Frankfurt Once again, there is a Greek letter of concern in the aviation industry. After Delta it is now Omicron. This is the name of the latest variant of the coronavirus. Its rapid spread is causing governments to take well-known countermeasures in these weeks: travel restrictions.
This was already noticeable in December. According to the airport association ADV, the number of passengers at German airports fell from 1.7 to 1.57 million in the week from the sixth to the twelfth of December compared to the previous week. But even if the recovery in air traffic is set back a little as a result, that does not change the generally positive outlook for the industry. The following factors speak in favor of this.
First: the great urge to travel. “The last 18 months have shown that people’s desire to travel is unbroken,” said Friederike Burge from Skyscanner a few days ago. And referred to a survey by the travel portal. There, 58 percent of the German respondents said that they would be more confident about the year 2022 when it comes to travel.
The airlines feel that. The Lufthansa subsidiary Eurowings is planning almost as many flights in the coming summer as before the corona pandemic. It is still unclear whether the first important travel time at Easter will bring the hoped-for momentum or whether it will be overlaid by the consequences of the omicron mutation.
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Second: The vaccination rates are likely to be significantly higher worldwide than in the summer of 2021. In many countries, people have been able to pick up their booster vaccinations for weeks.
Third, fuel prices could fall. The International Energy Agency (IEA) assumes that there will be a surplus of the important raw material oil in 2022. This means lower costs for the airlines. In addition to personnel costs, fuel is your largest cost item.
However, there are a few factors that could hold back aviation recovery. On the one hand, there is the growing competition, which is driven primarily by the Irish Ryanair and the Hungarian Wizz Air. Andrew Lobbenberg from HSBC Global Research recently calculated that the route offered by the two providers would currently overlap at 240 city pairs. This is also a burden for other airlines because it puts average ticket prices under pressure.
On the other hand, the airlines are threatened with higher fees from air traffic control and airports. They too got into economic difficulties as a result of the pandemic and somehow have to compensate for the lack of revenue. It is already clear that takeoffs and landings in Frankfurt will be more expensive in 2022 – by an average of 4.3 percent.
In addition, there are increasing expenditures in order to approach the ambitious goal of climate neutrality. For years, the airlines were mainly concerned about fuel costs. “European airlines should also increasingly worry about the cost of decarbonization,” advises Alex Irving of Bernstein Research. It would involve annual costs of hundreds of millions of euros for each airline.
The aviation industry is betting that air traffic will almost return to normal in the coming summer – despite Omikron.
(Photo: dpa)
So the airlines are once again facing troubled times. One should keep an eye on the market leader Lufthansa – and for several reasons at the same time.
Firstly, Europe’s largest airline group with the premium brands Lufthansa and Swiss is heavily dependent on frequent flyers and business travelers, who on average buy higher-quality flight tickets. Group boss Carsten Spohr has recently been confident that more business travelers will board the planes than feared at the beginning of the pandemic. Spohr is currently only assuming a minus of around ten percent for business trips. But it is not certain that the top Lufthansa seat will be right with its prognosis.
Second, the Lufthansa Group is once again venturing into the market for long-haul tourism with the new Eurowings Discover brand, and is entering into direct competition with Condor. The holiday airline has secured a new owner with Attestor in 2021 and is now setting itself up with big goals.
The aim is for Condor to become a leading European holiday airline. To this end, the entire fleet is being renewed with more efficient aircraft. That means further savings, which further relieve Condor’s already low cost level. There are some in the aviation industry who doubt whether a traditionally complex airline group like Lufthansa can keep up.
Eurowings is supposed to secure the European market
Thirdly, Lufthansa’s low-cost subsidiary Eurowings will also deserve attention in the coming months. On behalf of the parent company, he is supposed to defend large parts of the European market against cheap homes like Ryanair or Wizz Air. To this end, Eurowings is being expanded into a pan-European airline with new bases in Stockholm and Prague, for example.
However, tough competition awaits the airline here. The Scandinavian SAS wants to defend its own markets in Copenhagen, Stockholm and Oslo with two new low-cost airlines, SAS Link and SAS Connect.
In their home country Germany, on the other hand, the rival Ryanair, which Lufthansa was able to keep small in Frankfurt, for example, is far from defeated. The Irish have just announced that they want to take off and land in Nuremberg again after a two-year break.
Easyjet is also on the watch list. The British low-cost airline is one of the takeover candidates in European aviation. According to the latest information, the Greek-Cypriot businessman Stelios Haji-Ioannou holds a good 15 percent of the airline. But that doesn’t seem to deter potential buyers.
The Easyjet management announced last September that they had rejected a hostile takeover offer. A name was not mentioned. But supposedly it was Wizz Air who reached out to the British. In the industry, this is seen as a clear signal that a consolidation in European aviation is imminent.
More: Lufthansa boss Carsten Spohr: “We have three times as much liquidity as before the crisis”