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Explained: Why Lufthansa, IATA don’t see air travel taking off soon

International Flights Resumption: The International Air Transport Association (IATA) has recently projected that global passenger traffic will not return to pre-Covid-19 levels until 2024, a year later than previously estimated

Written by Abhishek De , Edited by Explained Desk | New Delhi | Updated: August 8, 2020 12:43:13 pm
German airline group Lufthansa Thursday reported its worst quarterly result in the company’s 67-year history

German airline group Lufthansa Thursday reported its worst quarterly result in the company’s 67-year history while saying it does not expect air travel demand to return to pre-Covid-19 pandemic levels before 2024. The development reflects the mood in the overall aviation industry, with international air travel down to a trickle following a second wave of infections and the subsequent re-imposition of quarantine guidelines in various parts of the world, similar to what the UK has imposed on Spain.

The Geneva-based International Air Transport Association (IATA), which represents about 290 airlines comprising 82 per cent of global air traffic, has recently projected that global passenger traffic will not return to pre-Covid-19 levels until 2024, a year later than previously estimated.

The IATA expects air traffic will fall by 63 per cent in 2020 compared to 2019, triggering the worst financial performance in the history of commercial aviation at a loss of record $85 billion this year and in 2021 — nearly three times the losses after the 2008 economic slump.

What has Lufthansa said in its quarterly statement?

German airline group Lufthansa has reported a net loss of 1.49 billion euros ($1.77 billion) for the second quarter, Reuters reported. In normal times, summer represents the only profitable period for many carriers.

However, Lufthansa said it carried 96 per cent fewer passengers during the April-June quarter and experienced an 80 per cent drop in revenue. Its revenue dropped to 1.9 billion euros from 9.6 billion euros in the same quarter year-on-year. Most of that revenue came from the company’s cargo and maintenance businesses

“We are experiencing a caesura in global air traffic. We do not expect demand to return to pre-crisis levels before 2024,” Chief Executive Carsten Spohr said. The company has received a government bailout worth 9 billion euros to enable it to keep flying. Lufthansa said last month it would cut 20 per cent of its leadership positions and 1,000 administrative jobs.

Lufthansa has started flying short-haul vacation flights, with its operations in July reaching around 20 per cent of last year’s levels. It is planning to increase short- and medium-haul flight operations to 40 per cent in the third quarter and long-haul capacity — normally a key source of earnings — to 20 per cent.

A man wearing face mask to protect against coronavirus waits in line to check-in at Sheremetyevo international airport, outside Moscow. (AP)

What is the present situation of airlines? Which carriers have resumed flights?

According to a Bloomberg report, some 34 carriers have wound up their businesses so far this year, up from 27 in 2019 but short of the 63 that went under in 2008 during the economic crisis.

Airlines that have folded include UK-based Flybe, SunExpress Deutschland, which carried German tourists to Turkish sunspots, Miami Air, and the OpenSkies unit of IAG SA. Richard Branson’s Virgin Atlantic Airways Ltd. has filed for Chapter 15 bankruptcy protection in the US.

So far, only a handful of carriers like United Airlines, Delta Air Lines, Etihad Airways, Emirates, British Airways, Lufthansa have resumed international flights to select destinations. Here is the full list 

Why have international flight operations not taken off?

While several countries are gradually opening their air space and lifting lockdown restrictions, a host of quarantine rules and guidelines in arrival destinations and spontaneous lockdowns owing to a second wave of Covid-19 infections seems to have affected the sentiment of flyers.

To mitigate quarantine hassles, governments are implementing “travel bubbles” or air bridges between countries, allowing citizens to travel freely between specified nations. However, there’s still the risk that such efforts will be short-lived given the resurgence of the infection.

Italian Healthy ministry personnel check passengers who disembarked from a flight from Bangladesh at Rome’s Leonardo Da Vinci international airport in Fiumicino (AP)

For example, the proposed travel bubble between Australia and New Zealand is on hold for months after a surge in infections saw a stringent lockdown imposed in Melbourne and a state of disaster being declared in Victoria The Philippines has also halted non-essential overseas trips just a month after resuming service.

Compounding the crisis has been a collapse in lucrative business travel, particularly on key routes across the Atlantic and linking China with Europe, which make up a major part of full-service airlines’ earnings, a Bloomberg report said.

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Borders across Europe, Mexico, the Caribbean, and some Pacific island nations have begun to reopen to non-essential travel even though many countries across Africa and South America are in lockdown. US border closures remain in place with Europe, Mexico, and Canada.

The underlying consensus among public health officials and travel industry executives is that international air travel will continue to remain skeletal until a Covid-19 vaccine is administered globally.

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