Global airlines grasp at the 100pc recovery

HONG KONG (Reuters): Global airlines are setting drawn out timelines to a full recovery. Some carriers, particularly in Asia, think they will only fly at or over pre-pandemic capacity levels in 2024 or later. It’s a bumpy and lopsided journey.

One reason for the long timeline is a staffing shortage. Airlines didn’t rehire quickly enough to support the sudden recovery in demand and are now overpromising and under delivering.

In Europe, flight cancellations increased by some 90 per cent in March to over 14,000, according to Cirium, an aviation analytics company, though April numbers fared better.

Australia’s Qantas Airways cancelled 600 domestic flights in March alone. The International Air Transport Association (IATA) expects global traveller numbers will only reach 4 billion in 2024, roughly the same level as in 2019.

Travel patterns are shifting too. Globally, domestic flights are picking up at a quicker pace. It makes the rebound a harder slog for airlines that heavily rely on international passenger traffic; that cohort of travellers will only fly as often as they did by 2025, IATA reckons.

Asian hub carriers like $16.5 billion Singapore Airlines are particularly strained. A reduced fleet, a delay in delivery of Boeing 777-9 aircraft, and slow reopening from China – which historically accounted for about 15pc of group pre-pandemic capacity, per Morningstar analyst estimates – weigh heavily. The carrier declines to give a timeline for when it will hit 100% of its January 2020 available seat kilometres (ASKs) – a measure of an airline’s seats multiplied by kilometres flown – despite pestering from analysts.

Part of the reluctance is understandable. Networks and flight frequencies have changed, altering the underlying composition of capacity. The Middle East has benefitted from rerouting because of the Ukraine war and it, alongside Africa and South America, are the only regions flying clear above pre-pandemic levels. The global total of ASKs is down 4.4pc since May 2019, per Cirium.

A long slog back to 100pc is not necessarily a big problem. Singapore Airlines, for example, posted a record net profit of $2.2bn ($1.6bn) for the financial year ended March. Its net margin rose to 12pc up from 4pc in 2019 partly because it is able to charge high prices for tickets as Asian rivals are slower to get their planes back into the sky. Even so, record orders of almost 1,000 planes combined from India’s top two carriers, IndiGo and Air India, signal intensifying competition in the region ahead.

Peers from Cathay Pacific to Deutsche Lufthansa and Britain’s IAG are more readily committing to a timeline for a full recovery but Singapore Airlines’ total shareholder returns are 18.6pc since the pandemic, versus negative at rivals. And whether competitors can deliver is still up in the air.