Travel industry 2022 lookahead: Are we back to square one?
Less than a month ago, Luis Gallego – chief executive of British Airways’ (BA) owner IAG – was telling aviation stakeholders the industry’s recovery was on its way.
Speaking at the Airlines UK conference in Westminster, Gallego revealed that “transatlantic bookings have reached almost 100 per cent of 2019 levels.”
“I expect North Atlantic routes to reach full capacity by next summer,” he said. “And we think we’ll return to pre-pandemic levels of flying in 2023.”
That was two days before the World Health Organisation (WHO) received reports of the latest Covid variant, Omicron. Since then, the global travel industry has been hit with a new wave of restrictions.
In the UK, the aviation sector lambasted the government’s decision to bring back the travel red list – which has now been scrapped less than two weeks after its re-introduction – calling on the government to support ailing businesses.
The industry has also attacked neighbouring countries such as France and Germany for their decision to effectively ban travel from the UK, calling it a “hammer blow to the winter travel industry.”
As concerns over a possible tightening of restrictions mount, what are the UK aviation industry’s predictions for 2022?
Providing financial support
According to Francesco Ragni, aviation lecturer at Buckinghamshire New University, despite dealing with Covid for around 20 months, the UK Government’s decision-making process still suggests “a lack of understanding of how the industry works.”
“Recently we had two changes of rules in a single week,” he said. “It’s hard for airlines and passengers to react to that and plan accordingly.”
Despite a series of public outcries, the UK Government has not offered the industry a tailored economic support scheme since the end of furlough.
Just yesterday, trade body Airlines UK condemned Whitehall’s lack of support, saying “offering more debt to a sector that has already borrowed billions of pounds is not sustainable.”
“We have a bleak few months ahead with potentially little to no revenue, yet still need to be able to deliver for passengers and UK plc in the spring and summer,” said Airlines UK’s chief executive Tim Alderslade. “The cost to the wider economy will be hundreds of millions of pounds if we can’t open up.”
“Unless the government takes action to remove the remaining emergency travel restrictions, the Chancellor must urgently come to the table with economic support for the aviation industry.”
The Treasury might be forced to cough up economic packages if the situation does not improve, Ragni added.
“Government’s dismissive view on aviation has never really changed since the beginning of the pandemic and there is no evidence to suggest it will,” he added.
“But [it] might be forced to provide financial support if the situation gets worse in spring/summer, the season where the industry normally makes most of its profit.”
Ragni’s words were echoed by travel association ABTA which criticised the Chancellor’s funding announcement of today.
“Travel agents, tour operators and travel management companies will rightly be asking why they haven’t been given the same treatment as other businesses that are suffering at this time,” said Luke Petherbridge, ABTA’s director of public affairs.
“As the sector approaches what should be the peak sales period for booking holidays for summer 2022, businesses are instead facing another round of heart-breaking and demoralising cancellations, with no indication that the government is listening to the challenges they are facing.”
Recovery will be slow (and volatile)
Travel, in particular business travel, will continue to remain down for the good part of next year, said Clive Wratten, chief executive of the Business Travel Association (BTA).
“With Omicron, we are now not expecting any meaningful return to business travel before Q2 of 2022,” he told City A.M. “The business travel sector is at 20 per cent of 2019 levels and the new variant is already having a catastrophic impact on the industry.
“Our latest data reveals that in the first week Omicron was identified, business travel plummeted by 76 per cent on 2019.”
Wratten’s comments contradict data from aviation analytics platform Cirium, which predicted capacity could grow 47 per cent in 2022, returning to 2015 levels by the end of next year, City A.M. previously reported.
“The past year has had its challenges as we continued to face fluctuating cases of Covid-19, new variants – most recently Omicron – and varied vaccination programs per country,” said Cirium’s chief executive Jeremy Bowen.
“Cirium’s experts have analysed 2021 data and formulated forecasts for 2022 and beyond. Near the end of 2022, global capacity will return to 2015 levels, as we see a steep increase in more seats returning to the skies.
By the end of 2022, global passenger fleet will increase to 20,700 – a few hundred less compared with 2019 levels while business travel will surge by 36 per cent, Cirium added.
According to Susannah Streeter, Hargreaves Lansdown’s senior investment and markets analyst, the sector’s recovery will remain fraught with volatility.
“After an initial panic the financial markets are volatile but in wait and see mode,” she said.
“Travel stocks are higher today amid expectations the big new Covid wave crashing over economies will recede relatively quickly, saving the crucial spring and summer holiday season.
“As the WHO points out, it’s too soon to assess just how high hospital admissions will climb, so the weeks ahead are likely to stay fraught with volatility.’’
Streeter added the industry will continue lobbying for international standards when it comes to testing regimes.
“Confusion still reigns over requirements for PCRs and lateral flow tests and similar rules brought in by countries around the world would help restore confidence,” she told City A.M. today.
“Implementing a standard lower price for all lateral flow companies may damage the fortunes of entrepreneurs who set up testing companies to make a quick profit from the scheme, but would certainly bring more holidays within budget for more people, enabling bookings to bounce back.”
Rafael Schvartzman, vice president for Europe at the International Air Transport Association (IATA) highlighted yesterday in a blog post the need for ensuring a “better, faster and more coordinated management” of the situation.
“It’s unnerving to see that despite nearly two years of experience in handling this pandemic, too many governing bodies and authorities continue to make counterproductive decisions,” Schvartzman wrote. “In times like these, when volatility is a reality, airlines need flexibility.”
“ I would like the government to regulate the cost of Covid tests, as it happens in other countries like Italy, where the cost of a pre-departure antigenic test is fixed by law at €15,” added Ragni.
“I would like it to eliminate the mandatory hotel quarantine permanently, people should be allowed to do it at home, and generally be more sympathetic towards air passengers.
“It has been proved that air travel has a very limited effect on virus circulation, and people need to travel for a lot of important reasons that the government doesn’t seem to keep in great consideration.”