I have searched a great deal for an upbeat airline story so far this week – this task is not an easy one. Airline shares across the board are being shorted (save for Ryanair) and that is the primary reason for exceptional falls at most listed airlines this week. There are some stories that just make you want to sit down and cry. Top of that list might be SIA’s desperate attempts to bring in revenue by converting an A380 into a restaurant and providing [cabin] meals by delivery service, or maybe the stark warning today that Heathrow might be the only major airport left in the UK soon (wishful thinking). But before you reach for the drinks cabinet, remember that this ordeal that is 2020 will bring about a leaner and meaner aviation sector with far reduced cost bases that will in the mid-term future offset much of the debt built-up.
Air Serbia, for example – written off a few months ago by many – confirmed today that it settled all of its $57.62m debt owed to Etihad Airways-linked SPV EA Partners I. Air Serbia managed to independently provide funds for the repayment of the long-term loan, which matured on September 28, following “extensive austerity measures at all levels”. You will recall that in June Air Serbia notified EA Partners of a potential default under debt agreements signed with EA Partners I and EA Partners II, on September 15, 2015, and May 20, 2016, respectively.
"The payment of this loan is proof of sound and responsible management of Air Serbia before and during the crisis, and during the recovery from the consequences of the pandemic. The Serbian national airline will remain committed to the interests of its shareholders, employees and passengers and will take all measures necessary to protect the company and ensure its successful development," said Duncan Naysmith, CEO of Air Serbia.
The fact is that the Serbian government paid off this debt and it will pay off the EA Partners II debt also. We will, however, give Air Serbia management their dues, they have done well in securing government funds by cutting costs and showing value to tax payers, that was their task and they have succeeded with flying colours and they have in the process shown that they are a good bet to weather this crisis.
AirFrance-KLM and Lufthansa and many others are in the pockets of governments now too and will also have to show good cost cutting as well as prove that they are cutting carbon emissions to show value to the tax payers of their respective countries. This trend is one of the main drivers for Airbus to get going and roll-out carbon neutral aircraft as fast as possible. I would argue that maybe we will see aircraft in service earlier than 2035 as pressure mounts on the airlines. That fact will not be lost on Boeing, which could do with a break and release a new product into the market not in response to Airbus but as a market leader – which has been the case for every Boeing aircraft save for the MAX. The dark tunnel through which we are travelling is long, but the light is clearly visible at the other end. The future is both exciting and bright and only a fool would think that aviation was going to fall off of a cliff and never come back in the same fashion as coal mining in England…
Aviation and the Environment was a big issue going into this crisis and It is going to be huge when we come out of it. Good then that Airline Economics will be holding its Aviation & the Environment summit once again in Dublin during H1 2021. https://www.aviationnews-online.com/conferences/dublinaviationsummit/schedule/