The airline industry passed a milestone this week: low-cost European carriers Ryanair and Wizz Air both announced their first profitable quarter since before the pandemic. Yet both still expected to have to cut prices to spur demand in the winter months; Ryanair cut its earnings forecast and Wizz warned it would plunge back into losses. Most large US airlines, meanwhile, still lost money before federal pandemic aid in the third quarter and reined back expectations into the first half of next year. That so much of the industry managed to survive the pandemic, when much of the global fleet was grounded, is an achievement in itself. But returning to anything like pre-pandemic levels will be a long haul.
Accommodative capital markets and government largesse kept the industry on life support through the dark days of Covid. Although the Delta variant held back recovery this summer, especially in flights to and from the UK, the EU’s digital Covid pass helped to support European demand. The US domestic market, meanwhile, was surprisingly strong. Restrictions are still being eased. The US will reopen for travellers from 33 countries, including the UK and EU, next Monday — marking the return of lucrative transatlantic routes.
Yet though this may release some pent-up demand for flights for holidays and to see loved ones, restrictions are being eased just as airlines go into the northern hemisphere winter — when they struggle, at the best of times, to make money. And the supply chain disruptions and staffing squeeze that are already weighing on broader economic growth are causing particular problems for the airline industry.