EconomyFinancialUS Vaccination Campaign Boosts Airlines

US Vaccination Campaign Boosts Airlines

The global capacity of the airline industry increased by one point to 58% from pre-crisis levels.

A powerful vaccine campaign in the United States has fueled the return of North American air travel beyond Asia for the first time since the Lunar New Year holiday in February. Airlines in the US continued to gain momentum in the most recent week, according to data from the OAG flight tracker. Asia, which had led all regions, lost ground as countries like Singapore and Indonesia delayed air travel to combat a surge in coronavirus cases.

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The change highlights the power of accelerating COVID-19 vaccination programs to recover activities such as entertainment and tourism that became high-risk with the onset of the crisis last year. Countries that have implemented rapid firefighting are rapidly moving toward the return of flights, including in the European Union, which agreed on Wednesday to reopen its borders to nations and travelers deemed safe, including from the US.

Air traffic in Europe still lags behind the rest of the developed world, but has started to close the gap. Progress has been made possible by rising vaccination counts – especially in the UK, but also across the European Union after a slow start.

Asian countries feeling the sting of the increase in cases have responded by tightening restrictions to counter the threat of a highly communicable variant of coronavirus that first established itself in India. This week, Singapore and Hong Kong suspended plans for a travel bubble that was scheduled to start on May 26.

While Western nations have also taken defensive measures, they have emphasized accelerating the launch of vaccines to protect their populations. Singapore, Thailand and Taiwan, for example, lag far behind the United States, United Kingdom or Israel in per capita vaccines.

What’s Happening in Air Travel This Week?

In general, air travel increased in the last week. Global capacity increased by one point to 58% from pre-crisis levels, according to Bloomberg’s weekly flight tracker, which uses data from OAG to monitor the pulse of the return.

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Aviation has been hit hard during the pandemic. The industry lost $ 126 billion last year and is expected to bleed another $ 48 billion this year, according to estimates by the International Air Transport Association. Governments that slammed borders early on are reluctant to loosen up too quickly, fearful that, like India, they will backtrack progress in fighting a disease that has now killed nearly 3.4 million people.

The cautious pace of the reopening means that the chances of a strong European recovery in tourism this summer are partly based on an extension of the peak season in July and August until September, when many tourists will traditionally have returned to work. This year, there is hope that the suppressed demand of the vaccinated masses will continue for another month.

Airlines located within large domestic markets such as China, the US and Australia have generally fared better than those in smaller locations such as the UK, Singapore or Greece. That dynamic is beginning to change, and vaccines are the big driver.

In the US, where 48% of the population has received at least one dose, carriers have added capacity to international destinations in the Caribbean and Latin America, fueled by demand from vaccinated travelers less fearful of getting on planes. Still, domestic flights represent 85% of the world total.

Overall, U.S. capacity is down less than 25% from the same week in 2019, increasing more than 7 percentage points in the past month, with American Airlines Group Inc.’s big three, Delta Air Lines Inc . and United Airlines Holdings Inc., along with discount specialist Southwest Airlines Co. and others accelerating their expansions. JetBlue Airways Corp. said Wednesday it would begin long-awaited transatlantic services from Boston and New York to London’s Heathrow and Gatwick airports, starting in August.

“Vaccines have really gone up,” said George Michalopoulos, commercial director of Hungarian discount chain Wizz Air Holdings Plc, on the sidelines of the Arabian Travel Market event in Dubai this week. The United States is “two or three months ahead of Europe, but that shows the way forward.”

Europe gets going

As of Wednesday, the return of international travel in the European Union has been complicated by border rules set independently by more than two dozen member countries. The decision on a coordinated reopening will likely speed up travel once it goes into effect, possibly within the next week or two. The US is likely to be whitelisted, meaning unvaccinated travelers will also be able to enter, based on EU guidelines and its rate of decline in COVID-19 cases.

Progress was made earlier this week when the UK, which has hit 55% of its population, finally lifted the legal ban on leisure breaks. Sunny Portugal, one of the few countries on Britain’s ‘green list’, has been the biggest beneficiary.

Greece, Italy and France have also come a long way, with EU vaccination rates accelerating and the anticipation of more external visitors. In total, airline capacity closed the gap from 2019 levels by 4.4 percentage points last week, the most of any region.

While vaccines are the single most important factor in returning to travel from a medical perspective, ending border restrictions will have a more immediate impact by transforming pent-up demand into ticket sales, said John Grant, chief analyst at OAG. The unilateral decisions on the blockades “are only damaging everyone’s confidence and frustrating the airlines.”

Across the pond

A key goal for US and European airlines is a significant restart of transatlantic flights. The highly profitable market was destroyed last year when the virus first appeared in the west. While countries like Italy had already begun to ease restrictions on Americans, openness is not reciprocal.

On Tuesday, Deutsche Lufthansa AG added its voice to a growing chorus of airlines demanding that decision makers from Washington and London to Brussels change the rules. The German airline said it will add flights to Atlanta and Orlando starting in June due to increased demand, after restrictions in its home country were loosened.

Meanwhile, American businesses, including hotel chains and car rental companies, are pushing hard for it to reopen. The EU aims to remove the recommended restrictions for US visitors by presenting its Green Digital Certificate which should facilitate border controls.

Once the restrictions are lifted, a good part of the transatlantic market “could come back very quickly, as these routes are for many airlines the most profitable and there is a lot of pent-up demand,” said Grant of OAG. He said it could take until next year for the schedules to be fully reset.

A catalyst for a rebound could be a meeting of the G7 nations in Cornwall, England, on June 11-13, said Sean Doyle, chief executive of British Airways. He said he hopes Britain will be “the first country on this side of the Atlantic” to be allowed to resume travel to the United States for non-Americans.

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