Long way to go until airlines can cover costs: Aercap | News | Airfinance Journal

Long way to go until airlines can cover costs: Aercap

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There is a “long way to go” before the majority of airlines will be in a position where traffic will reach a point that will enable them to cover their cash operating costs, Aercap chief executive officer Aengus Kelly believes.

Speaking on an analysts call on 29 July, Kelly said that “equilibrium” will be achieved when airlines can pay their lease rents.

This is not necessarily the point where airlines are making profits, but is nevertheless some way off, he argues.

Kelly estimates that airlines will need to get back to between 60% and 70% of pre-Covid-19 traffic levels to reach this point. This is because cash costs “won't be the same as they were in 2019”.

“So that's come down structurally as well. And so you don't need quite as much revenue to cover, where they'll be, they'll be more efficient,” he adds.

Factors such as yields and where the airline’s revenue base was in 2019, will also play a role.

“But we're just not there at the moment. There's a long way to go before we get to that, I can assure you, I don't see that happening this side of that anytime soon,” he warns.

Commenting on the state of recovery across the globe, Kelly said that a “steady improvement” in US traffic since a low point in April had “run out steam” as a result of the resurgence of the Covid-19 virus.

“It will take control of the virus to get the US recovery back on track,” he noted.

Europe, by contrast was seeing the “largest recovery”. While the continent reached a low point in April, the recovery was clear by July. A recovery in confidence in and the desire to travel meant that the European market is “leading the global recovery”.

Latin America, remains in the “throes of the crisis” but by contrast markets in Southeast Asia such as Thailand and Vietnam, appear to have extremely low levels of infection, Kelly noted, but remain “effectively closed to air travel”.

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