Issue No. 806

A European Wild West as Airlines Eye Opportunities

European Carriers Look Past This Year to a Changing Airline Market

Pushing Back: Inside This Issue

European airlines are looking beyond the exceptionally bad year they had last year and the possibly grim year this year to a brighter future. Many, like Lufthansa Group, are shuffling the pieces around internally to take advantage of any demand recovery that may occur. Others, like Ryanair, are capitalizing on their leisure-traffic strength to plan for what could be a quite a summer. And all are rushing to fill the vacuum left behind by Norwegian's retrenchment.

Meanwhile, AerCap is set to become the world's largest lessor, with 2,000 aircraft in its portfolio, by acquiring GECAS from General Electric. The once-mighty industrial conglomerate has been steadily shedding its assets, but conventional wisdom held that it would retain GECAS as part of its core aviation unit. Conventional wisdom was wrong, as it happens. Elsewhere in this issue, we look at why U.S. budget carrier Frontier, owned by Indigo, would choose now to go public. Crazy times. There's never a dull moment in this industry.

The Airline Weekly Lounge Podcast

New episodes drop every Thursday and are available wherever you get your podcasts and on AirlineWeekly.com. In the latest podcast, Edward "Ned" Russell and Madhu Unnikrishnan wonder if Frontier is crazy, or crazy like a fox, to go public now, and why does Lufthansa protect its fortress hubs from its own subsidiaries? Listen to the episode.

Verbulence

"In December, we had a little bit of an eye-of-the-hurricane phenomenon here in Brazil, where things had recovered... [now] we’ve had a significant reversal."

Gol Chief Financial Officer Richard Lark

Weekly Skies

Air Transat is seemingly unflummoxed by the possible collapse of its long-planned combo with Air Canada. Despite Canadian sign off on the the latter’s acquisition of Montreal-based Transat, the deal remains in limbo following the failure of European authorities to give the green light by February 15. But that’s not keeping Transat CEO Jean-Marc Eustache up at night.

“There is no need to worry about a plan B,” Eustache said during the airline’s fourth-quarter earnings call last week. “There’s a lot of work being done in the background.”

The Air Canada deal, which continues to “live on,” is Transat’s preferred forward path, said Eustache. A decision from the EU is expected before the end of the second quarter, or by June. However, if the deal collapses Transat will consider “all other options,” including a competing offer from Canadian businessman Pierre Karl Péladeau.

While Transat awaits a decision from Europe, the airline remains grounded. Operations were suspended in January and are not expected to resume until mid-June, when European summer travel begins to pick up. Fellow Canadian carrier Porter Airlines has also suspended all flights, though only through May, as a result of Covid-19 travel restrictions.

During the first quarter ending January 31, Transat reported an operating loss of C$98 million ($78.2 million) after revenues fell 94 percent year-over-year to C$41.9 million. The airline’s adjusted net loss was C$109 million.

Edward Russell

2021 Augurs Ill for Cathay Pacific

Cathay Pacific expects to operate about half its pre-pandemic capacity this year, with the bulk of the recovery expected to start in the second half of the year.

The year has not been off to a promising start. The Hong Kong-based airline had to slash its February capacity after the government imposed new travel restrictions at the end of last month. After February 20, when the restrictions went into effect, Cathay’s passenger capacity dropped to 60 percent of January levels, and cargo capacity fell to 25 percent of January.

Last year was grim for Cathay, which, unlike many of its rivals, has no domestic market. The carrier shuttered its Cathay Dragon unit and parked almost 100 aircraft. Cathay reduced its workforce by 8,500 employees. Another round of voluntary separations is expected in the first half of this year.

Cathay now expects to operate less than one-quarter of its pre-pandemic capacity in the first half of this year, with capacity steadily rising in the second half, to about 50 percent of pre-pandemic capacity by the end of the year. In the company’s full-year earnings report, management made clear that this forecast could change, because the pace of vaccination in its key markets and the threat of new travel restrictions could derail the airline’s recovery.

Cathay’s remaining Airbus A350-900s and A350-1000s, originally to be delivered this year and next year, will be deferred until 2023-2024. The carrier is in talks with Boeing to defer its order of 777-9s. Cathay Pacific took delivery of 10 aircraft last year, including one A321 Neo.

Cathay Pacific reported an HK$21.6 billion ($2.8 billion) loss last year, compared with a $218 million 2019 profit. Passenger revenues fell by 84 percent, and capacity for the year was down 79 percent. Cargo revenues rose by 16 percent to $3 billion, or about two times passenger revenues. During the year, the company stripped some economy seats out of its Boeing 777-300ERs fleet to complement its freighter fleet.

Madhu Unnikrishnan

Latam Starts Slow Climb

Latam‘s fourth-quarter 2020 capacity was about 38 percent of 2019 levels, but this was a vast improvement from April, when the carrier’s capacity plunged to 5 percent of the year prior’s. The carrier reported a quarterly operating loss of $502 million and $1.7 billion for the full year.

Latam, of course, filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code in May, with its Brazil subsidiary following suit in June. The carrier reported it ended the year with $1.7 billion in cahse, and has $1.3 billion left in debtor-in-possession financing available.

Latam’s planned joint venture with Delta Air Lines will continue and won regulatory approval last month in both the U.S. and Brazil. Chile is continuing its review of the deal, Latam said in its earnings statement.

Although capacity started to creep back up, the year was bad for the South American airline. Passenger revenues in the fourth quarter were 82 percent lower than in 2019. Costs were down almost 60 percent, mainly due to a 31 percent reduction in headcount. Latam ended the year with 300 aircraft in its fleet and did not detail its fleet plans.

Plunging passenger revenue was partially offset by cargo, revenues for which rose 27 percent, despite a decline in available capacity.

Madhu Unnikrishnan

$30 Billion AerCap-GECAS Merger Tilts Momentum Toward Leasing

AerCap’s $30 billion acquisition of General Electric’s aircraft-leasing arm, GECAS, is a bet by the Ireland-based lessor that cost-conscious airlines globally will be shifting more broadly to leasing aircraft rather than owning.

The deal will create a leasing behemoth, with more than 2,000 aircraft under management, 900 aircraft engines, and 300 helicopters. AerCap will acquire GECAS for $24 billion in cash, $1 billion in AerCap notes, and 111.5 million AerCap shares, giving GE a 46 percent stake in the combined company, which will continue to be known as AerCap. The company expects the combination will yield $7 billion in annual revenue.

AerCap and GE say the deal is expected to close in the fourth quarter of this year, after regulatory review both in 20 countries. Both companies are “confident” the deal will not raise antitrust concerns, AerCap CEO Aengus Kelly told investors last week in a call detailing the deal. It is worth noting, however, that AerCap and GECAS currently are the largest and second-largest lessors.

Globally, airlines are moving toward leasing, rather than owning, their fleets, both AerCap and rival Air Lease Corp. recently said. This trend only will accelerate as airlines emerge from the Covid downturn. Buying aircraft will be a harder argument to make to their boards, as airlines will be focused on paying down debt and any obligations they have to governments that offered loans as part of state aid “and not to send money to the OEMs,” Kelly said earlier this month during the company’s fourth-quarter and full-year 2020 earnings call.

A second trend that AerCap thinks the deal positions it to capitalize on is airlines’ expanding their fleets of advanced narrowbody aircraft, like the Airbus A320 Neo family and the Boeing 737 Max. A majority of GECAS’ fleet now is comprised of narrowbody aircraft. By 2024, the company expects two-thirds of its fleet to be comprised of narrowbodies, weighted toward “next generation” aircraft, like the 737 Max and the A320 Neo family. By that year, AerCap expects to have 75 percent of its fleet made up of next generation aircraft.

In its earnings call, AerCap said future demand for advanced narrowbodies will only grow, although the company remains committed to widebodies, particularly advanced aircraft like the Boeing 787 and the Airbus A350. “AerCap leased 200 widebodies in the last two years, or one every 10 days,” Kelly said on the call on the merger. “No other company has that capability.”

With 2,000 aircraft under management, AerCap will be a formidable force for the two airframers, Boeing and Airbus, to contend with and likely will gain a larger say in the design of future aircraft programs.

GE has been steadily divesting assets as the conglomerate seeks to focus on its core businesses, one of which is its aircraft engine unit. The deal with AerCap gives the Irish lessor 900 aircraft engines, mostly CFM 56 and CFM Leap engines used on narrowbodies like the Max and the Neo. But AerCap will not get preferential deals on maintenance, nor will the company be locked into selecting GE engines on future aircraft purchases, Kelly said.

AerCap also will acquire GECAS’ helicopter leasing portfolio, although it will comprise less than 10 percent of the combined company’s aircraft assets. The oil and gas industry is the primary customer for helicopters, and demand is rising now that oil prices have rebounded, Kelly said.

AerCap’s last significant acquisition was in 2013, when it bought ILFC from AIG for $28.1 billion.

Madhu Unnikrishnan

Airlines, Airports Benefit From New $1. 9 Trillion U.S. Coronavirus Relief Package

Airlines cancelled furlough notices to thousands of employees after President Joseph Biden signed a $1.9 trillion fiscal stimulus bill into law, ending a tortured route through Congress, which ultimately passed the bill on a party-line vote.

The law provides $14 billion to extend the Payroll Support Program through the end of September. As with last year’s CARES Act and the supplemental fiscal stimulus airlines received in December, carriers that take payroll support must promise not to furlough or involuntarily lay off employees through the period covered by the stimulus. Stock buybacks and dividend payments also are prohibited. Airlines got $25 billion in payroll support through the CARES Act and an additional $15 billion in December.

United Airlines and American Airlines were among the carriers that had issued notices to tens of thousands of employees that layoffs and furloughs were coming at the end of this month, when the December stimulus was expected to expire. “You can tear them up!” American CEO Doug Parker and President Robert Isom said in a letter to employees.

The federal government, like governments around the world, has lavished aid on the airline sector since the pandemic began. One key difference, however, between U.S. aid to the sector and that from other governments is that much of the federal aid is targeted at employees. In several European and Asian countries, furloughed airline employees are supported through existing unemployment programs or pandemic-related wage support that isn’t targeted at one sector.

Most U.S. airlines have said they expect to be much smaller this year and possibly next year. The federal aid is necessary, they argue, to keep staff current and certified and to avoid a brain drain, which would leave the unable to react when travel begins to rebound. “Preserving critical infrastructure will help our economy recover more quickly as the pandemic subsides,” Allied Pilots Association President Eric Ferguson said to make that pont.

Unions lobbied hard for federal support. “Our program reined in the worst corporate behavior by preventing layoffs, capping executive compensation for two years after relief ends, and banning stock buybacks and dividends for a year after the relief ends,” Association of Flight Attendants President Sara Nelson said in a statement. “Speaking with a united voice, we enacted the PSP and have now successfully extended it twice.”

The law also extends $8 billion in airport aid. This adds to the $10 billion airports got through the CARES Act and the $2 billion in the round in December. Airports could lose as much as $40 billion by next year if the pandemic continues, ACI-NA President Kevin Burke said.

Madhu Unnikrishnan

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Sky Money

F​rontier Airlines is the second low-cost carrier in a month to file for an initial public offering, clearly seeing opportunity in the prevailing assumption that affordable leisure travel will rebound first from the pandemic.

Denver-based and private equity-owned, Frontier filed paperwork March 8 with the Securities and Exchange Commission, stating it is looking to raise $100 million in the offering.

The filing comes on the heels of Sun Country Airlines filing for an IPO in February, a rarity within the industry but amid the growing anticipation that vaccines will encourage more flyers to book flights.

Wall Street is clearly encouraged by that prospect as well. The S&P 500 Airlines Index, tracking carriers’ stock performance, rose 24 percent year-to-date on the news.

Frontier is twice the size of Minneapolis-based Sun Country, with a route network of more than 100 destinations, versus Sun Country’s roughly 50, and a fleet of more than 100 aircraft, compared with Sun Country’s 43.

Also like Sun Country, which is owned by Apollo Global Management, Frontier is owned by a private equity firm, in its case, Indigo Partners, an investment group that specializes in budget airlines. In addition to Frontier, Indigo has invested in Europe’s Wizz Air, Mexico’s Volaris, and Chile’s JetSmart.

The similarities with Sun Country end there, however. Frontier, like all Indigo-owned airlines, is aggressively low-cost, famous for its unbundled fares. This is a strength, the carrier said in its filing with the SEC, giving it more pricing power and more sources of revenue. The lack of onboard amenities also contributes to its lower costs, the carrier said.

And Frontier is laser-focused on costs, telling the SEC that its costs are among the lowest in the industry. Its unit costs were 10.3 cents last year, compared with an average of 16.52 cents for United Airlines, American Airlines, Delta Air Lines, and Southwest Airlines. Only Allegiant Air and Spirit Airlines had lower unit costs, Frontier said.

Along with its low costs, Frontier points to its leisure-customer base as another strength, particularly now. The airline industry has been battered by the pandemic, with a key source of profits — business travel — all but shut off. Frontier, however, has always focused on leisure travelers, who are expected to return to travel as the pandemic recedes. This focus puts it in a better position than carriers, like American, Delta, and United, which derived much of their profits from business travelers.

Its focus on leisure travelers could also pose risks, Frontier noted. If the Covid pandemic lingers and causes a prolonged recession, price-sensitive leisure travelers may opt not to fly. Advances in technology, such as videoconferencing, could cause some people — particularly business travelers — to postpone trips.

The carrier is confident, however, that its base in Denver provides a strong home market from which to grow. After Denver, its top five markets are Orlando, Fla., Las Vegas, Philadelphia, and Phoenix — all growth markets in and of themselves as well as being top leisure destinations. The carrier did warn, however, that its ability to expand could be stymied by further congestion in Denver as well as its inability to secure landing rights at some of the country’s most desirable airports, like New York’s John F.  Kennedy International Airport and LaGuardia Airport, and Washington Reagan National Airport.

Frontier also warned that Covid itself poses a risk to its future growth, if the disease is not contained or if fresh outbreaks prolong the duration of the pandemic.

Frontier has 104 Airbus A320 aircraft in its fleet and plans to take delivery of up to 156 more between now and 2028. The carrier sees opportunity to operate 518 additional routes that are not currently served by ultra-low-cost carriers. Last year was bad for the carrier financially, though. Frontier reported a loss of $225 million last year, compared with a net income of $251 million in 2019.   Revenues plunged from $2.5 billion in 2019 to $1.3 billion last year.

Before Sun Country announced its intention to go public last month, the last major airline to float shares was Virgin America, in 2014, although regional carrier Mesa Air Group went public in 2018.

Madhu Unnikrishnan

In Other Finance News

  • Following on the heels of Spirit Airlines and United Airlines loyalty securitizations, American Airlines raised $10 billion in secured financing in what is the largest debt transaction ever by an airline. The notes are backed by its AAdvantage frequent flyer program, which boasts more than 115 million members and generated annual cash flows of $3.1 billion in 2019. The planned transaction comes as airlines look for new and creative ways to raise cash as they weather the Covid-19 crisis. Proceeds from the deal will be used to pay off $550 million American borrowed from the U.S. Treasury, as well as for general corporate purposes.
  • Korean Air raised 3.3 trillion won ($2.6 billion) from the issue of 173.6 million new shares last week. Proceeds will fund its acquisition of competitor Asiana. The former hopes to close the deal by June 30.
  • Go big or go home they say. After initial guidance of an up to $100 million IPO, Sun Country Airlines now aims to raise as much as $240 million from its pending public debut. The Minneapolis-based carrier will list its stock at $21 to $23 per share on the Nasdaq under the symbol “SNCY,” it said last week. Sun Country plans to sell 9.1 million shares with another 1.4 million available to the banks managing the listing. The carrier did not say when shares will go on sale.
  • E-commerce behemoth Amazon took a 19.5 percent stake in cargo carrier ATSG for $131 million by exercising warrants for 13.5 million shares. The deal gives the Seattle-based Amazon a minority stake in ATSG that stops just short of the 20 percent threshold that would require Amazon to change the way it accounts for the investment. The move is the latest expansion of Amazon’s air freight operations. The company operates a fleet of its own Boeing 767 cargo aircraft, which it acquired earlier this year from Delta and WestJet, as well as owning minority stakes in Atlas, in addition to ATSG. Sun Country operates a fleet of Boeing 737s for the company.

    Edward Russell & Madhu Unnikrishnan
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Fleet

  • The crisis has created an uneven recovery where some countries are seeing travel come back faster than others. In response to these disparities, Jetstar will shift six Airbus A320s from its Jetstar Japan unit to Australia for a two- to three-year period, Jetstar CEO Gareth Evans said at a CAPA event last week. The move will allow the budget carrier to leverage a stronger recovery and growth opportunities in Australia. Jetstar Japan operate 19 A320s following the shift.
  • Southwest Airlines is close to a deal with Boeing for dozens of 737 Max 7s, Reuters reported last week. If finalized, the order would forestall a defection of the all-737 operator to the competing Airbus A220 for part of its fleet. Southwest executives have previously said they were considering both the A220-300 and 737-7 to replace many of the airline’s 470 737-700s over the next decade.
  • Widerøe has inked a first deal for Italian planemaker Tecnam’s planned all-electric P-VOLT prop. The Norwegian regional carrier will work with Tecnam, and engine supplier Rolls-Royce, to develop, certify and introduce what could be one of the first all-electric commercial aircraft by 2026. The commitment is part Widerøe’s aim to go emissions-free by mid-decade. The P-VOLT is based on the P-2012 Traveller, which Cape Air introduced on passenger flights in 2020.
  • Icelandair is converting two of its Boeing 767-300ERs into freighters. The Nordic carrier is selling the aircraft to Titan Aviation, an Atlas Air unit, in a sale-leaseback deal. Titan will manage the aircraft. Icelandair currently operates two Boeing 757-200 freighters. “Our aim is to increase the capacity in our markets, as well as strengthen Iceland as a hub for cargo, in a similar way as our passenger hub that provides attractive connections between continents,” said Icelandair CEO Bogi Nils Bogason.

    Edward Russell & Madhu Unnikrishnan
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Routes and Networks

Eurowings will open a new base in Berlin on April 1, as the Lufthansa Group aims to capture the expected return of leisure travel this summer.

Eurowings will base three Airbus A320s at the new Berlin Brandenburg airport initially, the carrier said last week. The aircraft will initially support new flights between Berlin and Cologne, Düsseldorf and Stuttgart. The routes complement Eurowings existing service to eight mostly-leisure oriented destinations around the Mediterranean, as well as Lufthansa’s service to Frankfurt and Munich.

In a statement, Eurowings CEO Jens Bischof described the expansion as both meeting leisure demand and filling the gap left by other carriers who retrenched during the crisis. However, few airlines have permanently pulled out of Berlin and market leaders, EasyJet and Ryanair, so far plan robust schedules this year, Cirium data shows. Eurowings’ move appears more of an attempt by Lufthansa to capture some of the market ceded to the two foreign discounters following the collapse of Air Berlin in 2017, then a response to changing competition.

In 2019, EasyJet had a 32 percent share of Berlin seats followed by Ryanair with a 15 percent share, according to Cirium. Lufthansa and Eurowings had 10 percent and nine percent seat shares, respectively.

Separately, the vacuum left by Norwegian Air‘s restructuring is not the only space airlines are racing to fill in Europe. Eurowings plans its first service connecting the popular Mediterranean hotspot Palma de Mallorca with the UK this summer, a market previously served by defunct Thomas Cook. The German airline will offer new service between Mallorca and both Birmingham and Manchester from the end of May with additional holiday-focused routes under consideration.

Route Briefs

  • When the going gets tough, focus on home? Alaska Airlines was not kidding when it said it would focus growth on its Pacific Northwest home. A week after unveiling four new routes to Montana, the carrier is returning to both Idaho Falls and Redding, Calif., after a decade-plus hiatus with new nonstop flights from Seattle on de Havilland Dash 8-400s from June 17. Alaska will also add service between Boise and both Austin and Chicago O’Hare on Embraer E175s the same day.
  • Don’t call it a “focus city,” but American Airlines is adding 10 new routes from Austin for a total of 20 this summer. The carrier will connect Austin and Las Vegas, Nashville, New Orleans and Orlando in May; Tampa in June; Raleigh-Durham in July; and Washington Dulles in August. Seasonal flights between Austin and Aspen, Destin-Fort Walton Beach and Los Cabos will operate from June through September.
  • Romania’s Blue Air plans new connections of Milan’s convenient Linate airport. The carrier will launch up to daily Milan-Bucharest Otopeni service on March 28, and twice-weekly Milan-Cluj Napoca service on June 1. The Bucharest-Linate flight complements Blue Air’s existing service to Milan’s Malpensa airport.
  • Prepping for its eventual exit from Chapter 11 bankruptcy, LATAM Airlines has its eye on the Colombian market for future expansion. The country where LATAM is already number two is a “great opportunity” for the airline, said CEO Roberto Alvo at a CAPA conference last week. Any Colombia growth would further pit LATAM against competitor Avianca, which is also restructuring under Chapter 11. The crisis has forced both airlines to shut subsidiaries, LATAM its Argentinian unit and Avianca its Peruvian operation.
  • As United Airlines adds new bus connections, Lufthansa is swapping a plane for a train under an expanded partnership with Deutsche Bahn. New plane-to-train, and vice versa, connections to Hamburg and Munich in Frankfurt begin in July, and to Berlin, Bremen, and Münster in December. In addition, Deutsche Bahn will add new “Sprinter” service between the Frankfurt Airport and both Munich and Nuremberg in December. Sprinter trains will run nonstop and are timed to connect with the airline’s flights.
  • What do Bellingham, Wash., Eugene, Ore., and Myrtle Beach, S.C., all have in common? New Southwest Airlines flights this year. The Dallas-based carrier’s growth tear continues with the addition of its 15th, 16th and 17th new destinations since Covid-19 hit the U.S. market a year ago. Southwest will unveil its new Bellingham, Eugene and Myrtle Beach routes at a later date with plans for some service to begin by the summer.
  • Spirit Airlines is making no small plans as it recovers to pre-pandemic capacity this summer. with Pensacola, Fla., and St. Louis joining its map, plus new nonstops from New York’s LaGuardia airport. The discounter will connect Pensacola to Austin, Columbus, Dallas/Fort Worth, Indianapolis, Kansas City, Louisville and St. Louis from June 10 and 11. St. Louis flights to Fort Lauderdale, Las Vegas, Los Angeles and Orlando begin May 27. The new destinations join Louisville and Milwaukee where Spirit begins flights in May and June, respectively.

    Spirit is also taking advantage of the loophole in LaGuardia’s 1,500-mile perimeter to add Saturday-only flights to San Juan on April 17, and Los Angeles on June 12. In addition, the airline will add a daily LaGuardia-Nashville flight on May 5. The expansion means Spirit will begin using two gates in Terminal A, also known as the Marine Air Terminal, at the airport where it hopes to eventually consolidate its operations.

    Edward Russell
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Feature Story

How Will Europe’s Airline Market Reshape Itself Out of This Crisis?

Stronger, leaner and poised to capture new opportunities — that’s the name of the game among Europe carriers. After posting staggering losses similar to their U.S. brethren, nearly every airline is singing something of a more optimistic tune now with a way out of the coronavirus pandemic coming into sight.

“We will re-dimension our fleet and our workforce and transform our business to adjust to a smaller and structurally changing markets,” was how Lufthansa Group CEO Carsten Spohr put it to describe the group’s restructuring. In 2020, the conglomerate opted to remove 115 jets — including all of its Airbus A380s — and slimmed its workforce by as much as a fifth at its Brussels Airlines subsidiary. Even Lufthansa’s seemingly sacrosanct Frankfurt and Munich hubs were (finally) opened to other group carriers.

But Spohr’s colorful corporate speak was just another way to put the same story. Air France-KLM is on track to cut full-time equivalent (FTE) employees by 14,500 by the end of 2022, and IAG slashed some 10,500 staff from its Aer Lingus and British Airways subsidiaries. On top of that, more planes were parked, fleets streamlined and even some operating subsidiaries — like Level France — closed. The view that significant long-term savings were achieved was nearly palpable.

And what did these cuts achieve? Net losses of €7.08 billion ($8.4 billion) at Air France-KLM, $8.4 billion at IAG and €6.7 billion at Lufthansa in 2020. Each carrier expects improvements this year but few — none? — think the European carriers will turn a profit.

“The problem, at least in the near-term, is that most European governments are currently extending (or even tightening) restrictions to prevent the spread of new COVID-19 variants,” wrote J.P. Morgan European airlines analyst David Perry in an outlook in February.

These restrictions are weighing on every carrier’s short-term outlook. Both mainline and low-cost carriers have slashed capacity in response to the latest round of European travel restrictions. EasyJet plans to fly just 11 percent of 2020 capacity in the first quarter, Norwegian Air six percent, Ryanair 13 percent and Wizz Air 47 percent, according to Cirium schedules.

But restrictions are not keeping airlines from looking ahead. Many are downright bullish on their growth prospects coming out of the Covid-19 crisis, with EasyJet and British Airways both reporting dramatic week-over-week booking increases following the unveiling of the UK’s reopening plan. Budget carriers, in particular, are betting their low costs and holiday-travel tilt will be strategic strengths for them in the leisure-first recovery.

“We will emerge out of this with a much lower cost base… And we should use that to lower prices to take as much market share as we can cope with,” Ryanair CEO Michael O’Leary said in February. Never shy to name names, he cited cuts by Alitalia, EasyJet, Germanwings, Lufthansa, Norwegian and TAP Air Portugal as opportunities for the Irish discounter.

Ryanair plans to take delivery of 100 new Boeing 737 Max 200 jets over the next two years, and another 100 by 2025. While some of these jets will replace older models in its fleet, many can be put to work fueling the growth envisioned by O’Leary.

Ryanair is not alone seeing opportunity across the continent. Eurowings, Finnair, Icelandair and Vueling, to name a few, are also taking advantage of others troubles to grow. Eurowings will open a Berlin base aimed at capturing some of the holiday traffic that now flies on EasyJet or Ryanair. Finnair hopes to pick up some of the market ceded by Norwegian in its reorganization. And Vueling also has its eye on some of Norwegian’s former market with plans for eight new routes between sun-soaked Mediterranean destinations and Scandinavia.

But with air travel not forecast to return to pre-crisis levels until at least 2024, not every European airline can grow out of the crisis. Ryanair has the most ambitious plans — also one of the more outspoken airline chiefs on the continent — while others appear more muted and strategically focused in areas of strength. For example, it’s not difficult to see Finnair as a larger Scandinavian franchise while Eurowings plans to connect the UK and the Mediterranean this summer may raise some eyebrows.

Even before the crisis, industry leaders repeatedly said the European aviation market was too fragmented and ripe for consolidation. And while Covid-19 has prompted some airlines to close their doors and others into high-profile reorganizations, those forecast combinations have yet to materialize.

Europe, like the domestic U.S. market, looks to be set up for something of a Wild West of share grabs over the next years. Airlines will try routes, maybe open bases, and some will work but others will not. Giddy up and hold on to your hats.

Edward Russell

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