New travel ban sends aviation industry into fresh tailspin

parked out of use British Airways aeroplanes stored at Bournemouth International Airport, Dorset during the Coronavirus crisis

Hotel tycoon Surinder Arora had a plan to attract business and leisure travellers back to his Sofitel at Heathrow airport: a £179 “test and rest” deal, where guests could enjoy a night’s stay and a Covid-19 test before flying, with breakfast thrown in.

Occupancy levels at his Arora Group’s 15 hotels are languishing at a fraction of pre-Covid rates — 10%, in some cases. Arora, 62, had been hoping his initiative would give passengers the confidence to travel again.

That now looks like a distant dream. The prime minister’s announcement last night that England was about to be plunged into a second lockdown — with holidays off the table — has thrown the travel sector into a new crisis.

The aviation and tourism industry was already in the midst of its worst downturn since the Second World War. For Heathrow, the impact of the shutdown has been seismic. In normal times, 250,000 people pass through the airport every day. That number had fallen to 20,000-25,000 in July, before the latest restrictions.

Data from Eurocontrol, the air traffic safety organisation, showed that there were 1,833 flights in and out of Britain on Wednesday — 67% fewer than on the same day last year. The slump makes the UK one of the world’s worst affected nations in percentage terms.

Now, after limping along for seven months, with a small rebound in the summer, airports, airlines, hotels and tour operators have been plunged into a fresh chaos. Some will not make it through to the other side of lockdown.

Chris Tarry, an aviation analyst, said the restrictions would push the industry back into “hibernation”. “We’ve already seen very little activity in long haul, and in short haul, what we saw pick up over the summer has fallen away again,” he said.

Passengers who had booked trips to quarantine-free winter sun destinations such as the Canary Islands have had their plans thrown into doubt. For airlines, the new lockdown intensifies what was already a desperate fight for survival. A study by the aviation analyst Ctaira found that 96% of frequent flyers in Europe and America said they would travel either “much less” or “slightly less” for business, even should a vaccine arrive for Covid-19.

Even before the new lockdown, a fortnight ago analysts at Barclays were sounding the alarm. They said that while the three-month period between July and October had provided some relief, “winter trading is looking increasingly tough”.

“Infection rates in the majority of European countries are growing significantly and, as a result, governments are re-implementing travel restrictions. The lack of a uniform response to quarantine measures upon arrival has caused low confidence among individuals to travel,” they told clients.

Several days later, British Airways owner IAG revealed a heavier-than-expected quarterly loss of £1.2bn. It said it would fly at only 30% of last year’s capacity in the final few months of the year, compared to its previous guidance of 40%. British Airways, which is cutting 12,000 jobs, planned to seek new leisure routes and cut business-class fares to tempt wealthy holidaymakers.

Even before the new lockdown, airlines were burning through hundreds of millions of pounds a month. Not even taking into account working capital costs and capital expenditure, Barclays analysts predicted that IAG would burn through about £280m a month this quarter, Ryanair almost £90m, and easyJet £66m.

Britain’s airports, which have been clamouring to introduce Covid testing for passengers, are now asking for more support. London City airport, which is heavily dependent on business travel, has already indicated that it may be forced to cut up to 420 jobs.

Heathrow said last night that the latest restrictions amplified the “urgent need” for a package of measures to support the UK’s aviation industry. “This package will need to include policies that reduce costs and accelerate the sector’s recovery, such as business rates relief for airports and the implementation of a testing regime for passengers,” it said. “Without targeted support to help protect the UK’s aviation industry, tens of thousands of jobs across the country will be lost.”

The impact of the slump on international travel stretches beyond the UK’s transport hubs. London’s luxury hotels have been starved of guests, and the months ahead will be stark. A survey of hotel businesses, to be published by Deloitte tomorrow, found that 95% did not expect performance to return to pre-Covid levels until 2022.

“The thing that has been keeping hoteliers afloat is government support,” said Andreas Scriven, head of leisure at Deloitte, referring to the furlough scheme and bailout loans. Luxury hotels have high fixed costs. Scriven added: “There are certain owners who will not be able to keep haemorrhaging cash as they are now.”

Roger Whitfield, general manager of The Dorchester hotel in Mayfair, said its guest numbers were at 20% of pre-Covid levels. “Confidence has been greatly eroded,” he said.

For Arora, the months ahead will be a “juggling act”. Out of 800 rooms at his Hilton Hotel at Gatwick airport, which reopened last month, just 100 were occupied last week.

“Hopefully we can give it another week or a month and see how it goes,” he said. “We have to try and do the best we can. I live in hope.”