As European carriers lay out their plans for restoring passenger services, one of the most notable aspects has been a desire to rebuild the spread of networks ahead of volume.
That approach was evident as early as mid-May when pan-European budget carrier Ryanair outlined its plans for service resumption. The Irish carrier said it aimed to reinstate flights across 90% of its network from the beginning of July. But while much of the network will be available, with most bases active, the overall schedule – around 1,000 daily flights – will only amount to 40% of the airline’s normal flying timetable.
“There will be fewer daily [and] weekly frequencies on trunk routes, as Ryanair works to restore some services on the widest number of routes, rather than operating high frequency services on a small number,” the carrier said.
That is an approach others have followed. Dutch carrier KLM, for example, plans to operate 95% of its European network and serve 80% of intercontinental destinations by August.
In July, KLM will resume 80% of its European network and return to 75% of long-haul destinations, albeit with fewer frequencies than before the Covid-19 pandemic. “KLM has opted to restart as many destinations as possible first, in order to offer customers a wide choice and then to increase frequencies and capacity,” states the airline.
While half of the carrier’s long-haul flights are currently cargo-only, KLM says that as international travel restrictions are relaxed, “an increasing number of intercontinental flights will be allowed to carry passengers again from July onwards”.
KLM plans to operate 11,000 European and 2,100 long-haul flights in August, just over half the capacity it deployed in August 2019. “The recovery has therefore started cautiously, but the level of 2019 is far from being approached,” says the carrier.
Cirium schedules data for July shows short-haul capacity within the European Economic area still down around 40% compared with the same month in 2019. That marks a significant improvement on the 85% reduction in capacity for June on the same month last year. The same data shows August capacity may only be down a fifth on the same month in 2019.
Unsurprisingly, given the travel restrictions still in place, capacity is still further down in long-haul markets. Data shows capacity between European Economic Area and North America still down more than 70% in July.
Pricing to stimulate travel demand
The return of short-haul capacity in Europe reflects determination by governments across the region, given the pandemic is under relative levels of control, to kick-start the badly hit tourism and hospitality sectors. States have been lifting border controls in line with European Commission guidance to re-open internal borders among Schengen member and associated states. Some easing in quarantine measures in Spain and the UK is also under way – or anticipated.
But faced with likely nervousness among the public to travel again, both from a safety or economic uncertainty perspective, a price war to secure what business there is seems likely.
“Seat sales will be necessary to stimulate demand,” said Ryanair Group chief executive Michael O’Leary in May. He expects that, buoyed by government financial assistance, some airlines will sell seats at a loss in order to attract passengers and hold market share. “Wherever there is below-cost selling, we will price below the below-cost selling,” he vows.
Lower prices will enable carriers to attract consumers’ attention, and are characterised by what Peter Morris – chief economist at consultancy Ascend by Cirium - terms as “an attempt to change the dialogue around flying, to restart the industry and get a critical mass”.
“If airlines started charging ticket prices at a level to make a profit, with load factors that may be only 40%, they would have to double the fares,” Morris points out, and such pricing would obviously put customers off. “They are damned if they do and damned if they don’t,” he adds. “If they sat tight and flew no flights, eventually they would go bankrupt anyway.”
One low-cost carrier determined to be on the front foot in the recovery is central European budget carrier Wizz Air. The carrier has announced a string of new base announcements in the past month, including new operations at Bacau, Dortmund, Larnaca, Lviv, Milan Malpensa, St Petersburg and Tirana. The single-aircraft St Petersburg base marks its first in Russia, while in basing five aircraft at Malpensa it heightens competition with existing low-cost players at the Italian airport.
“We are reviewing our aircraft allocation and will react to the new market reality by taking advantage of opportunities across Europe as other carriers withdraw capacity,” Wizz said earlier in June. “Despite difficult conditions, we expect to grow the number of seats by roughly 9% compared to 2020.”
But the climate in some of the markets that were the focus of attempts to secure share before the crisis, may be different in the recovery. For example, after double-digit short-haul capacity growth at Vienna Airport last year, things have changed for two of its operators, Lauda Air and Level Europe.
The latter, the Vienna-based IAG subsidiary established in 2018, filed for insolvency in June. Cirium fleets data shows Level Europe had operated six leased Airbus A320 family aircraft from the Austrian capital.
Lauda’s Austrian arm is being repositioned as a wet-lease carrier and the Ryanair subsidiary is ending the employment of crew members who did not support a new collective labour agreement, as part of a “survival plan” to secure operations in Vienna.
Ryanair had in May announced the closure of Lauda’s Vienna base amid a labour dispute with Austrian union Vida. That decision was later reversed when an 11th-hour agreement was reached.
Despite the new labour terms, Lauda says it still faces “substantial challenges”. As part of survival measures, it says it will “become a wet-lease operator for other airlines”, noting that “the Lauda brand will continue in Vienna”.The carrier’s Vienna-based fleet will be limited to 10 aircraft rather than 16 originally envisaged.
Additional reporting by Cirium