The pandemic saw life as we know it grind to a halt, and spelled death for airline stocks. The majority of flights were grounded, airline staff were laid off and bankruptcy was looming for many big names. So why have more than 90 new airlines decided that 2021 is the year to launch, and what does this say about the recovery of the aviation industry?
The new airlines hail from Europe, North and South America, Africa and Asia and, according to reports, already have funding secured. Each is also set to take off before the end of the year.
Since the pandemic lead to global travel restrictions, over 40 airlines ceased trading or suspended their operations. But, as some parts of the world slowly start to recover, things are picking up again. The levels of airline travel, however, are still well below pre-pandemic levels, and most carriers are still losing eye-watering amounts of money.
This slow-down amongst established carriers has opened up spaces for new firms to be able to get a place at the table (or boarding gate, if you will), something which in the past would have been nearly impossible and also hugely costly. On top of this, leasing firms are eager to get their planes off the ground and are open to negotiations with different parties now their previous clients are pulling out, and there is a surplus of both pilots and cabin crew looking forward to taking to the skies once more.
There is plenty of opportunity to muscle in too; take the gap in the market left by Norwegian Air, who have retreated to purely Scandinavian routes. Newcomers Norse Atlantic Airways are planning to take over their transatlantic operations bringing low-cost long-haul back for passengers. They plan to fly to long-haul destinations such as Los Angeles, New York, Paris, and London, but also expanding to Asia in the future. In April 2021 they listed on the Euronext Growth marketplace and have their eye on raising a billion Norwegian Kroner in capital.
These newcomers are not novices. One new airline called Breeze - which is due to take off later this year pending regulator approvals - is managed by David Neeleman, the man behind West Jet, JetBlue, Morris Air, Azul and TAP. In the US too, two new airlines are set to take off, with one - called Avelo - already in the skies.
Established airlines are now doing their best to play catch up. Ahead of the UK allowing non-essential travel as of mid-May, British Airways has launched a raft of new routes including to so-called ‘amber’ destinations, adding 93,000 seats.
But, will this influx revive the flagging aviation industry? According to a recent report by Mckinsey, air traffic won’t return to pre-pandemic levels until 2024, with leisure travel being hailed the saviour. Business travel is likely to take a backseat, and by 2024 still only be at 80% of what it was in 2019. Then there are the debt levels of more established airlines, which soared to a staggering $180 billion across airlines in 2020 in a bid to stay afloat. To recoup some of this debt, it seems likely that passengers will see a hike in ticket prices.
Then there’s the cargo business, which pre-pandemic was flagging. In 2019 cargo freight accounted for approximately 12% of revenue. But during 2020 and earlier this year, it was a lifeline, not only for countries and suppliers but also the aviation industry as a whole, accounting for 49% of revenue.
As with other major aviation events in history, the Covid-19 pandemic will most certainly change the way we travel; from adherence to vaccine passports and more stringent testing and cleaning regimes for both passengers and carriers.
But with a wave of new entrants to the market, perhaps the impact of Covid-19 can be a mere blip on the graphs of airline stocks because, at this point, I think we all need a holiday, right?
