It’s clearly not just me who thinks “oh God, what now?” whenever a government press conference is announced. Yesterday, around lunchtime, Health Secretary Sajid Javid called one for later that afternoon. Travel stocks plunged immediately, and a damper descended across much of the FTSE.
The Spanish owner of British Airways, International Airlines Group was down 4.2%, EasyJet slid 3.4% and Ryanair fell 1.7% as investors, dreading enaction of the government’s ‘Plan B’ amid rising covid cases, sold up. As it happened, Javid said he wouldn’t be implementing any further restrictions to ease pressures on the NHS “at this point.” It was, basically, a press conference announcing nothing at all. But further damage was done to an already beleaguered airline industry.
As things stand now, it’s not clear whether the government’s ‘Plan B’ involves restrictions on travel, although lockdown history suggests it will. Perhaps we won’t even have a choice. At midnight last night, Morocco placed a ban on flights to and from the UK because of our rising numbers of covid cases. Other countries may follow suit.
Almost all businesses have suffered in some way throughout the pandemic (although an Oxfam report released today claims billionaires’ wealth increased by $3.9 trillion last year). Arguably, though, the airline industry has arguably suffered more than most. Not only were shutdowns and other restrictions tougher and longer than for most other sectors, but traveller confidence has also yet to fully bounce back. This is hardly unsurprising. Not only have we all discovered there is much we can do on Zoom or MS Teams, air travel is no longer the pleasant experience it once was, especially for business travellers. Many lounges are still closed. You must take expensive tests to travel, regardless of whether you are vaccinated or not, and suffer the stress and worry of either testing positive or not receiving the results in time to fly. If you’re not vaccinated, you face additional costly tests and a 10-day quarantine on return home, regardless of where you’ve been or for how long. Expensive and restrictive hotel quarantine remains in place for anyone returning from the seven countries still on the red list. Masks are still required – and who enjoys wearing those on an already stuffy flight? Then there is additional bureaucracy such as the mandated online passenger locator form. Believe me, seeing the words: ‘this site is currently unavailable” is no fun when you’re at an airport trying to fill it in. And, unlike most other countries, the UK government has no paper alternative; it’s fill it in online or stay put.
Airlines’ profits have plummeted since the first lockdown, as government mandates, advice, and the ‘traffic light’ system have changed more frequently than the weather. Healthy profits have turned into billions in losses. To stay afloat, airlines have made thousands of staff redundant, taken on debt and issued new shares. EasyJet share prices are currently some 43% down on their value two years’ ago, and IAG’s are down 53%. On just one day in June alone, when the government inexplicably removed Portugal from the ‘Green’ list, TUI, IAG, easyJet, Ryanair, Whizz Air, aircraft engine maker Rolls Royce, and Holiday Inn owner Intercontinental Hotels saw more than £2bn wiped off their combined London stock market value.
The anger expressed by airline bosses throughout has been palpable. On the day mentioned above, EasyJet boss Johan Lundgren, said: “The government has torn up its own rulebook and ignored the science, throwing people’s plans into chaos, with virtually no notice or alternative options for travel from the UK. This decision essentially cuts the UK off from the rest of the world.” When asked for a response to the news, another unnamed tourism industry source told Yahoo Finance UK: “Do you want four-letter words or what?”
Without any firm guarantees from government that their businesses will be secure in the long term, both travellers and investors will shy away from airlines. Will any such guarantees be forthcoming? In all honesty, it doesn’t seem to me as if the government will is there.
Even when this crisis is over, another looms around the corner: Net Zero. Yesterday, we saw a government research paper proposing to make in person meetings requiring business flights a “immoral indulgence” swiftly deleted. The mood music remains troubling though: if Ministers are prepared to consider doing this to business travellers, what of those taking cheap holiday flights to Ibiza? The airline industry is, I fear, still at risk of severe turbulence for some time to come.