That Was The Week That Was: 6 April – 10 April
These are grim days so there is nothing better than a good boardroom brawl to lift one’s spirit.
On Monday, Stelios Haji-Ioannou did just that. The founder of easyJet intensified his battle with the board and management over an order for 107 “useless” Airbus single-aisle jets: he requested (in that way you know is not a request) that it cancel the £4.5 billion contract with Airbus. Then, doubling down, he called for the removal of chief financial officer Andrew Findlay, criticized chairman John Barton of refusing to instigate a full independent inquiry if bribes from Airbus have been used in securing orders from EasyJet (boom!), and he labelled as “pure fantasy” a forecast by company’s house stockbroker, Credit Suisse, published on April 2, that assumed the easyJet fleet will return to the skies in June, drawing revenues of £1.5 billion in the summer months. The only reason CS is publishing “such wildly optimistic forecast’, Haji-Ioannou wrote in a two-page statement which is well worth the time to read in full, “is to provide ‘cover’ to the directors to preserve the contract with Airbus and convince naïve new investors to inject additional equity into easyJet just to pay Airbus.” Be assured, he added, the Haji-Ioannou family, who holds a 34% in easyJet Plc and last month received £60 million in dividends for 2019 performance, will “certainly not be throwing good money after bad. For the avoidance of doubt, I will not inject any fresh equity in easyJet whilst the Airbus liability is in place.” All this and more in one go. Thank you, Sir Stelios! There was more uplifting news, delivered by IATA. Safety improved in 2019 compared to 2018 and against the average of the 2014-2018 period. The number of total accidents, fatal accidents and fatalities all declined even as the number of flights rose to a record 46.8 million. There were 53 aircraft accidents, or one accident every 884,000 flights, and 240 fatalities last year, down from 62 accidents and 523 fatalities in 2018.
Tuesday, however, IATA reminded us we’re in unprecedented times and the airline industry is nearing total, or quasi-total, collapse. Some 25 million jobs in aviation and related sectors could be at risk, airlines are expected to see revenue from passenger ticket sales fall by 44%—$252 billion—compared to 2019 and will burn through $61 billion in cash in the second quarter alone. In other words: government support in whatever form is needed, NOW. Eurocontrol DG Eamonn Brennan did his part and brokered a deal enabling airspace users to defer payment of £1.1 billion in ATM charges for February through May to later this year and early 2021. The measure, Brennan thought, “will provide much-needed liquidity support” for airlines. Not so, replied A4E. It “only moves airlines’ current liquidity crisis to a future date.” Remaining true to its ever altruistic self, the lobby group of Europe’s largest—and most profitable and mostly privately-owned—airlines, wants more and demands a full-year waiver of air navigation charges across Europe. BTW, I borrowed the A4E idea and asked my electricity provider to waive my outstanding bill for February and waive all future bills for 2020, arguing this would best support my immediate survival and provide me with the flexibility needed to get back on my feet once the health crisis has passed. Guess what they said. Back to IATA, which by now was in full crisis mode. Whoops, someone left IATA’s global Covid-19 communication strategy out in public view, and, not surprisingly, the environmental lobby got a hold of it… The coms mishap comes on top of a letter to travel agents, in which DG Alexandre de Juniac bluntly admitted that airlines are withholding ticket refunds in the IATA Billing and Settlement Plan (BSP) because their most urgent need is “to keep their remaining liquidity to pay salaries and face their fixed costs.” It’s not a message that provides comfort, he reckoned, but vouchers in lieu of refunding passengers is the sole option to secure the good functioning of the BSP. IATA’s BSP processes more than $1.25 billion in industry funds every day. The little question of the legality of that move was left unaddressed, in either document.
Wednesday, DG MOVE held its, by now weekly, conference call with stakeholders. The industry sketched out the fall in the number of flights, the fall in passenger throughput, the fall in revenue, the fall in liquidity, and the refund-versus-voucher issue of sold and un-flown tickets. DG MOVE listened, noted that we’re in a rapidly changing environment, and then noted that rapidly changing EU 261/2004 is just not possible. Thus, in the meantime the law is the law—and cash refunds are obliged—even if some member states and most airlines are ignoring that. Vice-President for Promoting our European Way of Life, Margaritis Schinas and his colleague for Home Affairs, Ylva Johansson, tried harder to uphold Union unity and “invited” ‘EU+ area’ member states—yes, it is time to come to terms with the new term— to prolong in a uniform manner the temporary restriction on non-essential travel to the bloc until 15 May, at least at the external borders. According to Schinas,“We should not yet let the door open whilst we are securing our house.” Airbus also tried to secure its house. Faced with a stream of requests by airlines and lessors to postpone deliveries or cancel orders, the aircraft manufacturer had little choice but to scale back its production rates by roughly a third, to 40 A320s a month, 2 A330s and 6 A350s.
Thursday saw the European patchwork of travel bans become a bit patchier after Germany and Romania clinched a deal under which Romania is allowing citizens to leave for seasonal harvesting work despite restrictions on travel and Germany is opening its closed borders for the tens of thousands of badly needed seasonal laborers Lufthansa was standing ready to help out and its low-cost subsidiary Eurowings operated a first set of flights between Düsseldorf and Cluj and Cluj and Berlin. But do not think that this deal will a full summer of travel make. The travel bans otherwise remain in place. In Brussels, Commissioner for Justice and Consumers, Didier Reynders, reminded member states that the law is the law, and that the EU Package Travel Directive 2015/2302 also applies in case of “unavoidable and extraordinary” circumstances such as those caused by the Covid-19 outbreak. “Travellers have the right to get a full refund if their trip is cancelled,” he said. If vouchers are offered, and accepted by travellers, they should be reimbursable if not used and secured by the state against possible insolvency of the operator—such as the scheme set up by the Danish government and approved by the Commission. IATA’s voucher-no-refund policy escalated to the top of the European Commission thanks to a letter to Ursula von der Leyen signed by more than 100 French MPs accusing IATA of “abusive” behaviour. They called on the EU to create a state-backed and supervised fund to protect passengers and travel agents in case an airline or tour operator is bankrupt. In the meantime, ACI Europe updated its assessment of the impact of the pandemic, and now anticipates a loss of between 873 million and 1.2 billion passengers for Europe’s airports in 2020, representing a decrease of 35% to 48% in a year that was predicted to see 2.3% passenger growth in a business-as-usual scenario. “This is like nothing we have seen before,” said ACI Europe Olivier Jankovec. “In the global financial crisis, it took Europe’s airports 12 months in 2009 to lose 100 million passengers. With COVID-19, it just took 31 days – the month of March – for that same passenger volume and more to vanish.”
Friday marked the start of the long Easter weekend and a welcome rest for all of you and the TWTWTW team. Stay home, stay well, stay healthy.