Low-cost airlines in Europe are to have the edge over national carriers once the pandemic recedes, experts say. As the likes of Spain and Germany have darted to billionaire rescues for Air Europa and Deutsche Lufthansa AG (ETR:LHA), budget carriers have been able to rebound quicker.
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Low-cost Airlines Vs Big Carriers
In May last year, Germany and Lufthansa reached an agreement on a rescue package valued at about $10.6 million, to allow the company to swerve away from the looming economic crisis forecast during the peak of the pandemic.
In November 2020, the Spanish state holding company SEPI granted a 475 million euro rescue to Air Europa, whose owners by September have deemed to be insufficient, so the airline will require new public aid to survive.
Amid the crisis, Italy’s flagship carrier Alitalia will shut down as of October 15 to be replaced by the state-funded ITA.
Further, the European Commission (EC) declared Friday that the two loans for a total value of 900 million euros that Italy granted to the airline in 2017 were illegal. The EC demanded that the government recover the money from the company.
Low-cost Airlines Have The Edge
Paul Charles, chief executive officer of the luxury travel consultancy firm The PC Agency, told CNBC’s “Squawk Box Europe” Monday: “You are seeing legacy carriers unable to move so quickly compared with the lost-cost carriers out of the pandemic.”
“You are going to see the likes of EasyJet plc (LON:EZJ) able to take up more opportunities. That means potentially getting more slots, but also moving their fleet around more quickly in order to take advantage of where demand is.”
This is due to the short-haul flight focus of the budget carriers, as closer destinations are proving to be more attractive to flyers amid continuing travel limitations and doubts over the pandemic easing off.
“There is going to be a change of tune … now is the time that actually you will see more private equity starting to emerge into the sector. And this is on the back, of course, of many short-haul carriers able to take their market share from those legacy carriers,” Charles says.