There are few crumbs of comfort for European airlines as they look back on a worse-than-expected summer season and forward to what could be a bleak winter.

Passenger traffic has risen during the third quarter from what was, in many cases, a standing start. That recovery, however, has neither been as strong as expected, nor an indicator of any meaningful momentum heading into the fourth quarter.

Indeed, Eurocontrol data shows traffic largely flatlining during August at around 50% of 2019 levels, then beginning to tail away in year-on-year terms by early September.

A major problem is that for all their good intentions around the reinstatement of networks, airlines are being stymied by continued restrictions on international travel – both intra-European and in markets such as the lucrative transatlantic sector.

Those measures are proving unpredictable and changeable at a moment’s notice, often reflecting spikes in Covid-19 cases in many countries.

The combined impact of those travel restrictions and a rise in confirmed cases of the virus is doing little to boost passenger confidence in air travel where it is possible – a theme highlighted by IATA in early September, when it again noted the disparity between the negative passenger situation and rising business confidence.

The industry body notes that as a result, the tried-and-tested crisis response of reducing fares has not been an effective lever during this stage of the crisis.

Europe’s narrative has therefore shifted in a matter of weeks, from one of optimism regarding a late-summer boost, to a grudging acceptance that the chances of a V-shaped recovery are now all but dashed.

That shift in the mood is perhaps best reflected in the actions of the region’s low-cost carriers, whose pan-European operations theoretically created the most scope for a speedy recovery in capacity, allied with their reliance on VFR and leisure traffic, which have so far recovered ahead of corporate markets.


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Europe’s low-cost carriers had been bullish on adding back capacity

Indeed, Wizz Air entered the second half of 2020 in a bullish mood, backed by a plan to take advantage of the retrenchment seen at other operators.

“This is our time,” Wizz chief executive Jozsef Varadi said on a call in late July. “This is the time that sorts winners from losers. We need to maximise our advantage coming out of this situation.

“Really the objective here is to structurally take advantage of the pandemic situation and deliver long-term competitive advantages through the network development of the airline.”

Around the same time, EasyJet – which had earlier announced plans to cut around 30% of jobs from its 15,000-strong workforce – said that it was expecting to increase its flight activity to 40% of originally-planned capacity in its fiscal fourth quarter, up from the previous estimate of 30%.

Such developments raised the tantalising prospect that the summer season might pan out better than expected.

But the positivity did not last long.

By early September, Wizz had announced that it was no longer expecting to further increase capacity between October and the end of the year as fresh travel restrictions in Europe were tempering demand.

The airline had been expecting to lift capacity to around 80% in the last quarter of the calendar year, from around 60% in July-September. But noting renewed travel restrictions across Europe – particularly in its home market of Hungary – it said that if mobility restrictions across its network were to persist, capacity would remain at about 60% for the quarter.

Days later, EasyJet – which had been more cautious than its rivals in reinstating capacity – scaled back its plans for the June-September period.

“Following the imposition of additional quarantine restrictions to seven Greek Islands and the continued uncertainty this brings for customers, demand is now likely to be further impacted and therefore lower than previously anticipated,” said EasyJet chief executive Johan Lundgren.

”We now expect to fly slightly less than 40% of our planned schedule over the current quarter. We will continue to take a prudent and conservative approach to capacity, as we have done during this period.

“It is difficult to overstate the impact that the pandemic and associated government policies has had on the whole industry,” Lundgren adds.

Pan-European low-cost giant Ryanair had already said in mid-August that it would reduce its planned capacity for September and October by 20% as demand for intra-European travel weakened amid government-imposed restrictions.

Citing the impact of “continuing uncertainty over recent Covid case rates in some EU countries”, the airline said the cuts would be achieved through frequency reductions, rather than route closures.

The Dublin-based operator had reached around 60% of pre-Covid capacity in August.

“These capacity cuts and frequency reductions for the months of September and October are necessary given the recent weakness in forward bookings due to Covid restrictions in a number of EU countries,” Ryanair states.

The impact of weakening demand was underlined when the carrier’s chief executive, Michael O’Leary, told Reuters on 9 September that the airline now expects to carry 50 million passengers for the year ending March 2021 – 10 million fewer than it was projecting in July before the run of travel restrictions.


These network and capacity cuts do not bode well for a winter season that is likely to prove punishing, particularly for operators that were already struggling pre-Covid.

Among the most stark examples in Europe is Norwegian, which has warned that it will need more funding to survive the crisis.

The carrier has been in ‘hibernation’ mode since the crisis began – expecting to operate between 20 and 30 aircraft for the remainder of the year before stepping up services next summer – and required a major financial restructuring to tap vital rescue aid from the government.

“The Covid-19 crisis has impacted aviation and the travel industry particularly hard, and most companies need government support to survive,” said Norwegian chief executive Jacob Schram in late August. “We are thankful for the loan guarantee made available to us by the Norwegian government, which we worked hard to obtain. However, given the current market conditions it is not enough to get through this prolonged crisis.”

The company notes the financial restructuring, which also included a public offering, resulted in improvements to its equity position by NKr15.3 billion ($1.7 billion) during the first half of 2020.

But it adds that even with this, the restructuring of aircraft and vendor financings is still ongoing.

”There is significant uncertainty surrounding the long-term effects of the Covid-19 pandemic,” Norwegian says. ”The company currently estimates that it will need additional working capital during the first quarter of 2021 to meet its obligations in the upcoming 12-month period.

Elsewhere, the big network groups have been attempting to shore up their finances – often with the help of government bailouts amid projections of a slow recovery, particularly in the corporate-passenger markets that are often a critical revenue stream for such operators.

By their very nature, these large groups have been less nimble than the low-cost operators in terms of network and fleet-allocation flexibility, with their focus since June being more explicitly on right-sizing for the projected slow comeback of traffic into 2021 and beyond.

Among recent developments, Brussels Airlines was the latest part of the Lufthansa Group to receive regulator approval for a government bailout in late August – this time an aid package for up to €290 million ($343 million).

Lufthansa Group said earlier in August that it intended to lift capacity on long-haul routes to 20% of last year’s figure during the third quarter, and to 40% on short- to medium-haul routes.

By the end of this year, it expected to be operating to 70% of its long-haul destinations.

But chief executive Carsten Spohr warned: “Especially for long-haul routes there will be no quick recovery.”

The group has embarked on a corporate overhaul designated ‘ReNew’ which includes plans to cut up to 22,000 full-time positions across the group.

Towards the end of August, it struck a deal with the union representing German pilots, featuring concessions that mean redundancies for “operational reasons” will be averted until at least the second quarter of 2021.

Job cuts into the thousands have also been announced at Air France-KLM, as the group’s two carriers both benefit from government bailouts.

The unclear path ahead remains a key theme, with KLM noting at the end of July that it is “open to the possibility of further reductions” in employees if the fall in air travel demand is worse than the 20% it expects over the coming two years.

The Dutch flag carrier announced it would be cutting 5,000 jobs from its workforce of 33,000, while Air France had earlier announced plans to cut more than 7,000 jobs out of a workforce of around 44,000 staff.

Notably, however, the group as a whole has largely kept its aircraft orders in tact, beyond the short term.

Just six aircraft ordered by Air France-KLM have so far been pushed back to later delivery slots, although KLM has yet to detail its full fleet plan.

Air France-KLM says that its competitiveness and sustainability is closely tied to its fleet and network strategy.

“Mid- and long-term fleet investments drive the exit from the current crisis,” it states. “The group therefore intends to keep the schedule as much as possible intact of committed fleet deliveries between 2021-25.”

British Airways and Iberia parent IAG meanwhile agreed a €2.75 billion capital increase on 8 September, to which Qatar Airways – its largest shareholder with 25% – had already signed up to in late July.

IAG says the increase will strengthen its balance sheet and liquidity, and reduce financial leverage, given that it does not expect global passenger demand to recover to pre-crisis levels until at least 2023.

Nevertheless, outgoing IAG chief executive Willie Walsh warned that obtaining liquidity will offer a false sense of security to airlines unless they fundamentally adapt their business to reflect a different post-crisis market.

Walsh points out that British Airways’ second-quarter operating loss of £711 million ($936 million) eclipses that of previous crises – including the £187 million loss for the quarter immediately following the 11 September attacks in 2001 and the £309 million loss for the first three months of 2009, when the company suffered from the global financial downturn.

“Nobody questions the fact that [these events] led to permanent structural change and required structural response,” he said during a half-year IAG briefing in early August. “Our view is the industry has structurally changed [again].”

Walsh expects the leisure market to return ahead of business travel, adding that he foresees a “change in structure” of the business market.

“Liquidity is very important, but what you do with it is even more important,” Walsh stresses. “Anybody who believes that this is just a temporary crisis and can be resolved through temporary measures is misguided.

Walsh stated that IAG is striving to close the acquisition of Air Europa by the end of this year, undeterred by the impact of the crisis, although it is reviewing the structure of the €1 billion ($1.2 billion) deal in response to the downturn.

On 10 September, IAG has pulled back its capacity planning for this year and next, after the initial encouraging signs of booking recovery in the air transport crisis started to level off.

It is expecting third-quarter capacity to be 78%, rather than 74%, down on last year’s figure, while the fourth quarter will involve a sharper correction – down 60% instead of the 46% outlined in IAG’s previous planning scenario.

Despite this reduction, IAG is still predicting that it will break even in terms of net cash flows from operating activities during the fourth quarter.


Notable among the smaller network carriers attempting to adjust to that structural change, Virgin Atlantic saw off an immediate threat to its existence when creditors and the UK High Court backed its recapitalisation plan in late August, unlocking £1.2 billion ($1.6 billion) worth of refinancing.

That development was not enough to stop the UK operator announcing that a further 1,150 jobs would be cut just days later, reflecting the continued challenges in restoring international air travel amid the global pandemic – in particular the key transatlantic market, which represented around 70% of the operator’s flying.

”Based on the current outlook, the airline is planning to a scenario in which transatlantic flying from the UK does not extend beyond current skeleton operations until the beginning of 2021,” Virgin Atlantic says.

Under this scenario it expects its fourth-quarter capacity to be around 25% of 2019 levels and warns revenues next year could be only half of those seen in 2019.

In Italy, meanwhile, a direct government grant of almost €200 million to Alitalia was approved by the European Commission in early September.

Italy’s government indicated in March that it would renationalise the struggling flag carrier as part of a broad set of emergency measures in response to the coronavirus crisis.

Also in early September, TAP Air Portugal disclosed it had received just under €500 million ($591 million) of its potential €1.2 billion state rescue loan from the Portuguese government.

TAP had earlier stated that it planned to operate 700 flights per week in September, bringing its network to around 40% of its pre-coronavirus level.

Elsewhere, Aeroflot Group has obtained state guarantees to enable it to secure two loans totalling Rb70 billion ($940 million), and has also received a subsidy worth Rb7.9 billion.

Aeroflot Group says the state measures “support our financial stability” and give the company the liquidity necessary to preserve jobs, while also citing structural advantages in its home market.

“Russia’s large domestic market and wide variety of tourist destinations is an important competitive advantage of the Russian aviation market compared with other global markets,” said Aeroflot Group finance chief Andrei Chikhanchin. “[It] means airlines can continue operations even while restrictions on international flights remain in place.”

In Turkey, meanwhile, a relatively large domestic market is also aiding the recovery for carriers such as Turkish Airlines and Pegasus. The tough outlook means, however, that the former agreed swingeing salary reductions for its staff in early September. Those cuts – including 50% wage reductions for pilots – will be in place until the end of 2021, subject to a review every six months.

In Nothern Europe, Finnair announced in late August that it had started negotiations to cut up to 1,000 permanent jobs – 15% of its total workforce – amid “exceptionally tight” travel restrictions in its home country.

”Covid-19 is the deepest crisis of aviation,” stated Finnair chief executive Topi Manner. “The pandemic and the exceptionally tight travel restrictions in Finland have impacted flight demand and we will operate only a small part of our capacity compared to last year.

“A rapid turn for the better in the pandemic situation is unfortunately not in sight. Our revenue has decreased considerably, and that is why we simply must adjust our costs to our new size.”

And at SAS – which obtained support from the Swedish and Danish governments, as well as its third major shareholder, for a revision to its recapitalisation plan in mid-August – demand is slowly returning, in line with the company’s previous ramp-up estimates.

SAS operated 25% of prior-year capacity in July and it expects to reach 40% by the end of the fourth quarter in October, it said in late August.

“It is difficult to predict how demand will evolve during the coming [autumn] and winter due to changed customer behaviour with bookings being made closer to the date of travel,” states chief executive Rickard Gustafson.

He suggests that “more normalised levels” for demand in the industry might be reached around 2022, with pre-crisis levels following “a few years thereafter”.

Finally, pan-European leisure operator TUI disclosed in mid-August that it had agreed a second support package from state-owned development bank KfW, of €1.2 billion ($1.4 billion). The deal involves the addition of €1.05 billion to TUI’s revolving credit facility and the issuance of a €150 million convertible bond to German economic stabilisation fund WSF.

TUI Group chief executive Fritz Joussen had earlier indicated that the business would focus on becoming more “partner-friendly” in the future. Speaking to German newspaper Borsen-Zeitung in early August, he said that TUI’s need for capacity does not mean “that aircraft are on the balance sheet”.

His comments came amid media reports that the group’s German airline unit TUIfly is considering a joint venture with compatriot leisure carrier Condor, whose purchase by LOT Polish Airlines’ parent company fell through in the early days of the crisis.