COVID-19 and Impacted Air Service

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.Last week down-under, SYD airport released their FY20 results followed the next day by both NZ & QF releasing their 1H FY21 results. A review of the airlines commentary pertaining to Air Service Development (“ASD”) is noted below. As expected, the financial results reflect similar circumstances globally, and much was said about borders reopening – tentatively perhaps first between Australia & New Zealand as soon as July as is being planned by Qantas. Momentum is building in ensuring every effort is made to open borders safely and enable travel can recommence internationally as soon as possible.

The varying approach to border closures and restrictions on peoples movement has seen a divergent of outcomes. As the charts below illustrate, some countries have experienced significant capacity declines over the past 12 months as demand for travel has been sapped. Elsewhere, others have not had to endure equally as much pain, as nations managed the pandemic differently. For the 100 largest cities, we notice a higher degree of growth returning to Asian destinations, as opposed to that in Europe.

In the Americas, southern & central US cities tend to show more growth over 2019. Growth in the US market is echoed by recent consumer sentiment, which is finally at a recent high. Commentary from our US team indicate strength in new conversations with airline partners, off the back of strong interest in the upcoming Roundtable being evident. Again, these points are illustrated below. We’ll watch this over the coming months, as vaccinations roll-out globally, which we’ve also included a graphic on, to represent that evolving story.

For some clients, your latest updated schedules out into April, can be downloaded and viewed here by clicking on the link:
Asia Pacific schedule update

Recent commentary from airlines in Australasia as they release 1H21 results underpins a degree of optimism for the return to travel middle to late in CY21. Whilst NZ would not be drawn on an exact date, QF has moved back their international travel commencement until “the end of Oct 2021” to coincide with their national vaccine rollout target completion date, and still hopes of some meaningful Tasman travel from July 2021. In respect to both airlines commentary that provided insights relative to air service development included:

Air New Zealand

  • Prior to COVID-19, international travellers contributed ~20% of NZ’s domestic airline revenues (which were roughly 1/3 of the entire groups revenues);
  • Recent return of corporate travellers at around 75%-85% pre-COVID is encouraging, and they see the desire to travel remains strong worldwide;
  • Sale of LHR slots provided a gain of NZ$21m;
  • Decisions around fleet delivery dates or deferrals over the next 6-9mths will give some clue to the speed or hesitancy of borders re-opening;
  • NZ is confident of the future outlook – albeit with financial headwinds.  However, in follow-up Q&A, NZ did state, even with Tasman & Pacific Island travel being permitted with borders opening, NZ would still operate at a loss, but the cashflow contributions would be important.

QANTAS Group

  • “…the working assumption for international travel to restart has moved to the end October 2021, with the exception of a material increase in trans-Tasman flying scheduled for July 2021”;
  • Since July 2020, QF has seen the “introduction of 23 new routes and 14 charter routes with potential to expand further”;
  • Continue to see strength in the construction, government and resources sectors, and the return of the business market overtime… with VA capacity reductions, and Tiger Airways cessation, removing capacity from the market overall will mean QF Group has greater opportunities to leverage benefits from the market.

(Source & Comments by Ailevon Pacific Aviation Consulting: March 2021 Insights and COVID-19 Update, 2nd March 2021)

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