The airlines are revising their business models after the devastating shock of Covid
A picture taken on February 28, 2021 shows palm trees on the empty “Promenade des Anglais” in Nice on the French Riviera.
VALERY HACHE | AFP | Getty Images
LONDON – Airlines in Europe see sunshine and beaches as their way to make money again.
The sector has been badly hit by the coronavirus pandemic and people have been advised to stay home. Lufthansa announced on Thursday that the number of passengers had decreased by 75% between 2019 and 2020. This underscores the devastating impact many airlines have had since the Covid hit.
However, they are currently examining ways to adjust business models as economies seek to reopen in the coming months.
“European airlines will focus on vacation travel,” Adrian Yanoshik, a stock analyst at Berenberg, told CNBC on Wednesday. “This is a tactical answer. You follow the flow of people,” he said.
With restrictions on easing in European economies, it is expected that people will try to go on vacation as soon as possible after being stuck at home for about a year. In contrast, it takes longer for business trips to recover.
I think we’ll see a little less business travel and more vacation travel.
CEO of Scandinavian Airlines
“Will I be making the one-day trip from London to New York for a three-hour meeting? Probably not, so this will have some impact on business travel,” Keith Barr, CEO of IHG Hotels & Resorts, told CNBC’s “Squawk” Box Europe “last Month.
Rickard Gustafson, CEO of Scandinavian Airlines, also expects “some significant changes in the dynamics of the (airline) market”.
“I think we’ll see a little less business travel and more vacation travel,” he told CNBC. “We have to adapt our operations more to the seasonality than we do today,” he added.
Low-cost airlines like Ryanair and easyJet have always tempted customers to take breaks in sunny European destinations like Greece, Spain and Italy. However, more airlines such as Lufthansa and British Airways, which traditionally cater to those who travel for work, could do the same.
“Business travel will be above 2019 levels by the end of the decade,” Stephen Furlong, senior analyst at wealth management firm Davy, told CNBC on the phone, adding that vacation travel, on the other hand, could snap back “very quickly”.
Another mix of cabins
Business travel has led airlines to develop business class, premium seats and loyalty cards. However, as part of a new focus on leisure, analysts expect a different aircraft layout.
“You will get a cabin reconfiguration,” said Furlong, mentioning that business class will be a much smaller part of the aircraft. “The size of the plane is (also) smaller,” he added.
When you consider how low-cost airlines have traditionally organized their aircraft, the focus is far less on premium customers. In fact, for example, Ryanair does not have a frequent flyer loyalty card.
People sit on the “Castel” beach along the “Promenade des Anglais” on the French Riviera in Nice, southern France.
VALERY HACHE | AFP | Getty Images
“This is probably a temporary phenomenon. You will focus on business (travel) again,” said Yanoshik from Berenberg.
However, as more airlines focus on vacation travel in the short to medium term, he added that ticket prices “will be weak”.
European airlines hope vaccine passports will be used to restore lost businesses this year.
The idea of a vaccination pass is still debated by European politicians, but the travel industry sees it as a must that some trips can return during this summer season.
“IATA is pushing extremely hard within the industry,” Andrew Lobbenberg, equity analyst at HSBC, told CNBC.
The International Air Transport Association is currently working on a passport, a digital platform where passengers can upload their health information. She has asked the EU heads of state and government to introduce vaccination records so that customers can feel safe again.
Vaccination records “will ultimately be part of the reopening of air traffic,” said Lobbenberg.