Why do airline employees beat passengers

Report on the state of the industry

1. Passenger air transport

Worldwide air traffic has plummeted by two thirds and is only slowly recovering

Air traffic worldwide fell by two thirds in 2020 compared to the previous year. The low point of development was recorded in April at -94 percent. Air traffic slowly recovered from May to September.

However, with the increase in the number of infections since September, this recovery stopped and leveled off at a loss of -70 percent. Traffic to international destinations has hardly recovered. A small part was resumed in the summer months, but the recovery has stagnated since September. In the months of August to November there was only 12 percent of the international traffic in the same months of the previous year.

The development of domestic traffic was able to decouple from international traffic. Air traffic grew rapidly again, particularly within large domestic markets such as the United States and China. But the recovery in this traffic sector has also stagnated worldwide since September.

After the recovery in the summer, the European airlines recorded a significant slump again

The development proceeded differently in the individual world regions. There are very large domestic markets in North America and Asia. Driven by the strong domestic business, demand in the North American and Asian markets has increased continuously since May 2020 and reached the level of around 35 percent of the previous year at the end of the year.

The European airlines are more characterized by international demand. They remained at a very low level even in the summer months. The slight recovery in summer also only lasted for a short time. Since September, the traffic of the European airlines has decreased significantly due to the increasing number of infections and tightened travel restrictions.

The airlines from the Middle East with almost exclusively international transfer traffic recorded the greatest slump in the passenger business.

The German airlines are seeing a big slump in passenger demand

The German airlines carried around 40 million passengers in 2020, 75 percent fewer than in the previous year. Measured in terms of passenger kilometers sold, demand has fallen by 76 percent. Compared to other European airlines, the decline in passenger kilometers sold by German airlines is somewhat greater (-69 percent vs. -76 percent).

This is due to the high intercontinental share and the fact that the German airlines are somewhat more restrictive in terms of capacity than other European airlines during the crisis. In addition, the more crisis-resistant domestic traffic in Germany has a lower share of traffic than, for example, in France, Spain, Italy and the Scandinavian countries.

Passenger demand has collapsed worldwide - the decline in Germany is stronger than the global average

Passenger demand at German airports fell sharply after the first two months of the year and only recovered slightly for a short period in summer. With 63 million passengers, demand at German airports fell by 75 percent compared to the previous year.

The slump in demand spread evenly across all segments: traffic with domestic German destinations (11.7 million) fell by 75 percent, with European destinations (41.1 million) by 74 percent and with intercontinental destinations (10 million). ) by 77 percent. The decline in passenger demand at German airports was greater than the international average. Since September in particular, there has been a clear gap in development.

The main reason for this is the different traffic structure: traffic in Germany is primarily international, whereas in Asia and North America there are large domestic markets that have recovered somewhat more quickly.

Passenger demand has plummeted at both large and small airport locations

Passenger demand has collapsed at all German airports. The extent of the losses at small and large airports hardly differs.

Dortmund Airport shows the smallest drop in demand with its direct flights that are very strongly oriented towards Eastern Europe. The airports in Paderborn, Saarbrücken and Erfurt have recorded the largest slumps. This is due, on the one hand, to the cancellation of the tourist season and, on the other hand, to the temporary suspension of feeder routes to the Frankfurt and Munich hubs.

In a European comparison, the proportions have not changed significantly

Passenger demand fell in a similar way at all relevant air traffic locations in Europe in 2020. At the largest airports in Germany and Europe, the decline ranged between 70 and 77 percent. The proportions between the major airports remained largely unchanged.

The development of market shares has so far not given any indications of structural shifts

The number of seats to / from / in Germany was reduced by a total of 65 percent in 2020. Due to the lower capacity utilization of the aircraft, the decline in supply is not quite as strong as in demand at German airports (-75 percent).

While the German airlines accounted for around 55 percent of the available seats in 2019, the share in 2020 was 51 percent. Structural shifts in market shares are currently not apparent. The reason for slight changes in a significantly reduced market were the different reaction patterns of the individual airlines to the Covid-19 crisis. The German airlines have acted with foresight on the market and reduced capacities more quickly than foreign airlines when the development of demand required this.

The domestic German flight network has been significantly reduced in size during the pandemic

The domestic German flight offer was significantly reduced in 2020. There are differences in the individual types of transport:

  • Routes that serve both local traffic and feeders to the hubs (e.g. Berlin-Frankfurt) had the smallest decline. Currently only two routes in this category are not served (Friedrichshafen-Frankfurt and Munich-Paderborn).
  • In pure local traffic, individual routes are not served (e.g. Düsseldorf-Dresden). In addition, easyJet has completely stopped operating local routes within Germany.
  • Pure feeder routes with little local traffic (e.g. Leipzig-Frankfurt or Munich-Nuremberg) have been greatly reduced due to the low international connection traffic.

2. Air freight transport

Smaller declines in global freight traffic than passenger traffic and rapid recovery in the third quarter

Demand also fell sharply in global freight traffic as a result of the pandemic - albeit not as drastically as in the passenger business. Overall, demand in 2020 was around 12 percent below the previous year's figure. In the first quarter, demand plummeted due to production failures, interrupted supply chains and the abrupt loss of capacity in the passenger planes (belly freight).

The decline in demand continued in the second quarter, mainly driven by negative developments in most economic areas (USA -9 percent, euro area -12 percent). In the third quarter, freight demand recovered significantly due to a rapid recovery in global economic output (GDP +7.4 percent compared to the previous quarter).

After a brief slump, global air freight traffic quickly picked up again

The development for the freight-carrying airlines is slightly different in the world regions:

  • The airlines from North America benefit from the high share of express freight in the US domestic market and the boom in online trading. Therefore, the freight there has not collapsed as much compared to other regions.
  • European and Asian airlines are developing somewhat less dynamically with their higher share of additional cargo in passenger aircraft and a demand that is more oriented towards international trade and thus in line with the global trend.

For all regions, the shortage of capacities in passenger aircraft was also the market-defining factor in 2020: In the period from January to November, global capacity fell by 24 percent, but demand only fell by 12 percent.

Air freight demand in Germany has recovered after the slump in the spring and is showing a positive trend

Cargo loading and unloading at German airports initially fell due to the pandemic, with a low of -15 percent in April. This was followed by a trend reversal and since September 2020 air freight in Germany has shown a positive trend in terms of loading and unloading compared to the previous year.

Freight traffic is therefore developing significantly more positively than passenger traffic. There are a number of reasons for this: the manufacturing industry is less affected than tourism, the increasing demand for the transport of medical products and protective equipment, the recovery of the global economy from the 3rd quarter onwards and the strong development of online trading.

In 2020, the enormous importance of air traffic for the security of supply for the population became apparent, particularly when it comes to the transport of medical products and protective goods and the maintenance of supply chains.

The German air freight locations can assert themselves in the European market

The freight locations in Europe developed very differently in 2020, with the German locations able to hold their own against the European competitors:

  • In Frankfurt and Amsterdam, air freight demand has recently grown again, but at the same time there was still a lack of additional loading capacity in passenger aircraft.
  • Airports that serve as hubs for integrators (Leipzig and Cologne) saw above-average growth in the freight business in 2020.
  • The decline in Munich can be explained by the loss of intercontinental passenger connections. In Munich, freight is mainly handled as an additional cargo in the intercontinental network.
  • Liège Airport is an increasingly strong competitor in Western Europe. The reasons for this are the flourishing e-commerce and good regulatory framework in Belgium for the freight business.

3. Flight movements

The decline in air traffic is also reflected in the development of flight movements

In 2020, German air traffic control counted a total of 1,460,768 flights under instrument flight rules in and over Germany. The pandemic-related decline reached its low point in April at -87 percent. The number of flight movements then recovered somewhat, but since September the increasing number of infections and tightened travel restrictions have had a stronger impact on flight movements again.

With a minus of 56 percent, flight movements have not decreased quite as sharply as passenger demand. The reasons for this are that with the decline in passengers, the load factor of the aircraft has also decreased and that the airlines have also used smaller aircraft on the routes. Another cause is the only slight decrease in freight traffic.

4. Business implications

Airlines around the world are experiencing an unprecedented slump in sales and profits

After growing in 2019, airline revenues will decline 61 percent worldwide in 2020.

The global losses will add up to $ 119 billion in 2020. European airlines are affected with USD 27 billion. A significant decline in losses is forecast for 2021, but the profit zone will not be reached. Airports are equally affected by a sharp drop in sales. The companies try everything to maintain liquidity and reduce fixed costs quickly:

  • Reduction of flight operations, material and personnel costs, including the use of short-time work and crisis agreements with the tariff partners
  • Postponement of investments and temporary shutdown of infrastructure
  • Securing liquidity by taking out additional loans and / or government participation

Every fourth job in German aviation is threatened

The unprecedented decline in revenue is offset by ongoing high costs, especially for staff. As a result, companies need to quickly adjust these costs to reflect reduced demand. So far, the extensive possibilities of short-time work and crisis packages with the collective bargaining partners have prevented mass layoffs and a rapid reduction in staff. Around 60 to 70 percent of employees are currently on short-time work.

However, due to the only long-term recovery perspective, companies are being forced to reduce the number of employees. Of the approximately 255,000 jobs in the aviation industry in Germany (with airlines, airports, air traffic control, handling companies and retail at airports), 60,000 jobs are in danger of being lost.

A major market shakeout in global air traffic has so far not taken place

Some airlines that are relevant for Germany have filed for bankruptcy and some have also ceased operations. In particular, the suspension of Flybe flights has hit some German airports. So far, there have been no bankruptcies of major airlines, also due to supportive state bridging measures all over the world. In Germany there has been a consolidation of corporate structures.

Operating platforms were merged as part of the very extensive reduction in flights. A consolidation across company boundaries has not yet taken place. Paderborn / Lippstadt is the only German airport to have filed for bankruptcy under self-administration.
If the rules for filing for bankruptcy are put back into force, companies at the airports face further bankruptcies and thus further loss of income at the airports.

5. Outlook for 2021 and beyond

Sluggish recovery in the general economy and in aviation

China in particular is holding its own worldwide with high growth rates, even during the crisis. For the USA, too, a development is forecast that is higher than that of the euro area. Growth of over 5 percent for the year 2021 was forecast for Germany in the fall, but the outlook is now more pessimistic due to the violent second wave of infections.

The development of global air traffic depends to a large extent on the relaxation of travel restrictions. A forecast is therefore currently subject to high uncertainties. In the future, some travelers will not travel more, less or to different destinations in the future. The IATA therefore predicts that the development in the next five years will no longer catch up with the previously forecast development: In the positive scenario, global air traffic will reach the level of 2019 around 2023/2024, in the negative scenario only after 2025.

Demand from 2019 in traffic with Germany will only be reached again in the middle of the decade

The scenario - not a forecast - is based on the following basic assumptions:

  • In December 2021, the medical crisis will be resolved and all travel restrictions will be lifted.
  • In December 2022, the Covid-19-related recession will be over and the economy will be back at the level of 2019.
  • Air traffic will grow again from 2023 at the rates that were recorded before the crisis (approx. 3 percent per year).

In the scenario, the anticipated development will not be achieved without Covid-19 even after the health crisis has ended. This results from the changed demand in business travel, but also in short-term tourism. In the scenario, the 2019 level will not be reached until 2025. For the period 2020-2030, this development would mean a total loss of 25 percent of transport performance.

Airlines are cautiously rebuilding capacity

At the beginning of 2021, only a fraction of the usual air traffic will be offered (2019 is used as a comparison, since 2020 was already characterized by Covid-19 from February):

  • In January the airlines offer very little capacity (20 percent of the capacity of January 2019). This goes hand in hand with the severe infection rate and severe mobility restrictions in Germany and Europe.
  • According to the current planning status, this offer will remain at the same level in February and will increase to 47 percent in March, which is already slightly influenced by the summer flight schedule.

When it comes to building capacity, German airlines are acting a little more foresight than foreign airlines. Depending on the development, fewer short-term flight cancellations are to be expected with them.

6. Overview of key figures