LONDON – As the UK looks set to enter a recession next month, we ask the following question: Is the UK airline industry on the brink of collapse?
A report from ThisIsMoney highlights how the Winter 2022/23 season is the most volatile for the UK airline industry, with there been bankruptcies in the past.
For example, we have had the likes of Thomas Cook, Monarch, Flybe, and others go bust in the past few years.
With the price of jet fuel skyrocketing, to energy costs soaring, this will no doubt be another major tester for the UK airline industry going forward.
Bernstein, a city broker, said the following in a report:
“The pandemic has brought few airline failures in Europe, with state support and furlough schemes keeping many from collapsing. That may be about to change.”
“Winter 2022-23 looks set to be one of the worst in memory. September heralds the beginning of bankruptcy season.”
“After the summer is over, airlines often enter into a period of losses and limited cashflows, as demand ebbs with the weather, and children return to school”.
They also included a survivability index, highlighting which airlines will still be strong during this weak period of demand for the sector.
Ryanair received 92/100, which shows that they will stand to benefit from the Winter 2022/23 season, with TUI scoring at 60, meaning that they are at a greater risk of going under than the Irish low-cost carrier.
Cost-Cutting Has Begun…
One example of costs being cut has been seen with British Airways, which announced the cancellation of 10,000 winter flights late last month.
Over 120,000 are still planned to go ahead, based on data provided by Cirium.
The 120,637 flights that will take place in Winter 2022 equates to an output of around 23.2 million seats. The Winter season begins on October 30th and runs through to March 25th next year.
Of this number, around 94,166 of these flights will be short-haul services that will take place within the UK and Europe, which is a substantial percentage.
This means that around 26,471 flights will be long-haul services either across the pond or further afield into Asia and beyond.
47,400 of the flights will depart from London Heathrow, with 6,550 from London City and 5,501 from London Gatwick.
Within this as well, Heathrow to Geneva is scheduled to be British Airways’ largest route, followed by other routes such as:
The 10,000 flights that are due to be canceled means that approximately 1 million seats will be wiped off the capacity books.
Staff shortages may work well in the favor of British Airways as it means less money being spent on its Winter network, but even with the pay increases agreed with staff, this could put a strain on their purse strings.
What we will begin to see as we get closer to the Winter season is that routes will be cut, operations will be streamlined, and then this will all be built up again in Summer 2023.
That is the harsh reality of entering an economic downfall that will not see many benefits until we get to that busy period again next year.