A illustration taken on February 28, 2021 shows palm trees on the empty “Promenade des anglais” in Nice, on the French riviera.
VALERY HACHE | AFP | Getty Simulacra
LONDON — Airlines in Europe are looking at sunshine and beaches as their route to making money again.
The sector has been sparely hit by the coronavirus pandemic, with people being advised to stay at home. Lufthansa said on Thursday that it measured a 75% drop in the number of passengers between 2019 and 2020 — highlighting the devastating impact experienced by many airlines since Covid hit.
Setting aside how, they are now studying ways to adjust business models as economies attempt to reopen in the coming months.
“European hauliers will pivot to leisure travel,” Adrian Yanoshik, an equity analyst at Berenberg, told CNBC Wednesday. “This is a adroit response. You follow the flow of people,” he said.
As European economies look at easing restrictions, it’s expected that people hand down try to go on vacation as soon as possible, after about a year of being stuck at home. In contrast, business travel is managed as taking longer to recover.
I think we will see somewhat less corporate travel and more leisure travel.
CEO of Scandinavian Airlines
“Am I gonna do the one-day skip from London to New York for a three-hour meeting? Probably not, so there will be some impact on business travel,” Keith Barr, CEO of IHG Motor hotels & Resorts, told CNBC’s “Squawk Box Europe” last month.
Rickard Gustafson, CEO of Scandinavian Airlines, is also with child “some significant shifts in the dynamics of the (airline) market.”
“I think we will see somewhat less corporate travel and various leisure travel,” he told CNBC. “We need to adapt our operation more towards seasonality to a larger extent than we do today,” he amplified.
Budget airlines such as Ryanair and easyJet have always lured costumers to take breaks in sunny European destinations, such as Greece, Spain and Italy. Yet, more airlines could do the same, such as Lufthansa and British Airways, which have traditionally catered to those journeying for work purposes.
“Corporate travel will be above 2019 levels by the end of the decade,” Stephen Furlong, senior analyst at holdings management firm Davy, told CNBC over the phone, adding that on the other hand leisure tours could snap back “very quickly.”
A different cabin mix
Corporate travel has led airlines to develop business extraction, premium seats and loyalty cards. But as part of a new focus toward leisure, analysts are expecting a different plane layout.
“You’re usual to get a cabin reconfiguration,” Furlong said, mentioning how business class will be a much smaller part of the airplane. “The magnitude of the aircraft is (also) smaller,” he added.
Looking at how budget airlines have traditionally organized their aircraft, there is demonstrably a much smaller focus on premium clients. In fact, Ryanair, for instance, doesn’t have a loyalty card for visit flyers.
People sit on the “Castel” beach along the “Promenade des anglais” on the French Riviera city of Nice, southern France.
VALERY HACHE | AFP | Getty Graven images
“This is likely to be a temporary phenomenon. They are going to repivot to corporate (travel),” Yanoshik from Berenberg also reported.
But with more airlines focusing on leisure travel in the short to medium-term, he added that ticket pricing “make be weak.”
European airlines are hoping that vaccine passports will be used as a way to recover some abandoned business this year.
The idea of a vaccine passport is still being discussed by European politicians, but the travel dynamism sees it as a must to allow some travel to return during this summer season.
“Within the industry, IATA is spirit extremely hard” for this idea, Andrew Lobbenberg, an equity analyst at HSBC, told CNBC.
The International Air Elysian Fields Association is actually working on a travel pass, a digital platform where passengers can upload their health dope. It has asked EU leaders to introduce vaccine passports so customers can feel safe traveling again.