Emirates’ Clark: A380s Will Return

Madhu Unnikrishnan

July 12th, 2020 at 12:54 PM EDT

  • Emirates President Tim Clark tells The Times of London that the airline will be lucky if it carries half the numbers of passengers that it did last year. A380s and B777-300ERs headline the bulk of some $50b in assets currently sitting on the ground. Roughly 22k flight attendants and 5k pilots are idled. A tenth of its workforce (6k people) was dismissed, with the figure potentially rising. Losses are probable this fiscal year (which started in April). Clark himself is working without a salary. Other employees swallowed pay cuts ranging from 25% to 50% for six months. Emirates raised $1.2b in new funds, mostly through borrowing. And that won’t be nearly enough if conditions don’t improve soon.

    Will they? Clark actually sees global travel demand worsening over the next few months, as government aid tapers off. But by the second quarter of next year, things should start coming back strongly. “Give it a year or two,” he said, “and travel will come roaring back.” Predictions of business travel’s demise are wrong, he adds, just as they were when videoconferencing was first invented, when Asia experienced a currency meltdown in the late 1990s, when 9/11 disrupted the industry, and when the global financial system nearly collapsed in 2008. It always bounced back. By April 2022, he expects all of the airline’s A380s to be flying again, and for all of the airline’s premium amenities to be restored.

    Most A380 operators, remember, are retiring the big birds, given all the passengers required to fill them, and their unattractive economics even before the crisis. Clark is surely mindful of all the capacity cutting its rivals are doing. On another long-discussed rumor — an Emirates-Etihad merger — he’s dismissive: The two carriers are “hugely competitive.” Clark by the way, was scheduled to retire last month but postponed his departure until November so he can help guide the airline through the Covid crisis. His successor hasn’t yet been named.

Breeze Presses Ahead

  • David Neeleman is moving forward with his new carrier, Breeze, pandemic or no, Bloomberg reports. Breeze has filed for regulatory clearance to buy defunct regional carrier Compass‘ air operator certificate. Compass, remember, went out of business in April. If Breeze is successful, it could begin flights as early as October. The company also plans to raise $45m from shareholders. Also in the filing, reports Bloomberg: Breeze has settled a lawsuit with Canada Jetlines for poaching former Allegiant executive Lukas Johnson.

    Separately, another Allegiant alum, Andrew Levy, plans to launch his new airline next year. Levy said he is taking advantage of depressed aircraft prices and buying B737s, instead of leasing them as originally planned.

The Economist Paints Dystopian Airline Scenario

  • The Economist did a series earlier this month speculating on what the world might look like at different points in the future. In one article, it imagined the airline industry in May 2022, painting a dark picture of demand that never recovered from the Covid pandemic of 2020. IATA’s expectation that traffic would recover to 2019 levels by 2023 looks wildly optimistic. After vicious fare wars, many carriers disappeared, leaving a less competitive industry in which fares are rising sharply. Bailout recipients are awash in debt and burdened by new environmental regulations. People are more comfortable with online meetings. Depression-like economic conditions prevail. Firms fear lawsuits from employees who catch Covid-19 while travelling. Travel bubbles collapsed in panic when a second wave of infections hit in autumn 2020. The world’s youth, highly climate conscious, see air travel as a problem.

    Sound frightening? Unrealistic? It certainly is a reminder that just because air travel has increased steadily for decades, and has always bounced back quickly from demand shocks, there’s no guarantee of that trend holding forever.

Madhu Unnikrishnan

July 12th, 2020 at 12:54 PM EDT