A continued relaxation of the ‘use it or lose it’ regulations governing airport take-off and landing slots is essential to aid airlines’ restart of operations and ensure connectivity in the longer term, IATA has warned.
Regulators suspended the rules earlier this year as the coronavirus crisis was building, allowing airlines to cancel services without losing valuable slots.
But with air travel now beginning to return, there is industry concern that airlines could be forced to return to the skies while passenger demand remains weak.
“In order to survive airlines will need the support of regulators and governments to enable them to … respond to where consumer demand is taking place,” says IATA chief economist Brian Pearce. “In particular, they need an extension of the slot-rule waiver.”
The problem is compounded by passengers’ booking flights much closer to the date of departure than normal, making it difficult for carriers to plan their schedules. They currently have very little idea what demand will look like for the winter season, even though under normal circumstances planning for it would have been well under way.
Adding to the concerns, the latest consumer survey from IATA shows that confidence in booking tickets has actually decreased over the past two months. Whereas in early April 61% of people said they would fly within “a few months” of the end of the pandemic, now only 40% do.
“It means airlines are still fragile,” says IATA director general Alexandre de Juniac. “The current waiver has been very useful in giving airlines flexibility in the restart.”
The danger for governments, IATA suggests, is that if the rule is not extended, those slots normally used for long-haul services will instead be taken over by short-haul providers, as long-haul demand is forecast to take longer to recover. “The loss of slots could mean when demand returns to stronger levels, these long-haul connections could be permanently lost,” says Pearce.
“There were good reasons why the 80:20 rule was waived for the summer season,” de Juniac argues. “Regulators should apply the same commonsense approach again and waive the rule for the winter season as well. Airlines need to focus on meeting what consumers want today, without trying to defend the slots needed for what their schedule might look like a year from now.”
IATA is also requesting the continuation of several other measures to assist carriers as they restart their operations, such as provision of financial assistance “in ways that do not increase industry debt levels”. This could include subsidising domestic operations and waiving airport and air traffic control charges.
Wage-subsidy schemes that have contributed $35 billion in relief to airlines should also be tapered “more slowly”, IATA says, in order to give “airlines more time to recover and minimise job losses”.
Governments should also consider funnelling relief through corporate and indirect taxes such as value-added tax or taxes on passengers or fuel, in IATA’s view, and avoid any increases in charges and fees that would hit carriers as they struggle to get back on their feet.
IATA’s concern is that as passengers return to the skies, there will arise a perception that airlines no longer need assistance. But it points out it expects the sector’s losses to reach $84.3 billion for the year, while the northern summer season – the period in which most airlines make the bulk of their earnings – will not be operated at a profit, and “the winter season will be even more challenging amid the recovery from Covid-19”.
“Financial relief measures are still desperately needed,” says de Juniac. “And policy-relief measures like a slot-usage waiver remain critical. Governments need to grant that by no later than the end of July to provide at least that certainty for this beleaguered and battered industry.”