aviation industry

As America reopens, airlines hunger to reclaim transatlantic cash

Reuters
As America reopens, airlines hunger to reclaim transatlantic cash

TRANSATLANTIC FLIGHT. Passengers are seen aboard before a JetBlue flight to London at JFK International Airport in the Queens borough of New York City, August 11, 2021.

Jeenah Moon/Reuters

The Biden administration's decision to soon reopen the US to fully vaccinated air travelers represents a chance for airlines to recover the transatlantic routes that are key to their profits

America’s reopening to international air travelers can’t come soon enough for US and European airlines which have sorely missed the lucrative transatlantic market.

The Biden administration’s decision on Monday, September 20, to reopen the country to fully vaccinated air travelers from around the world will allow tens of thousands of passengers to fly to the United States from early November.

For the large traditional European airline players, like British Airways owner IAG, Lufthansa, and Air France-KLM, it represents a chance to recover the transatlantic routes that are key to their profits.

US carriers American Airlines, United Airlines, and Delta Air Lines will also benefit, although their finances had already been helped by a recovery in the large US domestic market to near pre-pandemic levels.

“The transatlantic market is a key profit generator for the main European legacy airline groups,” said Bernstein analyst Daniel Roeska.

Pre-pandemic, in 2019, those routes accounted for more than 26% of IAG’s revenues, Roeska estimates, over 24% of Lufthansa’s, and over 16% of Air France-KLM’s. Transatlantic flights accounted for between 11% and 17% of US airlines’ passenger revenues that year.

Shares in IAG rose 4% on Tuesday, September 21, having jumped 11% on Monday when the White House announced the reopening. Air France was up 3% on Tuesday.

The news will also benefit British-based airline Virgin Atlantic, a transatlantic specialist, which has turned to cargo to help it survive the pandemic.

Lean winter

The lifting of restrictions coincides with the onset of winter season, historically a lean period for international travel, when many airlines tend to make a loss.

Colin Scarola, vice president, equity research at CFRA Research, said the decision would encourage companies to approve overseas business trips, yet COVID-19 risks remain, and he does not expect international travel to rebound to pre-pandemic levels before late 2022.

British Airways said that its customers were keen to fly again, citing an increase of nearly 700% in searches for holidays to US destinations like New York, Orlando, Las Vegas, and Miami on its website on Monday, versus the same day last week.

In the United States, though, airlines fear the travel recovery could be blunted by the Delta variant of the coronavirus.

While Europe has been contending with the fast-spreading variant for months, it hit the United States later and carriers there have warned this month about the consequent financial hit.

Several airlines have slashed revenue forecasts, citing a slowdown in bookings and increased cancellations.

Savanthi Syth, an analyst at Raymond James, called the White House’s decision an “incremental positive” that would give US carriers clarity for next year’s summer travel season. Yet it did not prompt her to revise her financial estimates for them or the outlook for air travel.

In early September, US airline passenger volumes for international travel were just 44% of the pre-pandemic levels, according to data from trade body Airlines for America. – Rappler.com