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Airlines face more turbulence before vaccine relief

January 14, 2021.

By Laurence Frost and Sarah Young.

For a year expected to mark a turning point for pandemic-stricken European airlines, 2021 is off to a rough start. A resurgence of COVID-19 lockdowns has killed off a fragile bookings upturn, executives and analysts said, just as airlines were hoping the promise of vaccines would put the worst of the crisis behind them and set the stage for a summer rebound (image - Kevan James)

New outbreaks and travel restrictions - some designed to curb the spread of a highly infectious virus variant detected in Britain - have hit forward bookings that are usually relied upon to bring in vital cash during the thin winter months.

Global airline industry body IATA believes a return to positive cash flow “might not arrive before the end of the year,” Chief Economist Brian Pearce said. “Meanwhile the cash burn is going to continue” and may even in increase in Europe, Pearce told an online conference on Wednesday.

Some carriers may yet run out of cash, he added. For bailed-out airlines like Air France-KLM and Lufthansa , a longer slump increases both debt and the likelihood more support will be needed. Europe faces some of the worst setbacks - although hitherto buoyant Chinese and Russian domestic bookings have also been weakened by new restrictions. Intra-European bookings for the first half of the year stand at 22% of their level 12 months ago, Olivier Ponti of aviation data specialist ForwardKeys said. That compares with 36% for U.S. domestic bookings and 48% for flights within China.


Airlines have responded by cancelling yet more services. Ultra-low-cost carrier Wizz Air, which has been expanding its fleet and network during the crisis, is suspending most UK routes and sees January capacity down 75%. “The lockdown puts strains on demand, and we’re adjusting capacity according to demand,” Chief Executive Jozsef Varadi told Reuters. “It’s going to be a difficult quarter.”