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Europe’s Low-Cost Carriers Eye Fall for Recovery

Madhu Unnikrishnan
April 23rd, 2021 at 2:07 PM EDT

In a marked contrast from their U.S. counterparts, the heads of three of Europe’s largest low-cost carriers (LCCs) are only cautiously optimistic about the upcoming summer travel season. While most U.S. CEOs are confident the worst of the pandemic is behind the industry, Europe’s airlines are looking beyond summer to the autumn for when the recovery will begin in earnest.

Ryanair CEO Eddie Wilson, Wizz Air CEO Jozsef Varadi, and EasyJet CEO Johan Lundgren agree, like their peers in the U.S., that there is massive pent-up demand for leisure travel this summer. Nothing will keep Northern Europeans from their beach holidays, Wilson said at the online World Aviation Festival this week. “People will want to go out and breathe the fresh air,” Varadi said.

But Europeans may take to the road or rails for their summer holidays, especially if air travel remains as tightly restricted as it is now.

Last summer, Europeans took to the air for their summer holidays, with many governments believing strict lockdown measures last spring had succeeded in containing the virus. But the virus had other plans, and hundreds of travelers were stranded in their holiday destinations after lockdowns were reimposed. This summer, with vaccines picking up pace and lockdowns easing in some countries, should have been much better.

But the impediment standing in the airline industry’s way is the “confusing” variety of travel restrictions throughout the European Union and the UK. “There is not a lot of transparency in the regulations,” Varadi said. “I don’t have a crystal ball.”

Europe’s current travel restrictions vary by country, with the UK, for example, implementing a tiered system — red, yellow, and green — to categorize countries. Meanwhile, across the Irish Sea, Ireland maintains a “completely useless” hotel quarantine requirement for incoming passengers, Wilson said.

This patchwork of regulations is why European airlines are less optimistic about the summer than their U.S. counterparts. “The difference between the U.S. and Europe is that the U.S. is one domestic market, and Europe is made up of 30 countries,” Varadi said. “Like in the U.S., domestic travel will recover first in Europe, but domestic Europe travel is much smaller than in the U.S.”

Another difference is the pace of vaccinations, which most industry insiders thought would have been further along by now. While the UK and Israel have vaulted ahead of most other countries the three LCCs serve, others, like Germany and France, have lagged.

Testing requirements on entry to a country is another impediment. When the average LCC fare in Europe is under $100, it’s a difficult to convince passengers to pay for a $50 PCR test, Lundgren said. Testing still has a role to play, but governments should help offset the cost of tests if they are required for entry, he said.

Wizz Air plans to fly between 60-80 percent of its 2019 capacity this summer, and Ryanair is planning for 75 percent of its capacity. EasyJet did not offer a percentage. All three airlines, however, said capacity can be raised or lowered based on demand. Ticket fares are likely to be about 20-25 percent lower this summer than they have been. “It will be a great time to travel for the consumer,” Varadi said.

Europe’s legacy carriers have retrenched, freeing up valuable slots at several of the continent’s most congested airports. Meanwhile, EasyJet, Ryanair, and Wizz Air are continuing to take delivery of aircraft and have not slowed down their growth plans. All three are in discussions with airports about sopping up some of their spare slot and gate capacity, but only if the price is right. “Airport charges are going to go down,” Wilson said. “They won’t like it.” But he pointed out that airports may have little choice but to negotiate, given that the LCCs are the only airlines that are continuing to grow.

The legacy carriers also have benefited from billions in state aid from their home governments, which “distorts the markets,” Varadi said. This is an issue Ryanair has fought vigorously in court. The carrier is taking its fight to the European Court of Justice.

“We all know there has to be some level of support during this crisis, but you can’t pick out your favorite sons and daughters,” Wilson said, referring to French aid to Air France and Scandinavian aid to Finnair and SAS.

Madhu Unnikrishnan
April 23rd, 2021 at 2:07 PM EDT

 Rob Hodgkins

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