Europe in Disarray
Europe’s hot, vaxxed travel summer already appears in shambles. Staffing issues across aviation are prompting carriers to proactively cancel flights during busy July and August, flight caps are in place at three of the continent’s busiest airports and counting, and industrial actions are hitting — or may hit — some of the continent’s largest airlines.
“The upcoming summer will undoubtedly be a major operational challenge for the whole industry,” Lufthansa Group CEO Carsten Spohr warned in May. At the time, he said airports, air traffic control organizations, and even third-party caterers were “struggling with significant staff shortages.” Fast forward seven weeks, and Lufthansa and its budget subsidiary Eurowings are cancelling more than 3,100 flights in both July and August in order to mitigate the disruptions they are already seeing.
From June 1-23, more than 2 percent of all flights in Europe — not including those to points outside the region — were cancelled, according to Cirium data. That is not a wholly bad result but also not a great one either in an industry that strives for completion factors greater than 99 percent. KLM, Eurowings, and EasyJet cancelled the most flights: 9 percent, 7 percent, and 5 percent, respectively. Unsurprisingly, the airport with the most cancellations was KLM’s hub at Amsterdam Schiphol, followed by Hamburg and Brussels.
What gives? It’s the post-Covid hex that is plaguing the recovery across industries and countries as the world tries to come back from its pandemic stupor. While there is no one reason for the situation, generally staff who left their jobs for whatever reason during the crisis are now in high demand, which allows them to pick and choose where they want to work and for what wage. This has made airport jobs, particularly those in terminals without the travel benefits of airline employment, more challenging to fill due to what is a lengthy credentialing process in many countries. It has also put upward pressure on wages.
“You cannot scale up overnight,” Airports Council International (ACI) Europe spokesperson Virginia Lee said when asked about the situation at European airports. It can take up to six months to hire and credential an airport worker in many European countries. That, she pointed out, means airports needed to have hired for current demand in December and January — or in the middle of the Omicron surge when many countries were reimposing travel restrictions and airlines were cutting flights.
Airport staffing is widely cited by airlines for cancellations. In addition to Lufthansa’s reductions, British Airways in May cut its schedules at London Heathrow by 10 percent through October due to what it sees as understaffing by the airport’s operator. EasyJet has reduced its June quarter capacity by 3 points to 87 percent of 2019, and September quarter by about 10 points to roughly 90 percent. And lack of security and airport staff have been widely cited for the disarray at Schiphol that has hurt KLM.
The staffing situation has prompted Schiphol, as well as London’s Heathrow and Gatwick airports, to institute caps on the number of flights. Schiphol Group operations chief H. L. Bui said in a letter to the airport’s slot coordinator on June 17 that the caps through August 28 were “necessary to ensure a safe operational environment.”
Industrial actions are also taking a toll. Nationwide strikes in Belgium closed Brussels Airport on June 20, and Brussels Airlines has warned of further cancellations from June 23-25 due to actions by its own unions. Ryanair, Europe’s largest budget airline, cancelled several hundred flights due to industrial actions on June 23, 24, and 25. And British Airways, which has already reduced its schedules at Heathrow, faces potential actions by two unions representing work groups at Heathrow airport, including check in agents.
Despite the operational disarray, there has yet to be a material financial fallout for Europe’s airlines. Industry executives near universally forecast strong demand ahead of the summer season that, despite the negative operational headlines, has abated little. EasyJet, the last to update its financial guidance on June 20, said that despite the operational issues “booking momentum has continued with demand for travel this summer remaining strong.” The airline did not update its financial guidance other than to revise down its capacity targets for the June and September quarters.
Less capacity and high demand, of course, benefit airlines by driving up fares. The cuts implemented by many airlines are likely to do just this, which in turn will help them recoup historically high fuel costs. But the question is how long this situation can last before travelers, sick of operational issues, opt to stay home or economic forces outside of airlines’ control — whether it’s high energy prices or a recession — dominate the picture.