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Airlines take bullish turn after pandemic turbulence eases

Good evening,

A UK parliamentary report today hit out at “disproportionate” and “arbitrary” Covid-19 travel restrictions that had left air passengers confused and delivered a “severe financial shock” to the aviation sector.

As our Big Read explains, the last two years have seen the global industry battling for survival against flight bans and strict restrictions on passengers to control the spread of coronavirus. But after shedding thousands of jobs and diving into debt, airlines and airports are now struggling to handle the sudden surge in demand as restrictions are relaxed.

The number of scheduled flights is now at 89 per cent of 2019 levels, a jump from just a third a year ago, according to Financial Times analysis of data from consultancy Cirium. (You can see a visual presentation of the data here.)

Airlines are in a bullish mood after Easter, the first busy period for two years in many markets and a test for the upcoming summer holiday season. “The demand that we’ve seen over the last five weeks has been historic. We’ve never sold more tickets in any period in [our] public history . . . it’s been remarkable,” Delta chief Ed Bastian told the FT.

Recent earnings announcements have brought similarly good news. American Airlines, the US’s largest carrier, last week signalled an end to pandemic losses and a return to profitability in the second quarter as passenger demand surged. Smaller budget operations such as Wizz Air are also optimistic.

And although the rebound is mainly from leisure trips, there is renewed hope that business travel could stage a comeback. Travel spending by big US companies was “well over 50 per cent” of pre-pandemic levels in March, the chief financial officer of American Express told the FT last week. Delta said domestic corporate sales in March were 70 per cent of 2019 figures.

But while US airlines have been able to drop requirements for passengers to be masked after a legal challenge prevented authorities from implementing the rule, carriers in other countries are still chafing against restrictions. The head of Korean Air told the FT last week that it was “nonsense” for inbound passengers to still require a PCR test.

Staff shortages remain a big issue. There were 2.3mn fewer jobs in aviation compared with pre-pandemic levels, according to Oxford Economics, including a 29 per cent fall in contracted staff such as ground handlers. London Heathrow says it needs to recruit an extra 12,000 people to cope with summer demand. The UK’s busiest airport may be helped by a decision by government ministers to relax background checks for new employees.

And although airlines are making confident noises about new bookings, it is estimated that the global industry will still lose $11bn this year, taking overall net losses between 2020 and 2022 to $200bn.

Governments should have extended more support and airlines should have been less “short-sighted” when cutting staff, says Stephen Cotton, head of the International Transport Workers’ Federation. “Now it’s the workers who are left doing the jobs of two or three people and who are bearing the brunt of the frustration and anger of the passengers.”

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Need to know: the economy

French president Emmanuel Macron was comfortably re-elected, giving new impetus to EU policymaking, including the next package of sanctions against Russia. Macron is now Europe’s most powerful politician, says chief foreign affairs commentator Gideon Rachman, and could help the EU become a major geopolitical power, on a par with China and the US. He could however get his wings clipped in the country’s upcoming legislative elections.

Latest for the UK and Europe

German business confidence bounced back in April, according to the latest Ifo survey, despite fears of surging energy prices and Ukraine-related supply chain disruption. First-quarter German GDP figures are due on Friday.

The head of V.Group, the world’s largest ship manager, has urged Nato to provide naval escorts for vessels passing through the Black Sea, off Ukraine’s coast, a region with global importance for food supplies.

Global latest

Beijing is being hit by panic buying as rising Covid-19 infections spark fears that the city could be hit by a lockdown of the type deployed in Shanghai, where entrances to apartment buildings have been blocked off and authorities are trying to stem viral videos of the city’s hardships. Strict zero-Covid restrictions have put paid to any revival of the country’s stricken property sector.

The “Great Cancellation” looks set to continue as hard-pressed consumers ditch not just Netflix but other subscription services and discretionary items. Sectors such as clothing and restaurants are braced for downturns as consumer confidence dips across the world in what columnist Rana Foroohar dubs a global “buying strike”.

Sri Lanka is struggling with a surge in fuel prices as the island nation’s debt and economic crisis intensifies, with businesses hit by electricity outages and people unable to afford to drive to work. Talks with the IMF have begun but officials and the UN are pushing for immediate help to stave off economic collapse.

When China exports its surveillance tech is it also exporting its political values? Listen to the latest episode of our Tech Tonic podcast series on the US-China tech race.

Need to know: business

Palm oil prices shot up as Indonesia, the world’s biggest exporter, levied a blanket ban on supplies leaving the country in the latest example of crop protectionism, exacerbating concerns over global food security.

Coca-Cola reported its highest quarterly revenues and profits since 2016 as pandemic restrictions eased in venues and customers put up with higher prices. Revenues were up 16 per cent on last year at $10.5bn and profits increased by 24 per cent to $2.8bn.

EU legislators finally agreed a new regime at the weekend, forcing Big Tech to police online content more aggressively and keep users safe. The Digital Services Act is likely to be followed by similar rules in the US, Canada and Singapore in coming months. Meanwhile, Twitter is edging closer to accepting Elon Musk’s $43bn bid to buy the company.

Sales at Roche were lifted by US demand for Covid-19 tests, but the Swiss pharma group said it expected revenues from coronavirus treatments to decline, a sign that corporate America believes the pandemic is on the wane. This belief may be a tad premature, the Lex column argues.

Decades of complex financial investments, opaque corporate ownership stakes and anonymous property purchases have made it difficult to disentangle Russian investments abroad. Sanctions expert Justine Walker says banks need guidance on the extent to which they will be held responsible for failing to stop banned payments or freeze targeted funds.

UK supermarkets are having to increase wages to combat staff shortages in what one union has called a “market correction”. Retail is the largest private-sector employer in the country with hundreds of thousands of hourly-paid staff in stores and distribution centres.

Half of small British companies say growth this year will be hit by rising costs, according to a new survey. The responses point to higher fuel and utility bills, rising National Insurance and business taxes, supply chain disruption and the combination of higher wages and labour shortages.

The World of Work

The historic victory for union organisers at Amazon’s Staten Island facility in New York City is being hailed as a major breakthrough and a successful alternative to traditional recruitment methods, deemed by some to be too out of touch with young people and workers of colour.

The UK’s return to the office has stalled, sparking frustration among some bosses as well as government ministers — who hit out at civil servants still working from home. Offices are about a quarter full compared with pre-pandemic numbers, London tube travel is down by half and fewer City workers are in the office on Mondays and Friday.

Those prepared to return need more than a few “welcome back” perks if they are going to give up the two hours gained by not commuting, writes Rana Foroohar in her discussion of the “cognitive dissonance” of office life in the Swamp Notes newsletter.

Some of those preferring to work from home may be suffering from a version of “ergophobia” — an excessive fear of the workplace. Viv Groskop discusses workplace anxiety and how to overcome it.

Get the latest worldwide picture with our vaccine tracker

And finally . . . 

London has long been an investment magnet for Russian oligarchs but critics say it acts as a laundromat for ill-gotten gains. Watch our new film on how London became the dirty money capital of the world.

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