That Was The Week That Was: 30 March – 3 April
Welcome back to TWTWTW! After a short – well, of a couple of months – break we thought it was time to lift the spirits and pick up our good habit by looking back on the news that caught our attention in the week that was.
The theme this week was: Damage Control. The damage to air transport caused by the spreading COVID-19 virus and government-imposed travel restrictions is common knowledge, but ICYMI here is a refresher of the dramatic state of play, based on Eurocontrol data: Flight movements (including international and domestic arrivals and departures) across the European network were down 85% compared to last year. In other words, the skies were eerily calm and quiet. Fleets grounded. Airports empty.
Monday saw the Dutch Minister for Infrastructure, Cora van Nieuwenhuizen, play her bit to control the potential financial damage to airlines by allowing them to issue vouchers for cancelled flights rather than reimbursing passengers. “Airlines are not sufficiently liquid in the short term to cover all refund tickets,” van Nieuwenhuizen wrote to the country’s MPs. She acknowledged the move is against the infamous pro-consumer EC 261/2004 legislation, but so be it. Why care about the damage to passengers who are not getting their money back–within seven days, as required by 261— or face an increase in post-Covid-19 fares? Why consider the Commission’s guidelines, published on 18 March, on EU air passenger rights in the context of Covid-19, which state: “In the case of a flight cancellation by the airlines (no matter what the cause is), Article 5 obliges the operating air carrier to offer the passengers the choice among: a) reimbursement (refund); b) re-routing at the earliest opportunity, or c) re-routing at a later date at the passenger’s convenience.” These guidelines, Commissioner for Transport Adina V?lean pledged, “will provide much-needed legal certainty on how to apply EU passenger rights in a coordinated manner across our Union.” Right.
Tuesday saw IATA calling on the world’s press corps to support the travel vouchers idea. Sold but un-flown tickets represent a potential liability for the industry of up to $35 billion in the second quarter alone, explained the trade body’s chief economist, Brian Pearce, while IATA DG Alexandre de Juniac blamed governments for the flight cancellations. Airlines did not cancel flights in their own interest, he insisted, but because governments imposed travel restrictions and closed borders. This, of course, validates why passengers must take on the role of airlines’ banker and provide the much-needed liquidity. De Juniac nonetheless showed some compassion for passengers, admitting the voucher-no-refund practice is inconvenient for passengers as they would not get their money back, at least not the next 12 or 18 months. But, he concluded, “it is a matter of survival for us.” On the other side of the Atlantic, the widespread practice of issuing vouchers in place of cash refunds did not go down well with a group of nine US Democrat senators. With $58 billion in financial aid, including $25 billion in grants for passenger airlines to keep employees on their payroll, “we believe your company has a moral responsibility to provide real refunds, not travel vouchers,” they wrote in a letter to 11 airline CEOs. Meanwhile, in The Hague, van Nieuwenhuizen took yet another damage control move and decided to push back the already-delayed opening of Lelystad Airport by one year, to November 2021. The regional airport was developed as a twin gateway and “overflow airport” for Schiphol, but with AMS now lacking flow, let alone overflow and with one of its runways serving as parking lot for aircraft, there is no need to add capacity. Pre-covid-19 capacity crunch turned capacity cut. There is a silver lining in not opening Lelystad, the minister pointed out: residents will not be disturbed by low-level flights.
Wednesday was not a good day for Air France. The French airline had to accept defeat in its long-running efforts to convince the French government that the alleged massive subsidies to Qatar Airways were damaging its business. Akbar Al Baker, never shy of being in the limelight and spotting a good public relations opportunity, did not fail to tell the world, and France in particular, that his airline was asked by the French government, an Air France shareholder, to fly stranded French citizens home.
Thursday saw Brussels Airlines stealing the headlines, with reports that it might need an Alitalia-style bailout. A re-nationalisation is one of the scenarios under consideration by a group of high-level economists and bankers as funds to keep the carrier afloat are dying up. The Belgian government appears unwilling to inject unlimited cash without knowing the true state of its affairs. The unprecedented Covid-19 environment and the airline’s ownership complicates the discussions as to who needs to bail out the airline—the Belgian government because the airline is based in Brussels, employs mostly Belgian citizens or Lufthansa which owns 100% of SN Airholding. Brussels Airlines, in its current or in one of its prior forms, has never been a textbook example of how to operate profitably. Even Lufthansa has struggled to turn the company around. Since taking full control in December 2016, it has zigzagged between strategies—a hybrid model, followed by full network model, then a low-cost model under the wings of Eurowings, and back again to the network model.
Friday saw the failure of IATA’s voucher-no-refund lobby in the US and the Department of Transportation standing by its “airline cancel/ airline pays” rule. The obligation of US and foreign airlines to provide prompt refunds, including the ticket price and any optional fee charged for services a passenger is unable to use, does not cease when the flight disruptions are outside of the carrier’s control such as a result of government restrictions, the DOT stated. Then, to matters worse, and bring the week that was back to where it began, the week ended on a really sour note for IATA: Covid-19 claimed its Annual General Meeting and World Air Transport Summit. The event had been scheduled to take place on 22-23 June in Amsterdam.