Covid-19 continues to wreak havoc on airlines but attention is shifting to the future as people ruminate on what the industry will look like in the months and years to come. Many theories and ideas have been put forward, but one thing is certain – airlines must be allowed to fly full planes if they are to remain viable.
An oft-heard idea is that airlines can leave the middle seat free to reduce the risk of contagion onboard. There are two issues with this – firstly, leaving the middle seat empty does not leave a gap of anywhere near the recommended two metres in most economy class setups, where the average seat width is typically between 17in and 18.5in (43cm and 47 cm). Secondly, the business model for many airlines simply falls down if they have to reduce capacity by as much as a third.
Load factor is a key determinant of profitability, particularly for budget carriers like Ryanair, which rely on high load factors. This type of airline adopts a price leader model so low prices are crucial. Bargain fares can only be offered if there are sufficient passenger numbers. A reduction in capacity due to empty middle seats or aircraft re-configuration will only lead to one thing – higher prices.
An increase in prices brought about by reduced capacity or load factors will not be an example of profiteering, it will be a necessity as airlines are left with no choice but to hike prices to cover costs and hopefully turn a profit.
To put this into context, the International Air Transport Association (IATA) estimates that the cost of losing one-third of capacity would increase fares by between 43% and 54%. This is not a small increase.
According to a report in The Wall Street Journal, increasing the industry load factor to 85% from 75% in 2005 has played a key role in making airlines profitable. A step backwards in this regard risks the very existence of some airlines. Passengers complain about cramped seating conditions and Covid-19 could make them value space more. However, will (or can) they pay for it?
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By GlobalDataPassengers love travelling and a surge in air travel over the last decade has been largely driven by low fares opening up more options to more people. Higher prices risk pricing people out of the market altogether and the current pandemic is creating a recession that is categorised by increased unemployment and extensive furloughs. This is not an economic environment conducive to the imposition of higher prices so even if people value space more now, paying more just will not be feasible for many.
Given the complete upheaval seen in the airline industry this year due to Covid-19, which many carriers expect to continue for two to three years, airlines are not in a position to absorb any negative impacts. Not allowing them to fly full planes jeopardises the future of many carriers.
Passenger health and wellbeing are, of course, of paramount importance, but there are more effective measures that can and should be adopted.
