You might have suspected that this move was coming, but nevertheless when it did it was still a shock. All flights to the USA from the EU Schengen border-free travel area will be cancelled from midnight Friday (tomorrow) for 30 days. Notable exclusions from this travel ban are the UK and Ireland – IAG could kiss the White House staff for that one I am sure – but Iceland and Switzerland are included. It also includes anyone who has been to any of these EU countries within 14 days of travel to the USA. The ban includes aircraft crews, UN and NATO workers and diplomatic staff – it is total and therefore due to the crew inclusion it includes all airfreight flights. The ban does not apply to legal permanent residents and immediate family members of US citizens; therefore, flights would have to be crewed by people falling in this bracket.
Because this ban includes Norway and Iceland, it’s hard to see how Norwegian and Icelandair can survive without core flights for at least 30 days without government assistance. It is time that individual nations moved to take action and in so doing ignore EU rules. The logical thing for Norwegian would be some sort of forced merger with the likes of SAS to bring it at least under partial government control to save the bulk of the airline for the long term. For Icelandair it is clear-cut that the government will just simply have to either step-in or do what Germany and France like to do from time to time for businesses such as airlines and manufacturers and provide a “loan”. However, there is a silver lining to consider in that now airlines do not have to fly half empty across the Atlantic to hold slots, they can now ground the flights and put staff on unpaid leave. The White House might, just might, have done more to save EU airlines in one move than the EU has done to date full-stop. In that instance maybe IAG will wish for Ireland and the UK to be included in the ban, We can be sure that Virgin Atlantic, hardest hit of all UK airlines by all this, might well be wishing for a travel ban so that business interruption insurance can kick-in and stem the losses from cancellations on the all-important Easter Orlando routes, alas right now they have no such assistance. We do not know yet know if this move by the US Government will be beneficial or not, but upon first investigation it seems that it is a double-edged sword for all involved European airlines. Of course, alliances should come to the rescue with US alliance members collecting up many essential travel bookings through the codeshares, of course Norwegian cannot take advantage of this. The EU did announce yesterday that it is relaxing the airport landing “use it or lose it” rules and this will assist airlines in grounding aircraft and conglomerating flights but it will not kick-in any business interruption insurance for flights cancelled by the airlines, whereas the US ban will/should. Therein lies the benefit.
This could not have come at a worse time, we are in the booking period for summer 2020 and we are in the immediate travel period for Easter and Spring Break, Mother’s Day, Passover and more, all of the latter are covered by the ban – that destroys 60 per cent of transits to Orlando for Easter break for a start, as an example.
If we were to provide a hit list of airlines hit very hard based on known traffic data against how healthy an airline is/was then the top ten to worry about would be:
- Hainan Airlines – The airline was in trouble but for the fact that the Chinese government is/has taken the airline over. This now makes the airline a safe bet to survive, but what does it mean for lease agreements – a draconian: “we are taking our assets back”, or “we want and will have rental deferrals”, or “we will be renegotiating” is already happening.
- Hong Kong Airlines – Much the same as Hainan, the airline needs saving and that is in the form of Air China as things stand. Still, handing back unwanted leased aircraft and engines is right at the top of the list for them.
- Lucky Air – check-out their transit stats, it is not all good news.
- Cathay Pacific – Many airlines have collapsed under far less strain than this, politically unloved by Chinese authorities, only the weakness of the other Chinese airlines is preventing a forced takeover it seems.
- Norwegian – The brilliant finance team had got the airline to the edge of the woods. I do hope very much that the airline can ride through this storm. If it can then the staff would have done very well indeed.
- Korean Air / Alitalia – These unrelated airlines are put together because they are in the same situation. Alitalia was already teetering on the edge going into this pandemic, but Korean Air has been dragged down by the pandemic. Korean Air is a flag carrier and will be saved by the government, but the losses are off the scale right now and the assistance will have to be significant. Any action to save Korean will affect the other private airlines in the country greatly and further tip the scales against them. So, look out for all Korean privately-owned airlines as all are in a great deal of trouble right now.
- EL AL – right now the airline is effectively shutdown and will need to rely on government and key investor help.
- T’Way Air – Traffic has totally collapsed, and the parent company has reported a significant loss this week.
- Emirates & Etihad Airlines & FlyDubai – FlyDubai has not fared well; a forward booking spread for key routes this week revealed that its aircraft are empty? Do they really manage all this with no government assistance? The airline is therefore safe under the criteria to watch (as printed here yesterday) but nevertheless they will want to get rid of spare engines and aircraft on lease fast.
- Icelandic – Surely they cannot survive this latest hit without (more) government help.
So if you take out of that top ten all the airlines that will not be let to fail that leaves you with a worry list as follows:
- Lucky Air
- Cathay Pacific
- Norwegian
- T’Way Air
You can then add to these:
- Virgin Atlantic – multiple headwinds and worries, the worst hit UK airline after Flybe – which it lost a fortune on
- Aegean Airlines – The fall in passenger numbers is astounding. Can they take it? The airline was doing very well going into this pandemic but they were by no means cash rich and their new A320neo delivery last month will not help matters.
- Wamos Air – Heavily reliant on buoyant cruise traffic via sister company Pullmantur Cruises, this airline will be suffering.
- Air Asia / AirAsia X – Bookings have collapsed across the board and seats are being offered free of charge. Can they ride out this crisis?
- Lion Air – Lion was not super cash rich or that healthy going into this pandemic. The essential IPO has had to be postponed due to this pandemic and the airline is heavily discounting fares, but it has not yet, rather much like AirAsia, taken the steps needed to cut frequency – expect bad news.
- Wizz Air – A great well run airline, but cash reserves are drying-up fast and all main routes are now affected.
Good luck to all airlines and to aviation in general.