One of the main takeaways from discussions at the International Air Transport Association (IATA) annual meeting in Doha was that demand is outpacing supply by many times and this will create challenges for the sector for at least the next 12 to 18 months.
People have such a strong desire to travel that for now they are not bothered even by the higher prices of plane tickets. However, the aviation sector is facing acute staff shortages after hundreds of thousands of workers, from pilots to cabin crew to ground handling, were let go at the height of the pandemic. Airlines and airports almost all over the world are facing huge queues, delays and last-minute flight cancellations. "All airports and carriers are understaffed right now," Jeff Galbert, chief executive of Sydney Airport, which has laid off almost half of its 33,000 employees during the Covid-19 crisis, told Bloomberg.
Some airline companies and airports turned out to be unprepared for the big leap in demanding which is also a part of the problem. According to the President of Emirates, Tim Clark, some carriers had more pessimistic approach towards their prognosis and plans and hadn’t expected full recovery in demanding until 2025. This led them to insufficiency in capacity and resources for resumption of activity. “This boom in demand is expected rather than unexpected. The return to such a high demand for flights could have been foreseen by all aviation service operators if they had used more effectively the large databases at their disposal and had done their preliminary analysis well enough," said in an interview with Bloomberg TV Bulgaria Aleksandar Bogoyavlenski - pilot and author of the program "Airshow" on Bulgaria ON AIR.
Other problem seem to be the security checks and obtaining work permissions in the aviation sector. The approval of the candidates and the relevant authorities might take months. At the end of June British Airways had around 3000 potential employees awaiting security clearance, and EasyJet has 140 crew on standby who have not yet received the necessary clearances and approvals. "This means that it may take up to 12 months to overcome the shortage of personnel," Izam Ismail, the GM of Malaysia Airlines, told a press conference in Singapore.
In a response to the challenges of Gatwick airport announced in mid-June that it would cancel hundreds of flights in the peak summer season. London's second-busiest airport will limit the number of flights to 825 a day in July and 850 in August. For comparison: before the pandemic, in these months, around 950 flights were operated per day. "By taking decisive action now, we aim to help handling agents and airlines fine-tune their programs and available resources," explained Gatwick Airport's GEO Stuart Wingate. Gatwick's announcement came just days after Amsterdam's Schiphol Airport announced that passenger numbers would be limited to 67,500 per day in July, around 13,500 less than usual traffic. Air France-KLM's Netherlands office described Schiphol's decision as "very damaging" and expressed hope that it would be a one-off and temporary. The carrier will comply with the imposed requirements by limiting the number of passengers for domestic flights, but it does not expect mass cancellations of reservations. EasyJet has announced that it will reduce its flight capacity to meet the restrictions, but this could affect financial results. Analysts estimate the curtailment could cut the carrier's earnings by between £100m and £200m for the year. According to Johan Lundgren, EasyJet's guide, the changes will not affect ticket prices.
During the pandemic Sofia Airport was one of the few places which did not lay off its staff. Moreover, the capital's airport did not close its doors even for a day. "Now we are in a better situation to be able to face the summer traffic", commented Jesus Cabayero - executive director of SOF Connect, operator of Sofia Airport, in an interview for "Avioshow" on Bulgaria ON AIR. "In order to achieve our goals, people and the team are the most important. We are short of staff for certain positions, on our website you will see that we offer almost 60 positions at the airport," Cabayero added.
However, finding the right staff for the airline business can be more difficult than many assume. People who were forced out of the industry during the pandemic may no longer be so inclined to return to it. "We are no longer as attractive a place to work as we used to be. There's still an element of security concern," Sydney Airport chief executive Geoff Galbert said. After losing their jobs at the height of the pandemic, many aviation workers have found a living in other sectors that are less volatile and labour-intensive. Those entering the airline industry now will not be greatly favoured. "Given the shortage of staff, this means, at least initially, much longer working hours. Salary has not even returned to pre-pandemic levels, the expectation is that employees can start at much lower and unattractive levels for them," explained Alexander Bogoyavlenski. However, Sofia Airport has provided for higher fees. "This year we concluded an agreement with the union. We raised wages by 20%" Jesus Cabayero pointed out.
In other parts of Europe airline companies’ unsatisfied staff organized strikes which additionally have deteriorated the situation at the terminals. The main demands are for an increase in wages to compensate for the spike in inflation. Ryanair workers went on strike in Spain, Italy and France, and the company's British pilots reached an agreement to change pay. During the pandemic their salaries were reduced and have not yet returned to 2019 levels. British Airways workers at Heathrow are on strike over a pay dispute. Unions have said hundreds of check-in staff are set to strike in the peak summer months after BA management refused to reverse a 10% pay cut imposed during the pandemic.
Despite the challenges facing the industry, IATA Director General Willie Walsh is optimistic about the situation and believes that the problems are isolated rather than industry-wide. "A lot of these are isolated cases. They are not every day and every week. It would be wrong to say that every airline and every airport has problems. People can confidently make reservations until the end of the year," he said in an interview with Bloomberg. Other representatives of the sector admit that difficult months await them. "The airline industry needs to be prepared for problems to get worse in the summer," Deutsche Lufthansa CEO Carsten Spohr said in Doha. The German carrier does not expect operations to return to normal until at least next year. After cancelling 3,100 flights from its summer schedule, the airline is considering whether to cancel more flights to ensure the necessary resilience in the system in the coming months. "We've got nine to 12 months to build the capacity we need, whether we're talking about the airports, the crews, the engineers and the maintenance," Air New Zealand chief executive Greg Foran warned in an interview with Bloomberg. Alexander Bogoyavlenski's predictions are similar. According to him, dealing with this next crisis in the aviation sector will take at least another year, year and a half.
One of the good news is that after two years of hibernation due to the restrictions of Covid-19, the aviation industry will come back to the profits in the next years thanks to the enormous demand according to the prognosis of IATA. "Industry profits should be on the horizon again in 2023," director Willie Walsh said. The association also estimates that losses this year will be smaller - $9.7 billion, which is nearly $2 billion less than the $11.6 billion expected in October. "The recovery is moving quickly because more and more people want to travel, although some patience will also be required given the various challenges in the industry, not least of which is high oil prices,” commented Greg Foran. According his words the expenses for refuelling a Boeing 787-9 to fly from Auckland to Los Angeles had jumped from $42,000 to $96,000. In response, airfares in New Zealand had risen by about 20-25%.
More expensive fuels are a major concern for the entire sector, but are not expected to derail the recovery. According to United Airlines Holdings CEO Scott Kirby, high fuel prices will become the "new normal" for business. "I hope I'm wrong, but looking at some of the structural issues - even if more oil comes to market, the real problem is refining capacity. If our prognosis for the planes’ fuel price is true, I expect this to be the new normal also for the ticket prices", he comments for Bloomberg. "Our clients can expect higher prices as a consequence of more expensive fuels, especially in USA where the lack of hedging led to sudden price increase" this indicated Willy Wolsh. According to him and a large number of managers in the aviation business, more expensive tickets and general inflation will not significantly harm demand.
"I think the demand is sustainable. There is a lot of pent-up demand from people who haven't been able to travel for two years. But also economic activity and growth rates are very strong and there is still insufficient capacity. If I could put more planes in the sky, I would do it tomorrow," Qantas CEO Alan Joyce told Bloomberg. "As long as there are restrictions on supply, demand will not change," said Emirates president Tim Clark. In such situation passengers should be prepared for flight cancellations and very serious delays, which are already a fact across Europe. They should carefully monitor the information about the destination to which they are headed and the status of the flight for which they have tickets, advises Alexander Bogoyavlenski. - By Veronika Denizova
THE BOTTOM LINE However, finding the right staff for the airline business could be more difficult than many assume.