Amid a worldwide slump in passenger and cargo traffic due to the fast-spreading novel coronavirus, airlines are asking airport authorities to suspend rules governing the use of takeoff and landing slots as they cut back flight schedules.
Under slot allocation rules at more than 200 airports worldwide, airlines must operate at least 80% of their allocated slots under normal circumstances or risk losing the slot to competitors the following season.
The International Air Transport Association (IATA) is urging airport governing bodies to relax the slot rules for the remainder of the flying season due to the respiratory illness spreading around the world because carriers need flexibility to adjust their schedules.
Suspending the requirement through October will allow airlines to respond to market conditions with appropriate capacity levels, avoiding the need to run empty services in order to maintain slots. Aircraft can be reallocated to other routes or parked, while crews can have certainty about their schedules, IATA said.
Regulators have already been waiving the slot rules on a rolling basis during the COVID-19 crisis, primarily for operations to China and Hong Kong.
“The world is facing a huge challenge to prevent the spread of COVID-19 while enabling the global economy to continue functioning. Airlines are on the front line of that challenge and it’s essential that the regulatory community work with us to ensure airlines are able to operate in the most sustainable manner, both economically and environmentally, to alleviate the worst impacts of the crisis,” IATA Director General Alexandre de Juniac said in a statement.
On Sunday, the number of confirmed coronavirus cases outside China doubled to nearly 2,000, while new cases in China are declining after a monthlong quarantine program in large parts of the country. Overall there have been more than 80,000 cases and 2,900 deaths, most of them in China.
Many companies are limiting corporate travel and many industry conferences have been canceled in the past two weeks, while leisure travelers are also opting to stay home to avoid contracting the flu-like disease.
The impact on many airlines has been swift and severe. Some are offering to temporarily waive change fees for customers who book in the next few weeks. IATA said one of its members has experienced a 26% reduction in business across its entire network, while a major carrier reported bookings to Italy have collapsed to zero and refunds are growing. Many carriers report 50% no-shows.
Carriers such as Deutsche Lufthansa AG are reacting with cost-saving measures, such as offering crews unpaid leave, freezing pay increases and grounding aircraft.
Hong Kong’s Cathay Pacific has taken the most dramatic steps so far. It has parked about half its passenger fleet, or about 120 planes, and scrubbed about three-quarters of its weekly flights in March, according to the South China Morning Post.
On Monday, Lufthansa curtailed schedules for group airlines even further as part of an effort to trim short- and medium-haul flights by 25%.
Lufthansa Airlines is reducing frequencies on various routes to Italy from Germany this month and SWISS will probably reduce flights to and from major tourist destinations in Italy until the end of April, the company said. Austrian Airlines is reducing its flight program to Italy in March and April by 40%, and Eurowings is reducing flights to Venice, Bologna and Milan until Sunday. Brussels Airlines is reducing flights to Rome, Milan, Venice and Bologna by 30% until March 14.
Lufthansa Group airlines are also reducing long-haul flights between Germany and Hong Kong and Seoul, South Korea, from Thursday through April 24. Flight suspensions to mainland China and Tehran, Iran, remain in effect through April 24 and April 30, respectively.
Airline analysts over the weekend said they are watching whether airlines start canceling flights on the North Atlantic and U.S. domestic market to gauge how far the crisis is reaching.
On cue Monday, British Airways said it was reducing the number of flights from London to New York’s John F. Kennedy International Airport in the second half of March due to lower demand. It previously canceled flights to mainland China, as well as some flights to Italy, Singapore and South Korea.
Delta Air Lines (NYSE: DAL) also said it was suspending daily flights between JFK and Milan, with service scheduled to resume May 1. And Delta’s summer seasonal service between JFK and Venice, previously scheduled to begin April 1, has been pushed back to May 1. The airline’s daily flights between Rome and both JFK and Atlanta continue to operate as scheduled.
The pull-down of passenger planes is also reducing capacity for shippers and their cargo, forcing them to look for other options. That could be especially problematic for areas outside China where economic activity and trade are still proceeding and transport demand remains high. All-cargo carriers will likely be in hot demand around the world, beyond just the China market — but the uncertainty about the disease makes it difficult to predict where and when all-cargo demand will climb.
Airlines are girding for financial losses this year if the outbreak isn’t contained soon. The reduction in international corporate travel is especially worrisome because airlines depend on it for profits. Airlines could also lose significant revenue during the domestic spring break season that begins this week and runs through mid-April.
Airlines “can stimulate demand by lowering fares to attract leisure customers, but replacing high-value customers with leisure customers means earnings will come under pressure,” Cowan equity analyst Helane Becker wrote in a note.
A silver lining for airlines is that jet fuel prices have decreased to about $1.45 globally compared to $1.60 to $1.77 at the end of January and between $1.81 and $2.06 at the end of November.
