The current global health pandemic “is by far the biggest impact this industry has gone through,” said Alex Cruz in his evidence to the UK Parliament’s Transport Committee on the coronavirus implications for transport this week. The negative impact of Covid-19 is not something we haven’t heard before from airline bosses.
However, the comments from the British Airways chairman and CEO that the UK airline “cannot find much data or information to support optimism” and that in fact, there “is lots of information that shows this will be a very long recovery process” is not a positive outlook for the already embattled industry.
“The fact remains that people are still afraid of travelling,” acknowledged Mr Cruz who noted that British Airways is operating a flight schedule that is around a quarter to a third of its normal scale, and passenger levels are down to less than a fifth of those it had seen at the same time last year.
Mr Cruz noted in his evidence that in the immediate aftermath of the 2009 global financial crisis (GFC), British Airways lost GBP309 million. For comparison, in the second quarter of this year, the first full quarter of trading during the pandemic it lost GBP711 million and is currently bleeding an average of around GBP20 million every day.
The scale of losses is extreme and highlights how severe an impact Covid-19 is having on air transportation. Analysis by CAPA – Centre for Aviation, a provider of independent aviation market intelligence, analysis and data services, in its Airline Leader publication, highlighted earlier this month that the GFC was a mere shallow wave in comparison to the tsunami of turmoil cast by Covid-19.
Emphasising the scale of difference, in 2009 the century’s steepest global year-on-year drop in passenger numbers occurred post the global financial crisis, a fall of -0.4%. Estimates for the full year 2020 are that passenger traffic will be down by some -60%.
“There is no precedent for what is happening now. This is important to recognise, because it makes sound predictions from our new starting point impossible. Some things will never be the same again (even though many things that appear impossible today may look different in a year’s time),” said the CAPA article.
The British Airways boss shares a similar viewpoint. “All the data, all the information and the previous crises… point to the same conclusion: things have changed; the airline industry is fundamentally different,” explained Mr Cruz in his evidence. “The impact will be with us for many years,” he warned and “is not something that is just going to go away”.
After the global financial crisis, questions were asked if the business market would ever recover. It did, but it took some time. Had the coronavirus struck a decade ago, the commercial impact would have been vastly greater than even it has been today as at that time teleconferencing quality was poor and broadband WiFi was not widely available.
By the same token, the business travel recovery period would not be distracted by what is now an arguably viable online alternative. Mr Cruz said that in the case of British Airways the percentage of business travellers travelling in premium classes never recovered to previous levels after the global financial crisis, a stark warning for the current infinitely worse predicament.
Mr Cruz said that Covid has “devastated the business” and British Airways is “fighting for its survival” as he as he defended the airline’s decision to cut over 13,000 jobs, around a third of its workforce. Put simply, he said: “Fewer passengers means fewer flights, and fewer flights means fewer people required to actually service them… This is an impossible situation… We’re having to make incredibly difficult decisions as a consequence of this pandemic.”
The nature of this crisis means the “overall situation is quite challenging,” explained Mr Cruz, especially given the airlines does not see a short-term uplift in passengers. “All the feedback that we get, all the data that we get, all the companies we speak with, all the consumer groups that we speak with, are still pointing at a slow recovery process,” said Mr Cruz and he said he remains “worried on the evolution of the winter season”.
Travel sentiment, he said, was not being helped by “disruptive” weekly changes to the quarantine list and that “we don’t have a testing solution yet,” something many in the aviation industry are pushing governments hard to introduce. “And still our customers are paying APD (air passenger duty) even just to fly on domestic regional flights,” he added, which he describes as “disabling travel”.
Mr Cruz suggested the landscape could quickly improve from more decisive action by rulemakers. He said it is “incredibly important that we reach a testing regime of some sort as quickly as possible” to reduce quarantine periods. This, he said, could be introduced in the London – New York market, a city pair that is significantly important to the airline.
As The Blue Swan Daily has reported previously, the British Airways London Heathrow – New York JFK route was the world’s only billion dollar air service by annual revenue before Covid. In fact, the route is around a fifth more valuable than any other single airline global route. While current demand levels will be much reduced, freedom to serve the key business and leisure market would provide a key boost to the airline.
“We are making a suggestion that we actually run a test between London and New York, so we can give authorities on both sides of the Atlantic an opportunity to test different ways in which a particular testing regime would actually work,” said Mr Cruz. “This is imperative, so that we can drive the confidence of travellers so we can get business going again… We’re sitting here, we’re ready to go.”
Until such time Mr Cruz said the airline would campaign for more consistency around the quarantine list, and perhaps with a regional filter. “We need more regional considerations,” he said. “We need more detail and we need it fast.”
For British Airways this is especially valid to the trans-Atlantic market, where such an option would allow the airline to resume flights into destinations where Covid-19 infection levels are under control. “We can’t wait for the last state in the US to fall below the infection level,” he said that would open the door to restarting flights to other states or cities.
You can view the full UK Parliament’s Transport Committee session here: Formal meeting (oral evidence session): Coronavirus: implications for transport