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Old 7th Jul 2020, 08:17
  #202 (permalink)  
Flitefone
 
Join Date: Nov 2007
Location: Waters edge
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4 months on It seems I was rather too optimistIc

Originally Posted by Flitefone
It’s easy to be distracted by the fall out from the unfortunate demise of Flybe and the subsequent scramble to back fill routes. But the reality of the present crisis is much more profound for aviation and - in context of the Southampton area - for the Cruise Industry too.

Among the many announcements over the past ten days was the statement by the Delta Airlines CEO in which he said that demand is not expected to return for 18 months. Of course, none of us know, but we do have some precedent with both the global financial crisis of 2008/9 and 9/11. 18 months from now is the beginning to the winter schedule 21/22, so the reality is more likely to be a return to normality for the summer 2022 season. In the meantime, buckle up.

For the south coast, BOH in 2019 had recovered only about 80% of its previous peak passenger throughput which was in 2007! Meanwhile SOU, until fairly recently, doing better, had peaked a year or two prior to 2019. So what is a likely outcome?

For the UK as a whole, a reasonable estimate of the impact in 2020, is a 25% annual fall in passenger numbers for 2020, 20m wiped from LHR, 11m from Gatwick and so on. On current indications, it is also likely that more airlines will go under. In simple terms, those with cash in the bank and relatively manageable debt will probably come out of this stronger. That means IAG and Ryanair, perhaps even easyJet, but the latter has picked a very bad year to launch its inclusive holiday business.

In the meantime, all airlines (and airports) are in a cash preserving mode, cutting costs wherever they can. Staff will go, projects will be deferred or cancelled, at least until there is more clarity about revenue normalising again. The airport owners - usually Pension Funds and Infrastructure investors - look for consistent returns, when revenue falls, that means cost cutting.

Pressure on London runway slots and airspace will ease, the need for airlines to move into the UK regions to deliver growth has probably moved right by 3 years, and for easyjet the recently acquired Thomas Cook slots at LGW and BRS are in its back pocket for growth when it does return.

So where does that leave SOU expansion plans?

In my view there is no doubt that planning permission for the runway extension is much more likely to get the green light now, planners will need to be seen to support economic growth, there will be environmental requirements, but it will be approved. But, the airport owners are much less likely to be ready to spend the money on development. Why? Because the value of the (all) airports, has just taken a big hit, money will be spent only when there is a reasonable basis that it will deliver a return through increased traffic, or the value of the airport.

So, for the next 2-3 years staying in business will be the key objective for all airports, especially the regions.

FF
My views have changed since mid march when I posted this - make that 3-5 years and 5-8 for some!

Q4 this year is likely to be ugly.

FF
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