US vaccine drive gives airlines a boost

Dubai

A POWERFUL vaccine drive in the US has pushed North America's air-travel comeback past Asia's for the first time since the Chinese New Year holiday in February.

Airlines in the US continued to gain momentum in the most recent week, based on data from flight tracker OAG. Asia, which had led all regions, lost ground as countries such as Singapore and Indonesia held back on air travel to fight a surge in coronavirus cases.

The switch highlights the power of accelerating Covid-19 vaccine programmes in bringing back activities such as entertainment and tourism that became high-risk with the onset of the crisis last year. Countries that have quickly rolled out shots are making rapid progress toward the return of flying - including in Europe, where several nations have started to relax restrictions.

Air traffic there still lags the rest of the developed world, but it has begun to close the gap. The progress has been made possible by rising vaccination counts: notably in the UK, but also across the European Union (EU).

Countries in Asia feeling the sting of rising cases have responded by tightening restrictions to counter the threat of a highly transmissible Covid-19 variant that first took hold in India. This week, Singapore and Hong Kong suspended plans for a travel bubble that was set to start on May 26.

While Western countries have also taken such measures, they have emphasised accelerating vaccine roll-outs to protect their populations. Singapore, Thailand and Taiwan, for example, are far behind the US, UK, and Israel in per-capita inoculations.

Overall, air travel ticked up in the most recent week. Global capacity rose by one point to 58 per cent of pre-crisis levels, showed Bloomberg's weekly flight tracker, which uses OAG data to monitor the pulse of the comeback. Aviation has been hit hard throughout the pandemic. The industry lost US$126 billion last year and stands to bleed another US$48 billion this year, the International Air Transport Association estimates.

Governments that shut borders early on are loath to loosen up too quickly, fearful that, like India, they will backslide on progress fighting a disease that has now killed almost 3.4 million people. The cautious pace of reopening means chances for a strong European bounce back in tourism this summer now rest on the peak of the season in July and August extending till September, when many tourists have traditionally gone back to work. This year, there is hope that pent-up demand from vaccinated masses will extend for another month.

Airlines located inside of large domestic markets such as China, the US and Australia have generally fared better than those in smaller locales such as the UK, Singapore or Greece. That dynamic is starting to shift, and vaccines are the big driver.

In the US, where 48 per cent of the population has received at least one dose, carriers have added capacity to international destinations in the Caribbean and Latin America, fed by demand from vaccinated travellers less afraid to get on planes. Still, domestic flights make up 85 per cent of the global total.

Overall, US capacity is now down less than 25 per cent from the same week in 2019, jumping more than seven percentage points in the past month, with the big three of American Airlines Group, Delta Air Linesand United Airlines Holdings, along with discount specialist Southwest Airlines and others accelerating their expansions. "Vaccinations have really picked up," George Michalopoulos, chief commercial officer of Hungarian discounter Wizz Air Holdings, said on the sidelines of the Arabian Travel Market event in Dubai this week. The US is "two to three months ahead of Europe, but that shows the path forward."

In Europe, the return of international travel has been complicated by border rules set independently by more than two dozen countries. Progress was made this week, when the UK - which has gotten jabs into 55 per cent of its population - finally removed a legal ban on leisure escapes. Sunny Portugal, one of the few countries on Britain's "green list", has been the biggest beneficiary.

Greece, Italy and France have also made strides, with EU vaccine rates accelerating and plans being rolled out to welcome more outside visitors. In all, airline capacity closed the gap with 2019 levels by 4.4 percentage points in the past week, the most of any region.

While vaccinations are the most important factor to a return to travel from a medical perspective, ending border restrictions will have a more immediate impact transforming pent-up demand into ticket sales, said John Grant, chief analyst at OAG. "Governments have got to start acting responsibly and in unison rather than unilateral declarations around lockdowns,'' he said. "Those types of situations are just damaging everyone's confidence and frustrating airlines.''

One key objective for US and European airlines is a meaningful restart of transatlantic flights. The highly profitable market was gutted last year as the virus first surged in the west. Some European countries such as Italy have started to ease restrictions on Americans, but the opening is not reciprocal.

On Tuesday, Deutsche Lufthansa added its voice to a growing chorus of airlines demanding decision-makers from Washington and London to Brussels change the rules. The German carrier said it is adding flights to Atlanta and Orlando starting in June based on rising demand, after curbs were loosened in its home country.

Meanwhile, US businesses including hotel chains and car-rental firms are pushing hard for a reopening. The EU aims to lift recommended curbs on US visitors as it introduces its Green Digital Certificate that should facilitate easier border checks. Once curbs are lifted, a good portion of the transatlantic market "could be back very quickly, since these routes are for many airlines amongst their most profitable and there is a large amount of pent-up demand", said Mr Grant. He said it may take until next year for schedules to be fully restored.

One catalyst for a rebound could be a meeting of the G-7 in Cornwall, England, from June 11 to 13, said Sean Doyle, the chief executive officer of British Airways. He expects Britain to be "the first country this side of the Atlantic" permitted to resume travel to US for non-Americans. BLOOMBERG