Airlines around the world account for £ 7bn cost of Covid

Slower-than-expected global vaccine deployment and a wider failure to bring Covid under control will cost airlines $ 10 billion (£ 7.2 billion) more than expected, according to the organization that represents global airlines.

The warning from the International Air Transport Association came as Ryanair chief executive Michael O’Leary on Wednesday warned that there would be a “seismic” cut in capacity in the industry due to the pandemic, including up to 25% fewer thefts in Europe. O’Leary said UK travel to the EU will become more expensive and cumbersome due to Brexit, while leisure travel will not return to normal until 2023.

Willie Walsh, former boss of British Airways parent company IAG and new CEO of Iata, denounced the cost of the Covid PCR tests now required for air travel and criticized the government’s decision to charge VAT on products . The standard 20% VAT rate applies to private test kits.

Walsh said, “I’m surprised consumer groups haven’t focused on this issue. If we are doing these tests because there is a health crisis, governments shouldn’t charge VAT and people shouldn’t profit from it. “

The aviation industry is now expected to lose around $ 48 billion in 2021, according to new forecasts from Iata, more than a quarter more than the $ 38 billion forecast last December.

Iata highlighted the slower rollout of the vaccine in countries like France and Germany, as well as emerging markets for the higher losses, combined with the rise of new virus variants and continued restrictions on international travel restrictions. .

North American airlines fared better than European airlines thanks to a domestic recovery. They are expected to lose $ 5 billion this year instead of $ 11 billion as estimated in December.

However, European carriers are expected to lose $ 22 billion, up from the December estimate of $ 12 billion, and after losing $ 35 billion last year.

Iata also expects much higher fuel prices, with kerosene at $ 68.9 per barrel and oil at $ 64.2 per barrel – compared to $ 49.5 and $ 45.5 per barrel expected in December. – while the strengthening of the world economy is pushing up energy prices.

Cutting costs by airlines and returning to flights on some domestic routes has helped the industry reduce its forecast of losses from the $ 126 billion lost in 2020, although carriers are still not expected to meet the threshold. profitability before 2022.

Airlines have increased the number of their cargo flights during the pandemic, a trend that is expected to continue, but Iata warned that would not cover the collapse in passenger travel, which means operating revenues from airlines. airlines are only expected to reach 55% of 2019 levels in 2021.

“This crisis is longer and deeper than anyone could have imagined,” Walsh said.

“The losses will be reduced from 2020, but the pain of the crisis is increasing. Optimism reigns in domestic markets, where the characteristic resilience of aviation is demonstrated by rebounds in markets without internal travel restrictions. However, government-imposed travel restrictions continue to dampen the underlying strong demand for international travel. “

Iata said demand for tickets on domestic flights in China and North America showed passengers were eager to get back into the air. Demand for travel to China has already surpassed 2019 levels.

Despite persistent travel restrictions, Iata estimates that 2.4 billion people will travel by air in 2021.

The group said: “We have not written off 2021 as vaccination forecasts suggest some advanced economy markets should be able to open and we expect a strong fourth quarter as a result.”

Iata expects travel between the UK and the US, both of which aim to have 75% of their adult populations fully immunized by July, to resume earlier than travel to and from from continental Europe.

Walsh criticized the UK government’s requirement to test PCR for travelers before departure and after arrival, calling the fees charged for the tests “clearly outrageous”.

He added: “We must challenge the need for PCR[tests], is this the only acceptable risk mitigation that can be put in place if there is a significant improvement in the quality, speed and price of other tests. “

The Treasury is supposed to be thinking about how it can reduce travel costs, while also making sure it is as safe as possible. This could include cheaper tests used when vacationers return home, and the ability for the government to provide pre-departure tests.

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