Like a child in the backseat of a car yelling “are we there yet?”, the global aviation sector is desperately hanging on to hope.
Richard Branson once mused “If you want to be a Millionaire, start with a billion dollars and launch a new airline.”
Well, a million seems rich these days in a deeply troubled sector.
There have been some green shoots this week – the launch of the long awaited travel bubble between Australia and New Zealand began, with hopes of more counties, like Australia-Singapore, to follow.
But the International Air Trransport Association paints a pretty bleak picture for the sector overall. Global airlines are set to lose $US47 billion this year.
IATA’s Director General Willie Walsh puts it simply.
“This crisis is longer and deeper than anyone could have expected. Losses will be reduced from 2020, but the pain of the crisis increases. There is optimism in domestic markets where aviation’s hallmark resilience is demonstrated by rebounds in markets without internal travel restrictions.
“Government imposed travel restrictions, however, continue to dampen the strong underlying demand for international travel. Despite an estimated 2.4 billion people travelling by air in 2021, airlines will burn through a further US$81 billion of cash,” said Willie Walsh, IATA’s director general.
The outlook points to the start of industry recovery in the latter part of 2021. In the face of the ongoing crisis.
So what does the recovery actually look like? And who would be brave enough to predict it, given the various super-strains emerging around the world.
A lot of it is completely outside the control of airlines or passengers. Travel restrictions, including quarantines, have killed demand.
IATA estimates that travel will recover to 43 per cent of 2019 levels over the year. While that is a 26 per cent improvement on 2020, it is a long way from recovery.
Domestic markets will improve faster than international travel.
Overall passenger numbers are expected to reach 2.4 billion in 2021.
International travel has a long way to go – still 86.6 per cent down on pre-crisis levels over the first two months of 2021.
It’s why the 747 has disappeared from the skies, and the Airbus bosses must be glad they’ve already rolled the last A380 off the production line.
Vaccination progress in developed countries, particularly the US and Europe, is expected to combine with widespread testing capacity to enable a return to some international travel at scale in the second half of the year.
But remember, early last year we hoped we’d be flying overseas again by the end of 2020.
2021 and 2020 have opposite demand patterns: 2020 started strong and ended weak, while 2021 is starting weak and is expected to strengthen towards year-end. The result will be zero international growth when comparing the two years.
Industry revenues are expected to total USD458 billion. That’s just 55 per cent of the USD838 billion generated in 2019.
And then there’s the aircraft manufacturers. Spare a thought for Boeing. Etihad announcing its retiring its 777-300ER fleet to focus on becoming a smaller 787 boutique airline. While international travel slowly resumes, it will be a long time before airlines take the risk to buy larger, wide bodied aircraft.
But while the short term future looks grim, the airline industry has been battered before, and survived. The shoots of green have started to appear.
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Five reasons it’s so expensive to travel right now
We’ve been waiting years to go on holiday, but wow it’s expensive to fly. Here are the five reasons it’s so expensive to travel right now
Remember the good old days of competition in the travel industry? Those were the days. Now every time you look to book a flight, the prices are soaring. Even if you want to use your points.
The airline industry is complex, so a total shut down of the industry was always going to have long term effects. The long hangover from the shutdowns and lockdowns are with us.
So let’s break down the five key reasons your flight is so expensive.
It’s not just you who wants to go overseas and change up the scenery. Everyone else is thinking the same thing.
And as the northern hemisphere enjoys its first lockdown free summer in years, everyone is clamouring to use all that saved up cash, topped up with government assistance, to spend on flights.
The simple supply versus demand philosophy means it’s become an airline’s dream to push up prices while often pushing down the value of the ticket. How bad are those airline meals at the moment?
Big planes are grounded
Remember the good old 747 and A380s? Well you’re doing well to find a 747 in the skies these days. The last remaining airlines that were operating them used the cover of COVID to either reduce their fleet of the ageing Queen of the Skies, or retire them altogether.
Then there’s the A380, which is integral to huge airline flees like Emirates.
They were first to go into storage in the desert in 2020 as the pandemic hit. Airlines noticed its often cheaper to fly two 787s on the same route as an A380. So they are begrudgingly bringing the super jumbo back, but only once all their 787s are back in service first.
Don’t you just long for the days of extra space on a plane?
Rocketing fuel prices
In some cases, spot prices for aviation fuel has soared to 80 per cent! Airlines usually rely on hedging fuel prices (as in locking the price in in advance). But not many carriers in Asia do that, meaning they are at risk of fluctuating oil prices.
Airlines have a simple strategy for dealing with rising fuel prices – passing the cost on to consumers. Some passengers flying out of Asia are finding that a flight to London in economy is now $5000, five times the price.
The war in Ukraine hasn’t helped matters either, with Russian oil now missing from the global supply chain. That’s pushing up the cost of resources everywhere, and there’s no sign that’s about to end.
Lack of staff
Airline staff get COVID too, and in some (hilarious) cases, front line staff are returning to stop working from home!
Airlines have rules in place regarding how many flight attendants and pilots need to be on board an aircraft. And with so many different types of planes in service, some flight attendants can only work on certain aircraft types.
That severely limits the capability of airlines to quickly man aircraft in an emergency. And one cancellation snowballs into a travel nightmare.
Airports are struggling too. Lack of maintenance at baggage carousels and airport equipment means some airports are relying on just one vehicle to help every plane back out of a gate.
Remember when the pandemic hit and airlines sacked thousands of workers? The airlines didn’t think they would need them all back so quickly, and highly skilled pilots went on to find other, perhaps more stable jobs.
Accountants taking over
Airlines are big businesses with gigantic overheads. Think of the cost of a plane, which often reaches over $300 million.
Then add the cost of airports, fuel and staff.
Qantas had a debt bomb of $6.5 billion at the height of the pandemic, and while governments have been throwing money at airlines to stay in business, they still are a business.
Airlines need to make a profit, they need to return value to shareholders, and they need to pay down debt to stay financial. Not to mention cashflow.
So regardless of the airport queue, or the soggy sandwich you’re eating in business class, think of the balding accountants praying for good news.
And keep your eye out for some bargains. It’s not all doom and gloom. Some airlines are even allowing you to burn your points on upgrades. So why fly economy?
And if you can hang on a few months longer, you might enjoy cheaper fares. But no promises.
Disney vs Netflix – who will win the streaming revenue raise?
Netflix and Disney shares fall as the streaming companies fight to stay on top of their game
Investors to evaluate Walt Disney’s shift from cable television to subscription service as the company’s shares fall by 31 percent.
This comes after Netflix announced its first ever decrease in subscribers last month. The company reported a loss of 200,000 subscribers in its first quarter while predicting more losses ahead.
Netflix’s decision to suspend its services in Russia also led to a loss of 700,000 subscribers. It’s shares have also fallen by a staggering 71 percent this year, a bigger loss than its competitor Disney.
While Netflix struggles with its subscriber count, FactSet Estimates predicts Disney+ to have attracted 5.3 million new subscribers through march leading to a total of about 135.1 million subscribers.
Disney also predicts it will have amassed more than 230 million subscribers by September 2024.
Netflix is reportedly considering adding an advertisement-based subscription option by the end of the year as the company looks at how to stay competitive in the increasingly saturated streaming market.
In a previous statement, Netflix’s chief executive said they were looking to introduce advertisements in a year or two but a leaked internal note to the employees has revealed the company is introducing it as early as October 2022.
The note also says Netflix will begin cracking down on password sharing by monetizing it.
All of this has resulted in Netflix being sued by shareholders who argue they have been mislead about the state of the company and future prospects.
Rijul Baath contributed to this report
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