Analysts warn airlines face bleak winter after end of Government support, a summer of cancellations and rising costs
Airlines face a bleak winter after the end of Government support, a summer of cancellations and rising costs, analysts have warned.
Firms battling staff shortages and soaring fuel prices struggled to meet a surge in demand over the peak holiday period. Now the next three months will be a fragile time that could usher in a string of failures if travellers facing higher household bills cut back on flying.
Autumn is traditionally the most painful season for airlines, when they must settle bills and invest in the coming year even as demand dwindles. Monarch collapsed in October 2017 and Thomas Cook followed in September 2019.
City broker Bernstein said in a report: ‘The pandemic has brought few airline failures in Europe, with state support and furlough schemes keeping many from collapsing. That may be about to change.’
At risk: The next three months will heap pressure on airlines across Europe
Jet fuel is nearly double what it cost before the pandemic, while almost all major airlines have been forced to increase wages to combat staff shortages.
‘Winter 2022-23 looks set to be one of the worst in memory,’ said the report. ‘September heralds the beginning of bankruptcy season.
‘After the summer is over, airlines often enter into a period of losses and limited cashflows, as demand ebbs with the weather, and children return to school.’
Bernstein said airlines in Central and Eastern Europe were at the highest risk.
The report said the low-cost Irish airline Ryanair and Wizz Air could be among the biggest beneficiaries of a fallout.
Ryanair was also listed as among the European carriers best prepared for the squeeze, followed by easyJet, Jet2, British Airways owner IAG and – the lowest ranked of the London-listed stocks – travel firm TUI. But even Ryanair recently warned of an ‘extremely challenging’ winter as it withdrew planes from a Brussels airport.
Bernstein assigned airlines a ‘survival score’, though there is no suggestion any UK firms are in financial difficulty. Bernstein’s score ranges from zero to 100. Ryanair received 92 while Tui was handed 60.
However FTSE 250-listed Tui ranked higher than a large number of other smaller airlines that fly to the UK, including Finnair, Norwegian and Blue Air. The lowest was France’s ASL with a score of zero.
It has been a chaotic recovery for travel firms since Covid restrictions were eased earlier this year.
Cancellations and queues have littered airports across Europe, with Heathrow among the worst hit.
Last week, Gatwick’s chief financial officer Jim Butler said he was ‘cautious about what we might see in the winter or next year’.
He said economic uncertainty could ‘impact the overall propensity for travel’ as the industry faces ongoing staff shortages and rising fuel costs.
Heathrow recently came under fire for trying to introduce a new charge for airlines. The International Air Transport Association (IATA), which represents the largest airlines, accused the airport of trying to ‘squeeze more money’ from companies already struggling with sky-high costs.
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