That Was The Week That Was: 20 April – 24 April.
Monday saw US oil prices set a record, a new record low, that is. West Texas Intermediate crude fell below zero for the first time ever. It finished the day at -$37.63 a barrel. In normal times, this would be great news for airlines, but these are not normal times. Sadly, the pandemic claimed the life of four Norwegian Air Shuttle subsidiaries in Sweden and Denmark on Monday, just days after the not-so-Irish Irish wet-lease provider CityJet had succumbed to the virus. Management of the Dublin-based regional airline, nonetheless, remained upbeat and anticipates that its services will return gradually over the coming months. It said that it could make a profit if the examinership process is successful (while it failed to make a profit during the industry’s most profitable years in history). We wish them the best of luck.
On Tuesday Virgin Australia became the next casualty of the novel coronavirus, prompting co-owner Richard Branson to warn that his other airline venture, Virgin Atlantic, might follow suit if the UK government does not bail it out. Sir Richard was willing to do his part to save the British airline and offered to pledge his cherished luxury island resort Necker Island as collateral for any government loans. He would not help with cash. Correction: he could not help with cash. Or at least that is what he said. Find his lengthy letter to staff here. He modestly explains that he might be as rich as people think—some £4 billion— but that does not mean he has “cash in a bank account ready to withdraw.” Now we know. This did not stop Ryanair boss Michael O’ Leary criticising Branson’s appeal for state aid. O’Leary wondered what we were wondering: “Why doesn’t he put his hand in his own pocket?”. After all, O’Leary is an accountant by training—and he is quite wealthy himself—so he knows the ins and outs of loans, cash, collaterals, liquidity. BTW, 49% shareholder Delta Air Lines is also not sticking its hands in its pockets. Married in good times but not in bad times. Anyhow, the British government did not seem keen to write a cheque to Virgin Atlantic or accept a British Virgin Islands asset as collateral, even if the BVI are no longer on the EU backlist of tax havens. This bring us to the issue that dominated the agenda before the Covid-19-era, and is hardly a topic any more. That must be a disappointment for British PM Boris Johnson. He had hoped to earn his place in history books by getting Brexit done. A three-day pow-wow on the future EU-UK relationship in all matters of aviation kicked off on Tuesday. The TWTWTW team also had a little pow-wow to try to identify which UK airlines the UK is so worried about. Ryanair, an Irish company, has a UK AOC, easyJet has a UK AOC and also AOCs in Switzerland and Austria. BA is a self-declared Spanish company, albeit with a UK AOC. You are welcome to further enlighten us.
Wednesday was time to celebrate Earth Day 2020 and “flood the world with hope, optimism and action.” In that spirit, EU Transport Commissioner Adina V?lean took to social media, hosting a live chat on LinkedIn in the lingua franca of aviation, and then, on Facebook, in the lingua franca of Romania. The Commissioner gave a small teaser and said Brussels will next month present a set of guidelines for the safe resumption of air services when lockdowns end, including the wearing protective gear, mandatory temperature checks, disinfection of airports and aircraft, and social distancing in terminals and on-board aircraft. Rumours of the possible requirement to fly with empty middle seats got O’Leary back on his high horse. “Idiotic,” “mad,” and “entirely ineffective,” he thundered. The airline had told the Irish government that if it tried to impose such a rule, then “either the government pays for the middle seat or we won’t fly,” he told the FT. Really? Meanwhile the airline got heat at home, and across Europe, for making a U-turn on its refund policy and now siding with—indeed, these are not normal times—its EU legacy peers on prioritising vouchers rather than cash for cancelled flights. ICAO then got into the fun by issuing its grim Covid-19 outlook and warned that international air passenger totals could drop by a record 1.2 billion in the first nine months of 2020 when compared to a business-as-usual situation.
By Thursday you were excused if your head was reeling, but then, in what can only be a stroke of comic genius, IATA reminded their Big Three US carrier members that the Big Three Gulf carrier members continue to be battered by the impact of Covid-19 and are set to lose tens of millions of passengers if their government does not beef up their financial support. For years the US (and European) legacy airlines have been hammering away at the Gulf carriers, whilst IATA, understandably, has stood on the sidelines, not taking a position. These are surely strange days. For European airlines, the lobby group is now projecting that Covid-19 will shave off $86 billion in revenues this year and contract passenger demand by 55% compared with 2019. One month ago, it still anticipated a $76 billion revenue loss and a 46% demand contraction. The UK will be the hardest hit with a potential loss of 140 million passengers. Do not blame Brexit.
Friday saw everyone’s favourite rent-a-quote, Michael O’Leary realise that he rather likes the view from his high horse, so up he went again, lambasting the European Commission for rubber stamping a record number of requests by member states for state aid to their flag carriers. He also lambasted the flag carriers for asking for that state aid. Lufthansa, Air France, KLM and Alitalia “are the crack cocaine junkies of the state-aid world because their first instinct is to always go to the government for state aid,” he told Bloomberg. He also had some free advice for Competition Commissioner Margrethe Vestager. State aid in this crisis should be transparent and provided to everybody and national bailouts should be available to “all EU airlines in proportion to their share of traffic in a particular country.” Frankly, it is very hard not to agree with both parts of this, even if, in almost all markets Ryanair is the largest carrier, so, by definition, can expect the largest share of any largesse. Perish the thought that Michael O’Leary CPA had realised that though. The hits kept coming to end the week. With most aircraft grounded and airlines not flying, the chair of the TRAN committee felt the urgency to look forward and alert airlines they must reduce their CO2, and that the Green Deal is alive and well even if airlines are not so alive and well. Remember Stop the Clock? The mechanism should be terminated if the emissions cap allocated to airlines is not reduced in the planned revision of the EU ETS in 2021, Karima Delli argued in an op-ed. The airlines might be hoping that they can stop the stopping of the stop the clock. Friday brought some victorious news for Airbus. The $4.2 billion deal between Boeing and Embraer is officially off, with both sides blaming each other for the failure to conclude the proposed tie-up of their commercial aircraft. ICYMI: the planned joint-venture received unconditional approval from all necessary regulatory authorities across the world, with the exception of …the European Commission. So finally, the week ended where it began, with a new record. The ‘deficit’ of the number flights in European airspace since March reached the cap of 1 million, according to Eurocontrol.
Quiz of the week
The proposed Transport Community is
A. The post-Brexit EU-UK comprehensive air transport agreement
B. A replica of the European Common Aviation Area for land transport
C. A grand European project that will never be realised but secures income for staff and their travel needs
D. None of the above