Is the 2021 summer tourist season the last hope of survival for travel agencies and airlines in Europe?
Despite a round of positive news in recent months, including the start of the vaccination campaign, the number of cases has started to rise alarmingly in Europe. If in February 2021 the situation was at the lowest pandemic point in the last 5 months, here comes March with this alarming increase in the number of cases. And as if this sad news was not enough, but the number of serious cases in ATI departments has started to increase. The whole of Europe is under the effect of a wave 3 of the COVID-19 pandemic.
Wave 3 came at a time when the tourism industry was hoping for a much better 2021 than the 2020 disaster. Many airlines and tourism offices in Europe have begun announcing new routes, packages and the hope that mass vaccination will relaunch international tourism.
There are high hopes for the 2021 summer tourist season
So far, the pandemic COVID-19 made several "casualties" among airlines and travel agencies. But most of them managed to survive with the support of the authorities (not the case in Romania). The debts recorded are colossal, and the governments of European countries have tried to cover these losses by offering state aid and loans. The problem is that much of this support will have to be reimbursed, but if the summer season does not bring enough funds to airlines and travel agencies, we may witness the bankruptcy of other aviation and tourism companies in the fall.
The year 2020 was a catastrophic one for aviation, tourism and hospitality
The year 2020 was a catastrophic one for aviation, tourism and hospitality, a difficult year from all points of view. But passenger air traffic has recovered temporarily in the summer season. Eurocontrol data show that between 1 July and 15 September 2020, the number of flights in Europe increased. As an example, on June 27, 2020, 6730 flights were reported on the continent, decreasing by about 80% compared to the same day in 2019. 5 days later, already the number of flights increase, and compared to the same period in 2019, already the difference it was smaller, only 65%.
The recovery was quite significant in August 2020 when the number of registered flights was only 49% lower than in 2019 and we know all too well that August is one of the busiest months of the year. But wave 2 came, the summer season was coming to an end, and the number of flights was in free fall.
Low-cost companies were the most flexible during the COVID-19 crisis
If we analyze the evolution of airlines, by far the low-cost carriers have positioned themselves best. For example, Wizz Air continued to operate flights on major routes throughout the year, as long as restrictions allowed. Comparing 2019 to 2020, we can say that in June 2020 Wizz Air registered 960 passengers carried, which translates into a decrease of about 000% compared to 50. But it managed to recover in July when it reported 2019 millions of passengers carried, down only 3% from the same month in 26. And in August the difference between 2019 and 2019 was only 2020%. But we must not forget that in 20, Wizz Air intended to open 2020 new bases and dozens of routes, which happened with difficulty and not entirely due to the COVID-14 pandemic.
In addition to canceled flights, suspended routes, closed bases, airlines were forced to detain a large part of the aircraft fleet. Companies such as KLM, Air France, British Airways or Lufthansa have temporarily or completely given up the services of Boeing 747-400, Airbus A380, Airbus A340 and partially Boeing 747-8i.
The year 2021 started with high hopes for aviation recovery
The year 2021 began with high hopes for the recovery of aviation and the automatic resumption of mass tourism. However, everything will depend on the evolution of the COVID-19 pandemic, the number of new cases and automatically the restrictions imposed by the authorities. Vaccination of the population gives high hopes to people and automatically to economic sectors. But let's not forget that we still don't know much about the effectiveness of vaccines, about contagion, about the period of immunity.
2021 is a turning point for many companies
Economically speaking, 2021 is a turning point for many companies. Many of them managed to survive the inertia of the pre-COVID period, but liquidity was almost exhausted and loans increased. For example, easyJet raised its debt level from $ 1.7 billion in September 2019 to $ 3.7 billion a year later. The idea is that $ 1.3 billion matured on September 30, 2021. But easyJet is a "happy" case, with net cash of $ 4.2 billion. But even so, it is very much that a third of this amount is dedicated to reimbursements, especially if the 2021 summer season does not bring enough income.
But easyJet wasn't the only company that owed more. Lufthansa Group increased the debt level from $ 7.8 billion to $ 11.7 billion, IAG increased the debt from $ 8 billion to $ 11.4 billion. The problem is that a large part of these amounts will have to be repaid in a short time, about 1-2 years.
Let's not forget the aid received from regional and local authorities. There have been countries that have pumped a lot of money into airlines, in various forms and pretexts. But the aid is over, the authorities have reached the bottom of the bag and a recovery of the economy is uncertain in the next period. So what can we expect in 2021?
Aviation and tourism depend on what is happening this year
Certainly aviation and tourism depend on what is happening this year. Beyond the restrictive measures in the pandemic context, I believe that the authorities should implement a master plan for economic recovery. Countries such as Greece, Spain, Italy, Bulgaria are already fighting for the opening of the tourist season. They have high hopes for vaccination campaigns and people's desire to travel safely. Although airfare has risen recently compared to the pre-COVID period, tour packages are even cheaper. The accommodation offers various facilities to tourists, comes with attractive packages and offers bonuses for groups.
But if we relive the crisis of 2020, with tourism to zero, then certainly at the end of the year we will count many more airlines and travel agencies bankrupt than the end of 2020. Airlines will no longer be able to access cheap loans, the situation becoming much riskier even for creditors. At the same time, the level of indebtedness should not increase too much, so companies can enter a financial crisis, without prospects of expansion and recovery, and in the end everything culminates in bankruptcy.
In conclusion, the year 2021 will be decisive for many businesses, at least in the area of aviation and tourism. We want a 2021 open to tourism, at least at European level. We hope that digital green certificate be well implemented and achieve its goal. People are most afraid of quarantine, not vaccines or tests. This suggests that the authorities can find a way to remove quarantine from restrictive measures. This is the only way we can hope for a return of tourism and aviation.