general

Pent-up demand from the pandemic means consumers are weathering high airfares, but as summer ends and inflation and interest rate rises begin to bite, there are growing questions over whether the appetite for travel is sustainable. Global airlines are now expected to post a $9.7b loss in 2022, a sharp improvement from a revised $42.1b loss in 2021, the IATA said on Monday, and to possibly claw their way back to profit in 2023. But earnings remain well short of pre-pandemic levels as highly indebted carriers grapple with fresh challenges from rising fuel costs and high wages bills that they are attempting to pass on to consumers in the form of higher fares. "We have a certain degree of insensitivity to prices this year," IATA Chief Economist Marie Owens Thomsen said, citing high household savings rates during the pandemic and pent-up travel demand. "That could fade into next year." Industry leaders gathering at IATA's annual meeting in Doha said bookings generally looked very strong for the next few months, but there was less certainty beyond that. "The demand is pent up. It is revenge travel," Malaysia Airlines CE Izham Ismail said. "Airfares have gone up tremendously. It is not only in Malaysia or Malaysia Airlines – it is throughout the industry globally. If the price continues to be high the demand will taper off."<br/>

Global airlines battered by COVID-19 seem confident of narrowing their losses but still face challenges such as labour shortages at airports which could restrict post-crisis growth, industry executives at a summit in Doha said. Recent flight delays and cancellations have been widely blamed on a lack of staff as an increasing number of people desert low-paid airport work for flexible working practices that prospered during the pandemic. The head of host airline Qatar Airways, Akbar Al Baker, said labour shortages will be a big challenge in the coming months, though he added that his airline is "inundated with job applications". "People got into a bad habit of working from home," Al Baker told a news conference. "They feel they don't need to go to an industry that really needs hands-on people," he said, adding shortages in airport staff could hurt growth.<br/>Emirates airline President Tim Clark said the Dubai carrier had been told by authorities at London Heathrow to axe an A380 flight there at short notice at the weekend, resulting in disruption. But he urged the industry not to waste time bickering. "The airport side of things have got to sort out their labor supply in critical areas of baggage, check-in, baggage systems. Get on with the job. There's a lot of the blame game, everybody at each other's throats ... Guys, just get the job done."<br/>

Global airlines hit out at governments on Monday for what the industry’s leading ambassador termed their “shambolic” handling of the COVID-19 crisis, and urged nations to rip up the playbook of widespread border closures for any future pandemics. “The cost of government mismanagement was substantial. It devastated economies, disrupted supply chains and destroyed jobs,” Willie Walsh, director general of the IATA, told an industry summit. Airlines have themselves been under fire from governments and consumer groups for disruption as travel demand resumes more briskly than expected, but the airline industry sees a common thread in uncoordinated government responses to the crisis. “There was one virus, but each government invented its own methodology,” Walsh told the industry’s annual meeting. “How can anybody have confidence in such a shambolic, uncoordinated, and knee-jerk response by governments?” Speaking to more than 100 airline bosses gathered in Qatar, Walsh cited research showing that border closures had barely arrested the spread of the pandemic while virtually halting international travel and crippling economies. “Closing borders is not the right response to a pandemic,” Walsh said. Governments worldwide lent more than $200b of support to airlines to curb bankruptcies during the pandemic, according to UK-based aviation consultancy Ishka. Airlines expected to narrow losses in 2022 and may make a profit next year as air travel recovers, IATA said.<br/>

Air travel is roaring back, but not without some significant hiccups. Particularly in North America and Europe, travelers have described chaos at airports, with scores of flights canceled or delayed, luggage lost and wait times to board planes exceeding four hours. That's partly the result of labor shortages from the pandemic, as layoffs have put pressure on airports and airlines facing a surge of summer passengers eager to travel. Qantas CEO Alan Joyce, speaking to CNBC's Dan Murphy about the sector's recovery, said that after nearly two years of dramatically reduced activity, it's going to take some time to get the system up and running smoothly again. "The entire industry everywhere is experiencing this, and we're seeing some of it in Australia," Joyce said at the IATA 78th Annual General Meeting in Doha, Qatar, on Sunday. It's "not as bad as you're seeing in Europe or in the North American market," the CEO said. "We saw during Easter long queues at airports; nothing like you've seen in London, Manchester and Dublin and other places around Europe." "And I think it does take a while. The system is rusty, everything was closed down for two years," he added. "It is going to take awhile to get that system humming again. It's a huge complicated business, there's a lot of moving parts involved in it." IATA Director General Willie Walsh, in a separate interview from Doha, said airport chaos and delays are "isolated" and not every airport is experiencing problems. Nevertheless, he added that the airline industry isn't yet "out of the woods" when it comes to recovery.<br/>

Hungary’s government could keep its new windfall tax levied on the airline industry beyond its currently planned two-year lifetime, Economic Development Minister Marton Nagy said on Monday. The 30b forint ($78.95m) per year tax, levied from July as part of nationalist Prime Minister Viktor Orban’s moves to rein in the budget deficit, has drawn criticism from Ryanair and rival Wizz Air. Orban’s government announced new windfall taxes worth 800b forints on “extra profits” earned by banks, energy companies and other firms last month, hitting Budapest stocks and rattling investors. The taxes are needed to plug budget holes created in part by a pre-election spending spree that helped Orban stay in power and the surging costs of keeping a lid on retail energy bills. The levy on the airline sector involves a tax worth 10 to 25 euros on passengers departing Hungary from July, criticised by airlines for imposing a new burden on a sector that has yet to fully recover from the coronavirus pandemic. “We could call this something else after two years and keep it in the system,” Nagy said, adding that longer-term fate of the levy would depend on the shape of the Hungarian state budget and that of the airline industry. Re-elected for a fourth successive term in an April landslide, Orban is facing his toughest economic challenge to date with inflation surging despite price caps on fuel, some basic foods and mortgages.<br/>

Some cleaning staff at Amsterdam’s Schiphol Airport went on strike for several hours on Monday but flights were not impacted, a spokesman for their labour union said. The striking workers were angry that they were not slated to receive the 5.25 euros per hour pay bonus that about 15,000 other workers at the airport have been offered, FNV union spokesman Joost van Doesburg told Reuters. The wildcat strike involved cleaning staff who are not directly employed by the airport but instead by agencies working for other companies like airlines and are not included in the bonus pay agreement, said the spokesman. Schiphol is currently struggling with staff shortages that have led to a 16% reduction in passengers the airport will receive this summer.<br/>

Airports capping flight numbers this summer could face legal challenges from service providers to recoup costs after recruiting workers based on original schedules, the chief executive of aviation services company Swissport said on Monday. Airports including London's Gatwick and Amsterdam's Schiphol have said in recent days that they would offer fewer flights this summer than originally planned, citing a labour crunch that has left them struggling to cope with surging travel demand. "I think that there's going to be some challenges, I suspect legally, to putting caps on airlines," Swissport CEO Warick Brady told Reuters at an airline industry event in Qatar. "We recruited enough people for the summer schedule and they cut the schedules, so we now have too many people. We are going to have a cost overhang because they are cutting." Summer schedules are being cut in the face of mounting public criticism of airports over huge delays. Passengers have often had to wait hours in snaking queues through security and immigration, with some then missing their flights.<br/>

London’s Heathrow Airport asked some airlines to cancel a number of flights scheduled for Monday, the latest hitch to roil travel. Airport authorities requested carriers cancel about 10% of flights on Monday across terminal two and three, a Heathrow spokesperson said in a text message. The move came in response to the knock-on effect of a baggage system fault over the weekend, the spokesperson added. About 30 flights will be hit by the move. London Gatwick airport said last week that it would scrap hundreds of flights over the peak summer travel period, after Amsterdam’s Schiphol hub took a similar step. Meanwhile, Dublin Airport authorities have said they will compensate some passengers who missed their flights amid long queues. The aviation industry’s capacity crisis has deepened as post-lockdown travel demand has surged, with airlines and airports struggling to hire enough staff to handle the revived passenger flows. Up to now, Heathrow has been less impacted by staffing crisis hitting the wider industry since its key long haul flights have been slower to recover following the pandemic.<br/>

Bombardier has offered its workers on a key jet program a new and final contract that would deliver pay hikes of up to 18.5% over five years, according to a letter from their union seen by Reuters. Workers are set to vote on the contract on Wednesday and rejection would "automatically lead to an unlimited general strike," according to the letter sent to members on Monday. The Canadian business jet maker on Friday presented a final offer to the union representing workers on its Challenger program, which accounted for just over a third of the company's plane deliveries in 2021. Companies from Bombardier to some European airlines are seeing wage disputes with workers as inflation rises, which is expected to increase cost pressure as demand for travel soars. Business jet companies are filling up order books on higher demand from wealthy travelers to fly private due to COVID-19, but a recent market sell-off and recession fears have raised questions over the long-term strength of the market. Salary increases and pension are key issues in the talks for the estimated 1,800 workers who walked off the job for a day last week after rejecting an earlier offer. The new contract would give workers an additional 12.5% in the first three years, retroactive to December 4, 2021, plus 0.5% above cost of living in the final two years, up to a maximum of 3%, the letter said.<br/>

US aircraft maker Boeing has just revealed its new 2022 ecoDemonstrator plane -- a converted, 20-year-old 777-200ER that will be tasked with testing new technologies aimed at making air travel more sustainable and safer. The ecoDemonstrator will reportedly go through a six-month series of tests both on the ground and in the sky, starting this summer. Among the 30 or so technologies set for testing during the campaign include projects designed to reduce fuel use, emissions and noise, while incorporating more sustainable materials. For instance, Boeing is collaborating with NASA to produce SMART vortex generators -- small vertical vanes on the wing designed to improve aerodynamic efficiency during takeoff and landing. Other projects include a system designed to conserve onboard greywater -- water washed into the sink will be used to flush toilets, which also reduces the weight of the aircraft. The plane will also be used to conduct tests on an "environmentally preferred" refrigerant, a new fire suppression agent to reduce greenhouse gas emissions and a heads-up enhanced vision system for pilots to improve operational efficiency. Meanwhile, Boeing will continue its comprehensive study on the impact of sustainable aviation fuel toward the reduction of emissions. The aircraft maker says the team plans to power the 777-200ER throughout its test period using a 30/70 blend of sustainable aviation fuel (SAF) and conventional jet fuel.<br/>

The delayed arrival of aircraft engines is keeping Airbus SE from delivering some planes to customers as supply-chain problems weigh on the manufacturer’s recovery from the coronavirus crisis despite strong demand. Twenty narrow-body jets that were fully built by the end of May were still missing engines, which will lead to late deliveries, Airbus CEO Guillaume Faury said. “We have started to build planes without engines, again, as we did in 2018,” Faury said. “That’s really not a good signal that shows that the tension also on the engine side is very, very strong.” Companies across the aviation supply chain are struggling to keep up. Engine manufacturer CFM International has had supply snags and labor issues, while the maker of rival Pratt & Whitney jets, Raytheon Technologies Corp., said in April that it was facing constraints across its business. Faury said that aside from the engine delays, overall supply-chain challenges appear to have stabilized. Airbus plans to ramp up monthly output of its A320 series by 50%, and sees strong demand in coming years. “We believe for us the momentum is and will remain very positive moving forward,” said Faury. Airbus sales chief Christian Scherer said strong demand is “here to stay” as airlines face pressure to replace older, fuel-guzzling aircraft. He said he wished Airbus had more aircraft to sell but that given the supply-chain issues, the current pace is reasonable.<br/>

The strong cargo demand that helped passenger-deprived airlines stay afloat during the pandemic is showing signs of softening amid growing economic uncertainty, in part, fuelled by decades high inflation. A potential weakening of the air freight market coincides with growing concern in the aviation industry that surging passenger traffic, which has reduced airlines' reliance on cargo revenue, may be fleeting. The Baltic Air Freight Index , which shows weekly transactional rates for general cargo fell 8.7% last week, while the airlines group IATA said on Monday that freight revenue generated by carriers this year would fall by 6.4%. Qatar Airways' CE Akbar Al Bakar warned on Monday that inflation was expected to weaken demand for air freight and subsequently put downward pressure on yields. "There will be a downturn in business (activity) and when there is a downturn in business, people don't buy stuff that we normally carry as cargo," he told reporters at an industry meeting in Doha.<br/>Edward Bell, an economist at Dubai lender Emirates, described consumers and corporates as facing a "kind of vortex of price pressures" that they would increasingly be sensitive to over the rest of the year. Korean Air CE Walter Cho said freight rates had softened but were far higher than they were before the pandemic, when there was much more capacity. "Demand is weak especially since China is basically shut down right now. We expect it to come back soon. I expect the cargo market to be sustainable until next year at least.”<br/>