Routes Reconnected: “Quick wins are where you can combine passenger and cargo demand,” Virgin Atlantic says
Routes Reconnected put the spotlight on Europe in a panel session featuring senior stakeholders from Virgin Atlantic, Avinor and Berlin Brandenburg Airport. They stressed the importance of airport and airline alignment in the recovery phase within the European market and emphasised the importance of restoring consumer confidence.
Moderator David Casey, Senior Network Planning Editor, Routes, began by setting the scene. He explained that Europe’s market grew by 3.2% in 2019 to more than 2.4 billion passengers. “European aviation is currently feeling the burden of the COVID-19 crisis more heavily than any other world region. Since the middle of August seat capacity has gradually deteriorated, and the rate of the market’s contraction has gathered pace as new lockdown measures to curb the spread of COVID-19 have come into force. Seat capacity is now down about 70% year-on-year and airlines continue to burn through cash. But the positive news of COVID-19 vaccines in recent weeks, and their potential roll-out early next year, are signs of optimism as we head into 2021.”
Rikke Munk Christensen, Vice President Networks, Alliances and Commercial Planning, explained that Virgin Atlantic stopped its passenger-only services from April to July. “For that period, we operated cargo-only flights on passenger aircraft. At the end of July, we restarted our passenger flights. During all of this time, of course, there was a lot of uncertainty.”
Measures taken as a result of the pandemic include 4,300 redundancies, retirement of the oldest four-engine aircraft in the fleet, and consolidation of all London operations into Heathrow.
In November Virgin Atlantic operated 17% of passenger flights when compared with 2019, and 50% of flights overall as a result of the cargo services. “In December we aim to improve to 20% of passenger flights versus 2019, and 46% versus 2019 in total driven by cargo-only flying,” said Munk Christensen. “It’s a different business model we’re in right now, but hopefully soon emerging out of the crisis. All airlines are looking at higher efficiencies, higher utilisation, and bringing down unit costs – this is a must coming out of this crisis.”
She also referenced the direct relationship between travel restrictions and consumer confidence. “In the summer we saw an increase in demand, particularly for VFR and leisure traffic. Then, when restrictions start to apply in Europe, you see demand dropping.”
Responding to the demand for VFR traffic, Virgin Atlantic has announced three new routes to Pakistan: from Heathrow to both Lahore and Islamabad, and from Manchester to Islamabad.
“Quick wins are where you can combine passenger and cargo demand, so we have been agile in our planning cycle and seized opportunities,” Munk Christensen added. “In 2019, cargo accounted for 7.2% of turnover – we forecast it will be 40% in 2020. In terms of which routes return, it will be demand-driven. I definitely see, particularly as we recover, the need for airlines, airports and destinations to be aligned.”
Gaute Riise, Vice President Traffic Development, Avinor, said that current travel restrictions are having a significant impact on Norway’s international connectivity. “Current traffic levels take us back to where we were in middle of June, so it’s not a very bright picture. Luckily, we do have a handful of airlines that are securing connectivity to many of our airports and have done so throughout most of the crisis. I was looking last week, and we had 42 unique international routes flying out of Norway; usually we have between 150 and 220 unique routes. Those 42 unique routes that were flying last week, of course, don’t have the frequency that we are accustomed to.”
Riise looked ahead to spring 2021, when Avinor expects a more positive outlook for passenger volumes. “VFR and leisure traffic will be key drivers going forward into 2021. The business market will be much slower in recovering, with increased use of Zoom and Teams, and weaker financial situations for businesses across the world.”
Avinor is a group of 43 airports spread across Norway and without Oslo as a hub most of these airports would not reach the world. “At least 60% of our airports will never have a direct international service, as the volumes are so small at these airports, so they need a hub,” Riise explained.
Norway is a long and rugged country, with aviation playing a key role in domestic connectivity. Recognising this, in March the Norwegian Government told Avinor to cut airport charges to zero, while also removing the aviation passenger tax. “Gradually, the charges have been implemented again,” Riise said. “However, the aviation passenger tax has now been exempted until the end of 2021, giving at least some predictability for the airlines. Another thing the government did was buy capacity from domestic-operating airlines to ensure that all of Norway had a minimum level of domestic connectivity.”
The new Berlin Brandenburg Airport became fully operational in early-November. Thomas Kohr, Head of Aviation Marketing, commented that the airport’s launch went very smoothly, following a two-year Operational Readiness and Airport Transfer (ORAT) programme. “The situation at the moment is we are now down to around 5-10% of our normal traffic,” he said. “In summer, we had gone up to around 35-40% of normal traffic. Now, with the winter schedule starting, we went down again due to the lockdown situation throughout Germany and Europe.”
Berlin’s international population means VFR traffic is very important, while the leisure segment is also very dynamic. “When there is a travel corridor, for example like that we have with the Canary Islands right now, people feel confident that it’s safe to travel. We then see bookings going up fairly quickly and the airlines reacting swiftly and being flexible,” said Kohr. “One phenomenon we have seen recently is the importance of point-to-point traffic, as there is not as much connectivity in Europe. We see people virtual interlining and using Berlin as a transfer airport – indeed, we have entered a cooperation with Kiwi on that. We are working hard on international and intercontinental connectivity – we think that the demand is there.”
Echoing the comments of the previous speakers, Kohr concluded that the key is restoring the confidence of passengers. “People have a hunger to travel and if they feel it’s safe they will travel.”
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