The future of the air transport sector, between nationalisation and intervention plans

According to Eurocontrol (European air traffic management body), on 23rd March 2020 the European air traffic was decreasing by 75% if compared to the same period last year.

Airlines are being strongly affected by this situation, and some of them have already announced measures to be adopted in the next months. As Reuters reports, for example, Ryanair suggested a total cancellation of flights during the months of April and May.

Moreover, the global passenger capacity (the maximum number of passengers, also taking into consideration the present restrictive policies) dropped by 35%, and 2500 planes grounded since the beginning of the year. Last week it was registered a loss of 4,5 million available seats – American Airlines also arranged a 75% cut until May, and European airlines are foreseeing similar regulations.

In this instability, as Business Travel News reports, airlines could possibly bankrupt, with an increasing liquidity shortage. According to CAPA – Centre for Aviation, there is also a lack of coordinated government and industry action.

CAPA also reports that the destiny of airlines will depend region to region, and also on the policies that governments will adopt for their national airlines.

Whilst for several private companies the situation promises to be difficult, in China, for example, the Government is supporting national airlines, which will be able to remain solvent. It is also foreseen that the major US carriers will have the clout to lobby for subsidies, and some European companies will benefit from a direct state intervention. Hosteltur reports that the British Government is exploring the opportunity of acquiring shares of the national carriers, such as the British Airways. The plan is to subsidize these airlines with at least a billion pounds, buying shares to be sold to private investors later.

In Italy it is foreseen a newco, a new public company that could save Alitalia destiny. In the recent decree “Cura Italia” – “Cure Italy” -, ANSA reports, the Italian Government provided the creation of a 600 million euros fund to help the carrier and the sector, allowing Alitalia to guarantee the domestic transportation to the Italian airports.

At Twissen we observed that the present restrictive measures are compromising the stability of airlines at a global level and that, in some cases, governments are thinking about re-nationalising the flag carriers. However, in order to make the difference in the recovery of this sector after the sanitary emergency, state interventions should also include private airlines.