Airlines hope to make a handful of dollars with the return of transatlantic flights | Airlines Industries

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The golden goose is flying in the air again. The reopening of US borders to leisure travelers from the UK and most of Europe – with the attendant fattening of transatlantic streams – has finally given long-haul airlines something to cheer about.

The first flights for non-essential foreign visitors – vacationers, friends and family – will take place on Monday. For the owner of British Airways IAG, not to mention rival Virgin Atlantic and other airlines, it will feel like Christmas, Thanksgiving and all their birthdays in one.

In the wake of the reopening, IAG forecast a narrower loss – €3 billion this year, down from €4.3 billion in 2020 – and a potential return to profit by Easter. Transatlantic travel is the primary business of long-haul airlines, and the location and common language have traditionally put British carriers at the forefront of the European market. In the pre-pandemic days, when airlines were making profits, the bulk of IAG’s revenue came from British Airways, and the fading end of British Airways came from the United States.

On short-haul routes, British Airways was pushed hard by low-cost airlines. Aside from those with a connecting flight, living next door to Heathrow or in particular like neatly dressed hosts and complimentary biscuits, there is no good reason to pay the national carrier fares to Europe.

But the United States is different. The Norwegian company, which tried to capture a portion of this market, retreated, and all the full-service airlines forged partnerships, joint ventures and alliances – Virgin in particular chose the powerful arms of Atlanta-based Delta. Next week, both British carriers are expecting full planes as passengers also benefit from easier and cheaper testing requirements. BA says business travelers who tire of Zoom are also booking.

Almost enough to make investors forget about billions in losses and an uncertain future: Shares in IAG rebounded Friday after an initial dumping when the group reported third-quarter results and its full-year outlook.

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Analysts don’t see returns coming very soon. There are still problems ahead: the industry was obsessed with oil prices a decade ago with the dollar soaring against the barrel, and it is rising sharply again. The cost of massive borrowing that has attracted airlines over the past 18 months seems likely to rise as well. It remains to be seen whether opening borders and easing travel restrictions is a one-way trend – not least when you consider how more cautious governments view the UK’s laissez-faire policies and relatively high case rates.

However, for now, it’s the season of goodwill, and British Airways and Virgin are emerging from their old trenches to stand together and join their common enemy: Heathrow. The ritual pantomime of circling the organizer every few years and throwing out excessive demands for increases or decreases in airport landing fees took on a special feature this time around.

Not only does the pandemic mean all sides are really weak, but Heathrow has gone all-out to Ebenezer by trying to double his fees. The Civil Aviation Authority, which plays the miserable sack, said that “only” a 56% increase in the average fee – around £35 per passenger – would be allowed.

The controversy continues. IAG chief Louis Gallego indicated Friday that he would consider moving IAG’s investment overseas if the fees meant the airline would not generate a decent return on capital in the UK. But in another breath, Gallego admitted that British Airways only made a profit from Gatwick, the old cheap second choice, once a decade. Virgin has reintroduced its slots in the West Sussex alternative. However, IAG continues its plans to start a subsidiary of BA subtly disguised as short haul, allowing it to cut costs and stave off expansion by competitors.

For the big bucks, there’s clearly only one game in town. One in four flights between Europe to the US pass through Heathrow – albeit 40% less than it was two years ago. After an 18-month survival quota cycle, both IAG and Virgin will aim to fill their shoes on packed planes headed across the pond from Heathrow Airport.

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