EY sees more travel corridors in summer with vaccines easing restrictions
Etihad Airways expects the list of travel corridors between countries to grow this summer as the pace of Covid-19 vaccinations accelerates, herd immunity strengthens and rapid testing technology improves, its chief executive said. While the current lockdowns imposed by governments are a concern for the industry, a higher vaccine curve and faster PCR testing could ease travel restrictions and unlock pent-up travel demand, Tony Douglas, chief executive of Etihad Aviation Group, told The National.
As the vaccination curve rises into the 60th or 70th percentiles in Europe, Asia, Israel and the UAE, more governments will lift travel restrictions if passengers have the appropriate vaccine or testing certificates on arrival and departure, he said. "As we get into the summer months, unless vaccine programmes slow down or there is a flaw in the strategy, things will start to tip back into the right direction in a whole bunch of countries," Mr Douglas said.
"My expectation is that we'll start to see the list of countries that are able to have travel corridors will get longer and longer, which will be heavily impacted by the way in which vaccines give that assurance."
New virus variants are prompting governments to tighten travel restrictions, which is hurting the outlook for airlines, according to the International Air Transport Association (Iata).
Mr Douglas said he does not expect air travel to return to pre-crisis levels until 2023.
"We're expecting 2021 to be a very difficult year, we're expecting 2022 to be a transition year and we're expecting 2023 sees us slowly getting back to pre-Covid passenger numbers," he said. "We've budgeted for 2021 to be a continuation of many of the challenges we faced last year."
Etihad's core operating loss in 2020 more than doubled to $1.7 billion from the previous year, as passenger traffic fell 76 per cent due to the pandemic, which also pushed global peers such as Qantas and British Airways-parent IAG into the red.
Full-year passenger revenue dropped 74 per cent to $1.2bn as the airline carried 4.2 million people, down from 17.4 million in 2019, the carrier said on Thursday. That was due to lower demand, fewer scheduled flights and the UAE's suspension of passenger services in late March to curb the spread of the virus, Etihad said.
Etihad's full-year loss "could have easily doubled" had it not been for the airline's ongoing five-year turnaround plan, which it accelerated due to the pandemic, Mr Douglas said. "Had we not been engaged in the transformation programme and had we not accelerated it as a result of Covid, it would have been an awful lot more," he said. "We put the metal down on the floor on the transformation agenda and it was difficult because we had to make further network and fleet decisions."
Etihad aims to narrow its losses in 2021 compared to 2020, Mr Douglas said, adding the caveat of the uncertainty arising from the pandemic.
In 2021, the airline plans to recover revenue while maintaining an "obsessive level" of attention to costs, as vaccinations, PCR testing and health certificates unlock pent-up travel demand later this year, Mr Douglas said.
Last year, Etihad reduced operating costs by 39 per cent year-on-year to $3.3bn, due to a combination of reduced capacity and cost containment measures.
Etihad plans to operate as a mid-sized carrier, building its operations around smaller twin-engine aircraft, and focusing on the Boeing 787 Dreamliner as the "backbone" of its fleet. At the end of 2020, the airline operated to 50 passenger and seven cargo destinations from Abu Dhabi, representing approximately 35 per cent of its pre-Covid capacity.
Besides its 40 Dreamliners, Etihad will deploy its 12 Airbus A350s but not in 2021 or 2022, the chief executive said. "It's one of those where you segment how you fight your way through 2021-2022 and we'd do that with the 787s predominantly," he said.
Of its 10 Airbus A380 superjumbos, Mr Douglas said: "We have now taken the strategic decision to park the A380s, I'm sure it's very likely that we won't see them operating with Etihad again."
Etihad has Boeing 777-9s on order, with the US manufacturer delaying the plane's debut to 2023. Mr Douglas said the date for Etihad deliveries is a question for Boeing. "I'm not sure they know and it will probably be some time until they can answer it intelligently because of the Covid impact," he said. Asked if Etihad is considering converting the 777X order for Dreamliners, he said: "When you're in a street fight with Covid, it's almost irrelevant, because the deliveries are way out in the future anyway. The trick to this one is to focus on 2021-2022... that journey is a 787 Dreamliner journey."
The aviation industry is among the worst-hit sectors during the Covid-19 crisis, forcing airlines to cut thousands of jobs, ground aircraft and seek government aid.
The airline’s total workforce shrank 33 per cent to a total of 13,587 employees by the end of 2020, compared to 20,369 in 2019. Another wave of job cuts is in progress for 2021, but it will be "smaller significantly" than last year, he said, without providing an exact number.
The state-owned carrier plans to refinance existing debt that has been on its balance sheet since 2014 and maturing this year, Mr Douglas said. It will replace it with long-term debt and is open to a variety of financing instruments.
Asked if Etihad will seek government aid to bolster its finances during the Covid crisis, as other airlines have done, Mr Douglas said the carrier will continue to accelerate its transformation plan.
Airlines who got the biggest chunks of government bailouts such as Lufthansa, Cathay Pacific, Singapore Airlines and US carriers are the ones seeing recovery take longer because they've been given the funds to bolster their balance sheets, he said.
"The jury will always be out in my mind about that because on one hand you preserve a national asset but on the other hand, back to what transformation is all about, you don't make them as agile and resourceful," Mr Douglas said.
There is a silver lining for airlines who use the crisis as an accelerator to become more agile and who stay focused on sustainable flying, he said. A focus on sustainability will separate long-term winners from those who "fall by the wayside", Mr Douglas said. In 2020 alone, more than 40 commercial carriers stopped or suspended operations globally, according to Cirium.
Air cargo is another bright spot, with Etihad earning $1.2bn in revenue, a 66 per cent increase from 2019, driven by demand for medical supplies. "There will be an end to this. 2021 will be the year of how this not only turns a corner but resets. Vaccine and testing will be key ingredients to this," he said. "Governments in a controlled way will connect travel flows on a bilateral basis from A to B and the winners will be the ones who develop ways to handle this from a wellness point of view."
More than 75 per cent of the airline's UAE-based workforce has been vaccinated, and Etihad is the first airline globally to have 100 per cent of its flight crew inoculated.
The push towards digital health passports will very quickly mature this year and more people will "adapt and adopt to the new norm" of vaccines and PCR testing, he said. "We will come out of this fine."
