European low-cost carriers have the potential to dominate the post-covid world


Ryanair and easyJet planes.

Oracio Villa Lobos | Getty Images News | Getty Images

London-In the post-pandemic world, European low-cost carriers have obvious advantages over large flag carriers, analysts told CNBC, but governments around the world have rolled out large-scale support packages. There is.

It was a bruise for airlines as the trip was stopped due to a coronavirus pandemic. But now, low-cost carriers appear to be showing signs of recovery compared to state-owned airlines, which often receive subsidies and incentives.

“We’re seeing legacy carriers not be able to move that fast compared to cheaper carriers out of the pandemic.” Paul Charles, CEO of luxury travel consultancy PC Agency, told CNBC’s “Squawk Box Europe” on Monday.

Earlier this month, the International Air Transport Association said that both international and domestic flights surged in July compared to June, but demand was still “well below pre-pandemic levels.” In Europe alone, passenger numbers have fallen by 56.5% since July 2019.

However, EasyJet, UK low-cost carriers said they expect to fly up to 60% of 2019 levels in the three months from July to September. In comparison IAG —British Airways owners said they expect to fly only about 45% of their 2019 capacity over the same period.

LufthansaAnother flag carrier, which predicts to fly about 40% of 2019 levels across 2021.Low cost carrier RyanairMeanwhile, full-year traffic volume by March could reach 90 to 100 million, from 60% to 67% of the 148.6 million passengers who flew in the year to March 2020. He said it was equivalent.

Laura Hoy, a equity analyst at Hargreaves Lansdown, said low-cost carriers would benefit from focusing on short-haul flights. These have proven to be more attractive to consumers given their ongoing travel restrictions and uncertainty about pandemics.

In addition, Hui added that consumers are not keen on spending more on flights amid economic uncertainty and the potential for further turmoil in the future, which will also benefit the low-cost carrier’s business model. I did.

Ryanair’s share price has risen 1.8% year-to-date. Wizz Air Equities, another low-cost company, increased 7.5% over the same period and easyJet decreased 9%. Wizz Air was approaching easyJet about the possibility of a merger, but the latter declined the offer last week.

Meanwhile, IAG has fallen 2.6% year-to-date, and Lufthansa shares have fallen 19.7% during that period.


“You’ll see things like easyJet take more opportunities. That means you’ll potentially get more slots, but they’ll take advantage of where they’re in demand. Moves your fleet faster, “said PC agency Charles.

This is despite the large amount of cash that various governments went to flag carriers as a result of the pandemic, the € 9 billion ($ 10.6 billion) that the German government gave to Lufthansa. British Airways also received a £ 2 billion loan from the British Government in December.

“Aid has driven them in bad times,” Hui said, but it did not support their growth. She added that financial assistance was accompanied by a number of conditions, including restrictions on dividend payments.

In addition, there is a question mark as to how far the government will go to keep its flag carrier afloat. They have supported this sector, but some are facing legal action around it and are generally tied to cash after trying to contain the financial shock of the virus.

“The government is considering off-roading as much as possible, so we can’t afford to maintain some of these interests, but rather it will change,” Charles said. Cash them out and watch private sector buyers inject more innovation into the sector. “

“I think some of these restrictions on those who can own a career will be relaxed over time, especially in Europe, so in reality more private equity is beginning to emerge in this sector. Of course, behind the scenes of many short-haul carriers that can steal market share from these legacy carriers, “he added.

European low-cost carriers have the potential to dominate the post-covid world

Source link European low-cost carriers have the potential to dominate the post-covid world


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