Editor’s comment: Behind the mask

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At the beginning of June, the World Health Organization (WHO) updated its advice on wearing masks. It advised that the general public should wear “non-medical masks where there is widespread transmission and when physical distancing is difficult, such as on public transport, in shops or in other confined or crowded environments.”

Now, in line with information from the Centers for Disease Control and JetBlue’s own medical experts, from 10 August, the US airline will no longer allow the use of face masks with vents or exhalation valves. JetBlue will also no longer allow customers to claim exemptions from wearing a face covering altogether.

“The simple act of wearing a proper face covering is one way we can all help ensure the safety of all JetBlue crewmembers and customers,” Joanna Geraghty, President and COO at Jetblue Airways, said. “Our terminals and airplanes are a shared space, and every customer must wear a proper face covering or will need to delay their travel on JetBlue until face coverings are no longer required. Our policy is meant to offer the strongest level of protection for everyone given all that we currently know about how COVID-19 is transmitted.”

It’s a view echoed by Alaska Airlines, which is introducing the same approach from 7 August.

“We all need to look out for each other during this health emergency, and the best way we can do that – and prevent the spread of the virus – is to simply wear a mask or face covering when we’re around each other,” said Max Tidwell, Alaska Airlines’ Vice President of Safety and Security. “Safety remains priority number one for Alaska Airlines and Horizon Air. Our tougher policy shows how important this issue is to us and our guests. If you don’t wear a mask, you won’t be flying with us.”

Customers who do not agree to wear a face covering will not be allowed to board any aircraft, and customers who do not follow crewmember requests to wear a face covering while in-flight will be reviewed for future travel on both JetBlue and Alaska.

The majority of US airlines have introduced similar polices. The exemptions at time of writing are Allegiant Air, Delta and Hawaiian Airlines.

However, not everyone is behind this toughening of restrictions. It is claimed that such a blanket ban threatens the ability of some disabled passengers to travel by air. As John Morris, Founder of the WheelchairTravel.com accessible travel blog, writes, “That’s 7 of the 10 largest US airlines which have told disabled people with autism, asthma, cerebral palsy, claustrophobia, COPD, PTSD, severe anxiety and other conditions that they are not welcome onboard an aircraft. It is the largest ban on disabled air travel since the Air Carrier Access Act became law in 1986.”

As airlines battle to restore passenger confidence about air travel, the experience for disabled travellers looks set to become more challenging, and yet another stigma to endure.

Lufthansa suffers from collapse in air travel

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Lufthansa Group has reported an 80% drop in revenue for the second quarter of 2020.

The Group recorded revenues of €1.9 billion compared to €9.6 billion at the same time last year. Most of the revenue (€1.5 billion) was generated by Lufthansa Cargo and Lufthansa Technik.

For the first half of 2020, Lufthansa Group revenue fell by 52% to €9.6 8 billion euros (previous year: 17.4 billion euros). During this time, he Lufthansa Group airlines carried a total of 23.5 million passengers, two thirds fewer than in the same period last year (66% reduction). Capacity decreased by 61%.

In the second quarter of 2020, the Lufthansa Group airlines carried 1.7 million passengers, 96% fewer than in the previous year. Capacity fell by 95%.

The Group currently expects demand for air travel to return to pre-crisis levels in 2024 at the earliest. In response, it is to embark on a comprehensive restructuring programme entitled “ReNew”, which also includes the restructuring program already underway at the airlines and service companies.

The aim remains to maintain the global competitiveness and future viability of the Lufthansa Group. The Group’s fleet is to be permanently reduced by at least 100 aircraft. Nevertheless, the capacity offered in 2024 is to correspond to that of 2019.

Carsten Spohr, Chairman of the Executive Board and CEO of Deutsche Lufthansa AG said: “We are experiencing a caesura in global air traffic. We do not expect demand to return to pre-crisis levels before 2024. Especially for long-haul routes there will be no quick recovery.”

The Group plans to return to 95% of the short- and medium-haul and 70% of the long-haul destinations by the end of the year.

Etihad sees strong start affected by COVID-19

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Etihad Airways has released details of its half-year 2020 performance, which has seen a strong start largely wiped out by the effects of COVID-19.

The airline carried 3.5 million passengers in H1 (H1 2019: 8.2 million), a reduction of 58% from the same period the previous year. Average seat load factor was 71%. Core operating loss for this period increased by US$172 million to $758 million (H1 2019: $586 million), driven by a 38% drop in revenues, which stood at $ 1.7 billion (H1 2019: $2.7 billion).

However, the airline saw a significant decrease in Q2 operating revenues following COVID-19 flight suspensions, with 70% of its fleet grounded. This period registered a 99% drop in passenger numbers and a 95% drop in ASK compared to Q2 2019. Seat load factor for this period was 16%, mainly driven by the operation of special (repatriation) flights, and the resumption of a limited network of transfer services via Abu Dhabi in early June.

Tony Douglas, Group Chief Executive Officer, Etihad Aviation Group, said: “While we have revised our outlook for the rest of 2020 based on current realities, we remain optimistic that as international borders re-open, we will increase our flying and carry more guests securely and with greater peace of mind, supported by the Etihad Wellness programme and our new Wellness Ambassadors. By September, we aim to increase our worldwide flights to half our pre-COVID-19 capacity.”

Etihad operated up to 40 of its fleet of 97 passenger aircraft in Q2, including Boeing 787 Dreamliners, 777-300ERs, and Airbus A320 family aircraft as belly-hold cargo freighters to complement Etihad Cargo’s operational fleet of six 777-200F freighters. Between 25 March and 15 June, over 640 special passenger flights were operated to 45 online and offline destinations, using the passenger cabins of these aircraft to fly foreign nationals out of the UAE, and to bring UAE nationals back home.

“The clear focus moving forward is on adapting our transformation plan to reflect new market conditions, but without changing our overall objectives or sustainability goals and commitments. We anticipate some continued volatility for a while to come, as the world strives to put an end to COVID-19, and as testing methodologies and protocols evolve to become the new norm.

“We know that markets are certain to rebound and the world will rediscover the wonder of flying once more. When it does, our guests will value the Etihad Wellness proposition more than ever, and we are best positioned to deliver the security, assurance, and best-in-class experience they have come to expect from Etihad as a true full-service airline,” concludes Douglas.

Editor’s comment: A calculated risk?

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Despite the slowing virus containment in India (there are currently over 1.5 million reported total coronavirus cases and in excess of 34,000 deaths), there is growing pent-up demand within the country for domestic and short-haul travel.

At the beginning of July, Vistara released details of an online survey of nearly 6,000 of its customers, highlighting their sentiment to fly. Sixty-five per cent of the respondents expected to take their next Vistara flight within the next six months, and 57% of the Club Vistara elite (Platinum and Gold tier) members said they would fly as early as in the next month.

As Vistara’s CCO Vinod Kannan commented, “This finding gives new energy to our plans of growth and expansion in months ahead.”

Apparent vindication for the introduction of its first widebody aircraft, the Boeing 787-9 Dreamliner in March 2020 for long-haul international operations, and this week’s delivery of an A321neo.

The three-class-cabin narrowbody aircraft offers seating from Collins Aerospace including lie-flat beds in business class (the first in the region to have these on such an aircraft type) and in-flight entertainment and connectivity from Panasonic.

The new cabin products, interiors, and features are an exciting development for Vistara as it looks to ramp up operations.

As Leslie Thng, Chief Executive Officer of Vistara, said: “This new addition to our fleet reinforces our long-term commitment to international expansion plans, despite the challenges of the current times. The new cabin products on our A321neo aircraft truly complement our promise of providing a premium and world-class flying experience to travellers from and to India.”

Just when travellers will be able to enjoy fully the experience of both the Dreamliner and A321neo will depend upon the loosening of regulatory approvals, not just in India but globally too. With IATA now revising its recovery period for aviation, pushing it back a year to 2024, Vistara may have to play a waiting game.

Boeing HQ logo at night

Boeing releases Q2 results: revises production rates

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Boeing HQ logo at night

Boeing has reported second quarter 2020 revenues of US$1.6 billion for its commercial aircraft segment, as COVID-19 and the 737 MAX grounding continue to significantly impact the health of the manufacturer.

Commercial Airplanes second-quarter revenue fell by 65% and operating margin decreased reflecting lower delivery volume – 20 airplanes were delivered compared to 90 the same time last year. The backlog included over 4,500 airplanes valued at $326 billion.

The 737 program resumed early stages of production in May and expects to continue to produce at low rates for the remainder of 2020. Production is expected to gradually increase to a rate of 31 per month by the beginning of 2022, with further gradual increases to correspond with market demand.  There are currently approximately 450 737 MAX aircraft built and stored in inventory.

According to Greg Smith – EVP, Enterprise Operations and Communications, interim, CFO, “We’ve assumed that the timing of regulatory approvals will enable the 737 MAX deliveries to resume during the fourth quarter of 2020. We have also assumed that the majority of the 737 MAX aircraft in storage will be delivered during the first year after resumption of deliveries.”

In the wide-body segment, Boeing previously planned to reduce the 787 production rate to 10 per month in 2020 and gradually reduce to seven per month by 2022. However, the rate will now be reduced to six per month in 2021. The 777/777X combined production rate will be gradually reduced to two per month in 2021, with 777X first delivery targeted for 2022. At this time, production rate assumptions have not changed on the 767 and 747 programs.

Boeing is adjusting the timing of the first 777-9 deliveries in 2022 versus its prior forecast of 2021, and expects to deliver 777s at an average rate of approximately 2.5 per month in 2020

Due to market uncertainties driven primarily by the impacts of COVID-19 and moving the 777X delivery to 2022, Boeing plans to reduce the combined 777-777X production rate to two per month in 2021 versus the previous plan of three per month in 2021.

Boeing President and Chief Executive Officer Dave Calhoun commented: “We’re working closely with our customers, suppliers and global partners to manage the challenges to our industry, bridge to recovery and rebuild to be stronger on the other side.”

“The diversity of our balanced portfolio and our government services, defense and space programs provide some critical stability for us in the near-term as we take tough but necessary steps to adapt for new market realities,” Calhoun added. “We are taking the right action to ensure we’re well positioned for the future by strengthening our culture, improving transparency, rebuilding trust and transforming our business to become a better, more sustainable Boeing. Air travel has always proven to be resilient – and so has Boeing.”

Editor’s comment: Gone but not forgotten

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The past week has seen a teary, yet fond farewell to the 747 fleets of both British Airways and Qantas, bringing the curtain down on five decades of service for the ‘Queen of the skies’.

BA has retired its fleet of 31 747-400 aircraft with immediate effect as a result of the COVID-19 pandemic, while Qantas has bought forward the scheduled retirement of the fleet by six months.

BA is in the midst of a massive investment programme, which has seen the delivery of six A350s and 32 Boeing 787s, delivered with the Business Class Club Suite product.

The original aircraft featured 27 First Class seats and 292 Economy seats. Initially, the upper deck contained a lounge, with lounge chair seating. Later the model played host to the world’s very first flat-bed seat in 1999.

Today’s aircraft can seat up to 345 customers in four classes – First, Club World (Business), World Traveller Plus (Premium Economy) and World Traveller (Economy).  British Airways recently refreshed the interiors of a number of its 747 aircraft which were expected to remain in service for several years to come.

In 1979, Qantas became the first airline to operate an all Boeing 747 fleet.

Qantas CEO Alan Joyce said: “This aircraft was well ahead of its time and extremely capable. Engineers and cabin crew loved working on them and pilots loved flying them. So did passengers. They have carved out a very special place in aviation history and I know they’ll be greatly missed by a lot of people, including me.

“Time has overtaken the 747 and we now have a much more fuel efficient aircraft with even better range in our fleet, such as the 787 Dreamliner that we use on Perth-London and hopefully before too long, the Airbus A350 for our Project Sunrise flights non-stop to New York and London,” added Joyce.

The 747 made international travel possible for millions of people for the first time, and it will be missed, but the next generation of more fuel efficient aircraft will open the skies to millions more.

Editor’s comment: Hedge your bets

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Virgin Atlantic has become the latest airline to secure funding to guarantee its future following the severe impact of the COVID-19 pandemic.

The airline has launched a court-backed process as part of a private-only solvent recapitalisation with a five-year restructuring plan. The refinancing package is worth around £1.2 billion over the next 18 months and includes approximately £880 million rephasing and financing of aircraft deliveries over the next five years.

It is expected that the restructuring plan and recapitalisation will come into effect late Summer 2020.

The airline will operate a streamlined fleet of 37 twin engine aircraft following the retirement of 7 x 747s and 4 x A332s by Q1 2022, with rescheduled delivery of outstanding A350s and A339s. The simplified fleet will be 10% more efficient than it was pre-crisis.

According to Dr Darren Ellis, a lecturer in air transport management at Cranfield University, “It seems apparent that certain investors have decided that the risks associated with the industry’s uncertain future – particularly the timeframe for recovery to 2019 demand levels – are at a tolerable point.”

Ellis believes investors are optimistic about the future commenting: “There is a real sense of first mover advantage here, or at least fast follower, whereby the quickest airlines to literally get off the ground will enjoy competitive advantages including capturing substantial market share, and for some time to come.”

However, Deutsche Bank is anticipating a “major deleveraging cycle as the industry will have no choice but to address its significant debt load” for 2021 and beyond. Airlines for America (A4A) has also pointed to S&P lowering its credit ratings on every US airline since March this year. To improve cash flow, airlines are also negotiating with vendors such as caterers, content service providers, IFEC suppliers and others.

A4A is predicting that it will take years to address their debt and interest payments, limiting their ability and willingness to rehire and reinvest. A view at odds with the findings of a study conducted by Inmarsat as part of its online FlightPlan broadcast. Despite the financial impact that many airlines are facing, almost half of respondents (45%) believe that in terms of passenger experience, the crisis will only cause a short-term reduction in investment, and almost a third (32%) believe there will be an overall increase in investment.

As A4A identify, the economic and consumer psychological effects of COVID-19 are deep and global, and until this reverses, individuals will remain reluctant to travel.

Editor’s comment: Winners and losers

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While the US commemorated Independence Day last weekend, others have also found reason to celebrate.

Having entered into Chapter 11 Restructuring at the end of March, OneWeb looks set to exit Bankruptcy protection following its impending acquisition by India’s Bharti Global and the UK’s Secretary of State for Business, Energy and Industrial Strategy.

The consortium has committed more than US$1 billion to fund the full restart of its business operations, which, given the contrasting backgrounds and interests of the consortium, may or may not include in-flight connectivity services. If approved, the deal will be completed in Q4 this year.

Low-Earth Orbit (LEO) satellites have received another boost with the confirmed acquisition of Phasor Solutions by South Korea’s Hanwha Systems (HSC).

HSC has acquired the UK company’s engineers, proprietary technology including technical data and IPs (Intellectual Property Rights) as well as tangible assets like test equipment, etc.

The move strengthens HSC’s aerospace system capabilities and brings Phasor Solutions out of UK administration.

However, the future isn’t looking so bright for IFEC service provider Global Eagle, which this week warned of the real threat of bankruptcy.

Global Eagle, like many businesses, has found itself in a perfect storm. A reduction in the number of passengers travelling and therefore demand for its services, a decline in airline contacts, a constriction of liquidity channels and rising debt, has forced the company to confront the real possibility of filing for Chapter 11 Bankruptcy protection.

With ongoing uncertainty over the speed of recovery for the aviation industry, more companies are likely to disappoint their investors and seek protection in administration. But, as we’ve seen, for some the process will be temporary.

Editor’s comment: Behind the mask

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According to Goethe, “Behaviour is the mirror in which everyone shows their image.”

So, what should we make of those passengers who repeatedly refuse to wear a mask or face covering?

From the end of June, member carriers of Airlines for America (A4A), the industry trade organisation representing the leading US airlines, began vigorously enforcing face covering requirements.

Alaska Airlines explains, “Our flight crews encounter moments when some travellers disregard or disobey our mask requirement. It creates tension and anxiety for many of our passengers who do have their face coverings on. So, a change is needed.”

While acknowledging that “a piece of fabric across your nose and mouth is probably not your ideal way to travel”, that change is empowering their flight attendants to issue a final notice to any guest who repeatedly refuses to wear a mask or face covering on board its aircraft.

“With that warning – in the form of a yellow card handed to them – the guest’s travel will be reviewed and could be suspended for a period. It’s a decision that would not be made lightly,” the airline states.

Those exempt include children under 2; anyone with a medical issue that creates trouble breathing; anyone who cannot remove a mask without assistance; and anyone with a disability that prevents a mask from being worn. As Alaska points out, it is fine to adjust the mask to eat and drink.

For those who forget to bring their own mask, Alaska is making them available upon request.

All A4A member carriers will be asking passengers during check-in to sign off on a required health agreement to acknowledge and attest to their willingness to adhere to the mask policy.

It’s a shame that a minority are failing to follow airline advice. As Alaska says in its blog, “If we all take that small step while flying, we’ll be better off in the long run.”

Editor’s comment: Cash or burn

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Dr Karl-Ludwig Kley, Chairman of the Supervisory Board of Lufthansa Group, told shareholders that insolvency loomed in the coming days if they rejected a proposed €9 billion stabilisation package from the German government.

Speaking during a virtual extraordinary general meeting, Kley was blunt in his appraisal of the situation. “We have no money,” he said, admitting that the Group is currently living on reserves accrued over the years.

It was a similar candid tone from Carsten Spohr, Chairman and CEO, who made a direct request to shareholders. Telling them the vote was their opportunity to save Lufthansa he acknowledged that voting for the financial package, which will see the German government take a three-year 20% stake in the Group, was also a vote for the dilution of their own shareholding. The alternative is insolvency and the loss of all shares he said.

The pandemic, he said, has bought the Group to its knees, warning that there will be no swift recovery for passenger revenues. The stabilisation package is therefore the best option, added Spohr, for the Group’s future viability, which will be based upon competitiveness and an ability to invest.

Spohr reconfirmed that by 2023, when, by general consensus, air travel will return to pre-COVID-19 rates, the Group will be smaller, have a leaner structure, be more agile and efficient, and have 100 less aircraft.

In the end, 98% voted to approve the measures, leading Spohr to declare: “The decision of our shareholders provides Lufthansa with a perspective for a successful future. We at Lufthansa are aware of our responsibility to pay back the up to €9 billion to the taxpayers as quickly as possible.”

The airline’s flight schedules will therefore be consistently expanded in the coming weeks. The plan is to include 90% of all originally planned short-haul destinations and 70% of all long-haul destinations in the flight schedule again by September.

Elsewhere, Air France-KLM Group Board of Directors has approved a financial support package backed by the Dutch State for KLM in the amount of €3.4 billion. The Dutch state aid to KLM comes in addition to the €7 billion in funding granted by the French State to Air France announced on 7 May 2020.

Conditions associated with the direct state loan are linked to the airline becoming more sustainable as well as the restored performance and competitiveness of KLM.

“Due to COVID-19 KLM is currently in an unprecedented crisis,” said Pieter Elbers, CEO of KLM. “The financing package is necessary to secure the long and difficult road of recovery in the coming period.”

State aid has come at a price for airlines, with stringent conditions imposed – whether it’s performance-related, structural changes or environmental obligations, national governments are having a stronger say in the operations of their state carriers – all of which have stressed their economic importance.

The coming years will see what these airlines have to deliver.