UK: Airlines braced for grim winter as economic slowdown threatens recovery

Airlines are braced for a grim winter after struggling under the weight of booming demand for travel in the summer as the economic slowdown threatens their recovery from the pandemic. The dire outlook has prompted warnings that passenger numbers could fall as household disposable incomes come under pressure from high inflation and soaring energy bills. Despite upgrading its passenger forecasts, London’s Gatwick said the uncertainty on the economy was a big threat to an industry already shaken by rising fuel costs and staff shortages. “It could impact the overall propensity for travel,” said Jim Butler, Gatwick’s CFO. Although airlines have not reported a significant hit to bookings, he stressed that he was “cautious about what we might see in the winter or next year”. While it might not affect many people’s ability to take a big annual holiday, Butler said, it could weigh on demand for “the second or third trip”. One senior European airline executive said the “outlook is still very uncertain” for the winter, particularly as the end of the summer is never a strong booking period. He expected less demand for leisure travel in the fourth quarter, including a reduction in shorter city breaks. Instead, he expected bookings to cluster around typically busy periods, such as school half-term holidays and Christmas. It would mean a further blow to airlines and their share prices, which have been under pressure even as demand surged over the summer with airports and carriers struggling to cope with a flood of bookings. The MSCI index of European airline shares has lost 15 per cent this year, with major airline groups including British Airways owner International Airlines Group, Ryanair and Air France-KLM down about 30%. “There is a lot of negativity on airline stocks . . . people are saying you don’t usually buy airlines into a recession,” said Stephen Furlong, an analyst at Davy.<br/>