February 2, 2023

Pinoy Trekker

Pinoy Trekker – We go anywhere

Aviation execs worry about demand as post-pandemic honeymoon ends By Reuters

©Reuters. FILE PHOTO: Virgin Atlantic planes are seen parked at Manchester Airport following the outbreak of the coronavirus disease (COVID-19), Manchester, Britain May 9, 2020. REUTERS/Phil Noble/File Photo

By Sarah Young

LONDON (Reuters) – The outlook for airlines has clouded as the post-pandemic travel boom wanes and a recession looms, with UK-focused airlines particularly at risk, industry executives warned on Monday.

The chief executive of transatlantic-focused Virgin Atlantic has said 2023 will be “tough”, while the head of Heathrow Airport said airlines are increasingly concerned about the demand outlook and the head of global industry association IATA warned of the impact of the downturn on Britain.

Most European airlines have posted racy gains in the northern hemisphere this summer as people took advantage of three years of the first travel season without COVID-19 restrictions.

But with rising inflation and rising mortgage rates, disposable income will fall, and analysts have questioned how long the boom can last.

Shai Weiss, Virgin Atlantic’s chief executive officer, said he was preparing for next year after the company beat its 2022 guidance.

“It’s going to be a tough 2023. We obviously need energy prices to come down and people’s lives to get a little bit better as inflation is tamed,” Weiss said at an industry conference.

Heathrow CEO John Holland-Kaye said the airline industry’s focus was shifting from the recovery from COVID-19 to concerns about the global economy.

“Airlines are concerned about the nature of the demand,” he told reporters on the sidelines of the conference.

For Willie Walsh, Director General of IATA, the outlook for aviation worldwide is optimistic, but there would be a slowdown in Europe and even more so in the UK.

“I think the UK is different,” he told Reuters.

But he said airlines shouldn’t be “overly concerned” compared to what had happened during the pandemic, when governments banned travel and airlines grounded most of their fleets.

“I see these as business-as-usual challenges,” he said. “Airlines will take action to stimulate demand through pricing.”

‘REVENGE JOURNEY’

For 2022, Virgin’s Weiss said the airline will post higher revenue than 2019, the year before the pandemic, despite flying 20% ​​less capacity. He told Revenge Travel the idea that after years of lockdown people were determined to go on holiday helped boost Virgin’s performance.

Virgin’s competitor IAG (LON:), which owns British Airways, also reported a strong summer, beating earnings forecasts in October.

The UK is already in recession but Virgin had not yet seen bookings fall, although Weiss said he was planning a downturn.

“I’m very cautious for 2023. I don’t want to say anything but cautious,” he said.

Weiss used his speech at the conference to target Heathrow, Virgin’s main hub airport, which plans to increase passenger fees as it expands. He said Virgin’s support for a third runway at Heathrow was conditional on fair pricing and was open to competition.

Heathrow and its airline customers are waiting for Britain’s Aviation Authority to confirm what the airport can charge per passenger in the coming years, and Holland-Kaye said Weiss’ comments reflected her disagreement over the charges.

“This is about how value is shared between the airline and the airport,” he said.

Virgin Atlantic — owned by billionaire Richard Branson’s Virgin Group with a 51% stake and US airline Delta with a 49% stake — will announce full-year results in early 2023.