Airlines Expectations for any Recovery in 2021 are Fading

Airlines Expectations for any Recovery in 2021 are Fading
           Modest Weekly Growth Hides Longer-Term Trends
                                Source: OAG
The ups and downs of aviation’s recovery continued this week with capacity
increasing back up to 78.9 million seats a week, a modest increase of 0.7%
and over half a million seats added. Is that growth cause for optimism? Well,
at the beginning of July airlines were planning to operate some 93.3 million
seats so reduced operational capacity by some 15% in the space of seven
weeks before travel as they matched capacity to available demand. Key
markets such as the US, Europe and China to virtually anywhere remain
locked with no sign of anyone wishing to reopen their borders.
As we head into September and the summer season slowly sets, airlines will
be wondering where the good news really is and what their fortunes will be
for this winter; even the US domestic market seems to be stalling as the Delta
variant continues to spread across the country. IATA’s expected industry
losses for this year are likely to be larger than they expected unless
something significant happens soon.
This week’s latest schedule changes through to the end of October saw
another 18 million seats removed by airlines around the world from their
networks. Every day around 252,000 seats are being removed, and as airline
network planners return to work from well-deserved vacations this week we
can expect that number to increase in the next few weeks.
Chart 1 – Scheduled Airline Capacity by Month

Source: OAG

The recovery in this week's data is based around an 8% increase in capacity
across the North East Asia region with all of that increase attributed to growth
in China with all of the majors adding back more seats to the market with
China Eastern leading that recovery with over 23% capacity growth. Over 1.4
million domestic seats were added week on week whilst international
capacity fell slightly, less than 1% of all seats in the Chinese market are
allocated to international services; that must change for any recovery to
begin.
Sadly, capacity cuts continue in the Southwest Pacific region with domestic
capacity in Australia cut by another 22% week on week. In 2019 there were
some 1.5 million weekly seats in the Australian domestic market, this week
there will be around 480,000 and if that looks bad then international capacity
is at less than 15% of its normal levels. New Zealand is equally as grim with
just 12% of normal pre Covid-19 international capacity. And of course, in both
markets, airlines are operating with selling capacity way below the aircraft’s
commercial capacity, thank heavens for cargo!
South East Asia is another market heading in the wrong direction with most
major markets reporting declines in weekly capacity. On a more positive note,
Singapore, the pioneers of travel bubbles have now come up
with Vaccinated Travel Lanes (VTL’s) to replace bubbles with Germany
and Brunei the first countries to achieve such designation, let’s hope they are
more successful than the bubbles. Domestic capacity in Thailand this week
has been cut by around one-third as further outbreaks hit their attempts at a
recovery, last week Thai Airways reported that they are working
on 600 different projects to reduce the airlines costs!
Table 1– Scheduled Airline Capacity by Region

Source: OAG

Across the top twenty country markets there is little movement aside from the
previously mentioned optimism in China and another reduction in capacity in
Indonesia, a market where airlines are chopping and changing capacity every
week. Images of Australian nationals being suddenly repatriated from Bali
back home last week will have done nothing for consumer confidence in the
resort destination and the thought of a 3-week quarantine in Australia will not
seem like a holiday for many.
It seems incredible, although equally a reflection on the global impact of
the pandemic that eighteen of the top twenty countries in August 2019 are
still in the top twenty; the pain has been equally shared across all markets!
Only Australia and Thailand have dropped out of the rankings to be replaced
by Greece and Colombia both country markets that have perhaps taken a
more relaxed approach to travel restrictions.
Table 2- Scheduled Capacity, Top 20 Country Markets

Source: OAG
Aside from the Chinese “Big Three” adding back capacity this week, there is
little movement amongst the top twenty global airlines with less than a 2%
swing either up or down across the remaining carriers. Maybe that is a sign
of market stability or perhaps a reflection that no one has a clue about where
to add back or remove capacity any longer. Despite a round of CEO optimism
in the early part of the summer it seems that the flames of a recovery are
fading as quickly as Arsenal’s supporters’ chances of having to buy a Ryanair
flight to Europe next year.

Table 3- Top 20 Airlines Capacity

Source: OAG
Despite the current trends in many markets being gloomy at best in any data
there are always some encouraging points that can be picked out, sometimes
you just have to look harder to find those. One of those more optimistic
pointers is in the number of airport pairs that are being operated on a weekly
basis and how they have recovered through the pandemic. The chart below
shows the weekly number of airport pairs being operated; this week’s number
stands at 14,744 compared to 15,885 at the beginning of the pandemic, a
reduction of just 7% compared to a global capacity reduction of 28%; that’s
a positive, isn’t it?
Chart 2 - Operating Airport Pairs

The next few weeks will determine just how good or perhaps more likely 2021
will be for the world’s airlines. A reopening of the US market for Europeans
in the next week or so will undoubtedly lead to the normal rush of demand
that we have seen in other markets; if it remains closed then for many carriers
the forthcoming winter season will be as bad as last year. International
capacity to and from China is unlikely to get any better before the early part
of 2022, Australia and New Zealand will be based on current vaccination
trajectories and public resistance be locked in until the second quarter of
2022. And of course, the UK Government will announce its latest list of red
list countries; we shouldn’t expect any common sense to be applied to that
update.
Even with a pair of rose-tinted glasses, it’s not looking good this week I’m
afraid.