"EMEA\u2019s Air traffic recovery is slower than other regions\u2019"

" \n EMEA\u2019s air traffic recovery is lagging that of North America and APAC due to tighter travel restrictions, Fitch Ratings says. The return of leisure travellers is driving airlines\u2019 traffic revival in the region, although a full recovery is still three years away and is also dependent on a return of business and long-haul passengers. EMEA carriers stay under significant pressure as a result with most ratings remaining on Negative Outlooks. \n \n\n \n Significant pent-up demand for leisure travel after a prolonged period of travel constraints will be the main driver of air-traffic recovery in the medium term. We believe that long-haul international and business travel will be slower to come back. Although some business travel could be permanently lost due to the increased use of virtual meetings, we expect most of it to return in the long term. \n \n\n \n Carriers that are better positioned to benefit from these trends are low-cost carriers (LCC), such as Ryanair and Wizz Air. Other airlines, typically network carriers, such as British Airways and Etihad have larger exposure to long-haul travel and will find it harder to recover traffic. \n \n\n \n These airlines also operate from a single country base with a weak domestic market and are more exposed to travel restrictions than those with a strong domestic base or those operating in multiple jurisdictions (such as large LCCs) that are able to reshuffle their route structures depending on changing travel restrictions and demand. \n \n\n \n Despite some positive demand trends emerging for the summer 2021 season, supported by increasing vaccination roll-outs, we do not expect a full traffic recovery until 2024. EMEA\u2019s recovery is lagging behind other regions: it is still running at about 40% of its 2019 capacity, compared to 70% in the US and APAC, mostly due to raised restriction levels following the latest coronavirus wave in many European countries. \n \n\n \n \n \n\n \n Although the share of cargo transportation in airlines\u2019 revenue mix is anticipated to increase to almost a third in 2021 from 10%-15% prior to the pandemic, according to the IATA, we expect this surge to be temporary and passenger business to regain its revenue contribution as traffic recovers. As a result, we do not anticipate new entrants into air cargo transportation, including Amazon and Alibaba, to be a material threat to airlines\u2019 competitive position. \n \n\n \n In the long term, airlines should be able to keep most of their share of the cargo market as they can offer available space on commercial flights to shippers at attractive rates. However, increased cargo revenue supported some airlines, such as Turkish Airlines, during the pandemic, with some carriers stripping out seats and turning passenger jets into freighters. \n \n\n \n The recent diversion of a Ryanair flight to Minsk and potential restrictions on flights over Belarus are unlikely to have a significant impact on Fitch-rated airlines\u2019 profitability as the extra time and fuel required to bypass Belarus are negligible. Furthermore, the low volume of air traffic means there are fewer flights directly affected by the \u2018no-fly\u2019 zone. Both the UK and EU have advised airlines to avoid Belarusian airspace and suspended Belarusian airlines from entering their airspace. \n \n\n \n Passing over the Belarusian airspace can be the optimal routes for some intercontinental routes, such as from Europe to Bangkok or Singapore. Together with previous airspace closure over Crimea, this would narrow choices for some carriers\u2019 alternative flight routes. We believe the diversion will not have significant financial consequences and extra costs could be absorbed by long-haul fares, if the restrictions remain in place for a prolonged period. \n \n\n \n However, Russia\u2019s involvement may reduce the availably of alternative routes, worsening financial consequences for airlines. Last week, the country denied entry to two European airlines\u2019 flights that tried to avoid flying over Belarus. \n "

"EMEA\u2019s Air traffic recovery is slower than other regions\u2019"

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