice will, OAG suspects, run through the whole winter season.
It isn't just the virus. The three largest regional markets in the world account for some 72% of all capacity and all three report reductions for a range of reasons. In North East Asia capacity cuts in China and Japan have dragged back overall capacity; in Europe major low cost carriers have responded to changing quarantine requirements, while in North America every indication from the US majors is of further capacity cuts to be made, sadly accompanied by staff cuts and furloughs. Plus airlines in the US are already locking down to avoid a series of hurricanes that could hit at the end of September.
Collectively Ryanair and easyJet dropped 630,000 seats week-on-week as a combination of the end of the European school holidays and quarantine restrictions impact demand. Over the same two weeks last year they dropped less than 25,000 seats, which gives an idea of how quickly and dramatically airlines have begun to cut back capacity once again.
OAG reports lower South America has actually seen a +52% increase in weekly capacity although that does come with a cautionary note that whilst many of the major airlines have scheduled to recommence services, the probability of all of the planned capacity operating remains very small.
Some 450,000 seats were dropped in the US and 240,000 in China, which was expected to be the single largest aviation market by 2023/24. China is ahead of where it expected to be but for all the wrong reasons. Without an extension of the US CARES Act, China could stretch even further ahead by Mar-2021.
Some positive news emerged from India however. While the country reported 75,000 new cases in one day, further capacity was approved by the authorities which should boost yields that are already under pressure in the domestic market.
But despite the best endeavours of airlines around the globe, it feels like the hoped-for recovery in capacity and subsequent demand has stalled.
The most interesting observation from OAG, one that goes beyond the above recent article in The Blue Swan Daily about airlines removing flight change charges, is that we may have reached the point where some airlines begin to pay for some people to travel, offering free seats and then seeking to generate sufficient ancillary revenues to support the service whilst at the same time rebuilding traveller confidence.
Even in a crazy industry like aviation that would register as unlikely. It wasn't that long ago that one ultra low cost airline was considering charging passengers to use the toilet and even to allow standing passengers (i.e. not seated at all). But these are even crazier times and 'needs must.'