Airline shares – including those of Ryanair and IAG, which owns Aer Lingus – have soared on suggestions of growing consumer appetite for a return to flying, but an industry body has warned that a return to profitability may prove a long haul for many airlines.
Google searches for air travel have overtaken Covid-19 searches since the middle of last month, according to airline representative group the International Air Transport Association (IATA), although they remain 60% below where they were in January.
While Ryanair said it carried just 70,000 passengers in May – down 99.5% on the 13.5 million it carried in the same month last year – and expects “minimal” traffic this month, it plans a more concerted recovery in July and August. Its shares jumped around 6% as that period gets closer.
Other airline stocks similarly soared – Aer Lingus owner IAG up by over 11%; EasyJet ahead 8% and Lufthansa up 8%.
IATA warned, however, that lower air fares aimed at resuscitating passenger numbers pose a threat to airline profitability, with the crisis potentially costing the aviation industry around $314bn (€280bn) in lost revenues this year.
IATA chief economist Brian Pearce said a return to profitability may be some way off for many airlines, with some seeing “quite a difficult time” ahead.
Meanwhile Hungarian low-cost airline Wizz Air will stick with fleet expansion plans, and is confident of longer-term growth, but said expansion plans will be held back by Covid restrictions.
Elsewhere, Davy analyst Stephen Furlong said Lufthansa – which, this week, reported a first-quarter loss of €1.2bn – is likely to be challenged for some time, despite a pending €9bn bailout from the German government.
With many aircraft parked over the next two years, he said “significant restructuring and cost-cutting” will be required.
Source: Business News