Air travel resumes but staff shortages could hamper recovery
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The news this morning that Lufthansa is back in the dark is one of the biggest signs yet of the rebound in global air travel.
The German carrier has exceeded analysts’ expectations as it posted quarterly profit for the first time since the start of the pandemic of 17 million euros. Although passenger numbers of 19.6 million are less than half of pre-crisis levels, new bookings have returned to 80% of pre-pandemic standards and follow encouraging figures from Air France-KLM last week.
Lufthansa said the scheduled reopening of the US borders next Monday had triggered a boom in demand, but warned the recovery was fragile: it still expects to operate only 70% of its pre-pandemic capacity by 2022.
The airline was also able to benefit from rising demand for air freight, with bottlenecks limiting activity in ports around the world. The volume of cargo transported through German airports is increasing every month at a double-digit rate. Maersk, the world’s largest container shipping group, said yesterday it was buying a German air freight specialist to capitalize on demand, as it reported exceptional third-quarter results thanks to soaring rates of freight caused by the global supply chain crisis.
Not all segments of the airline industry are rebounding so quickly. Airlines are struggling to bring back first class passengers and business travelers who can generate up to 75% of airline revenue on some international flights. Some have given up on commercial planes altogether after using private jets during the pandemic.
Airlines are also aware that the current trend of easing restrictions on international travel could easily be reversed if Covid infections continue to spread.
US business leaders, enraged by the strict travel restrictions, warned this week of an expat exodus from China, which has imposed more than 18 months of strict border controls, including quarantine stays of three weeks and less visas for businessmen and their families. A worsening outbreak of the Delta variant of the coronavirus has led Beijing to reintroduce local lockdowns and travel bans, as well as advising citizens to stockpile food.
Airlines in the United States are also facing strong headwinds due to labor shortages affecting pilots, flight attendants, gate attendants, baggage handlers and customer service personnel. Carriers have already had to cancel a record number of flights before the lucrative travel window between Thanksgiving and New Years.
The other threat to air travel is existential.
In the context of the critical climate summit in Glasgow, environmental activists question whether certain forms of air transport, such as business and short-haul, should be encouraged. The UK, even as it prepared to host the COP26 meeting, announced last week that it would cut taxes on domestic flights. Although most aviation emissions come from international flights, environmental activists argue that people should be pushed towards low-carbon alternatives such as trains, rather than flying.
FT’s website is completely free to read today, so if you’re interested in anything COP-related, don’t miss our excellent Moral Money newsletter, which is normally exclusively reserved for Premium subscribers.
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Good to know: the economy
The US Federal Reserve said it would start slashing its monthly $ 120 billion bond buying program this month, the culmination of months of debate among Fed officials over the level of support needed for the biggest economy of the world as inflationary pressures increase.
FT’s editorial board says it’s not yet time for the bank of england raise UK interest rates, but should stop buying assets and stop reinvesting maturing bonds. The bank’s monetary policy committee will announce its decision tomorrow. You can ask our Capital Markets team about the next step to central banks, bonds and interest rates in our readers’ questions and answers on Friday.
Euro zone unemployment has fallen to pre-pandemic levels as the economic recovery leaves many companies struggling with staff shortages. The unemployment rate fell from 8.6% to 7.4% in September. All eyes are now on Friday’s monthly US employment report: we’ll have full details in tonight’s newsletter.
Latest for UK and Europe
Commercial activity in British services jumped sharply in October, according to new PMI data from IHS / Markit. The survey showed inflationary pressures rising sharply, with input costs reaching an all-time high, putting additional pressure on the Bank of England ahead of its interest rate decision tomorrow. PMI data also shows services in the United States are at record levels.
Another aspect of the UK economy which is definitely running at full capacity is the housing market: Nationwide reported today that the average UK house price has risen by more than £ 30,000 since the start of the pandemic, with average house prices now exceeding £ 250,000 for the first time . The ardor of homebuyers, however, should be cooled by a likely rise in lending rates as lenders react to accelerating inflation.
Romania is in serious crisis as internal political struggles intensify amid Europe’s highest Covid infection rates and some of the highest energy prices in the EU.
The UN announced a new short-term loan market for African bonds, a measure that should help developing countries significantly reduce their borrowing costs. The liquidity and sustainability facility will allow investors to use African debt issued in foreign currencies in repo transactions, which allows access to finance by swapping bonds for cash.
The Reserve Bank of Australia became one of the first major central banks to tighten monetary policy to control inflation. The RBA has said it will no longer try to keep the yield on three-year bonds at 0.1%, after a week of turmoil in bond markets in which yields soared after the RBA cut back. refused to defend his ceiling.
Ikea, the world’s largest furniture group, has warned that next year will be “more difficult” than 2021 as costs and supply issues escalate. The company said profits will fall for two consecutive years and prices are expected to be hiked for the first time since 2019.
American pharmacy giant Pfizer has more than doubled its forecast for Covid-19 vaccine sales to $ 36 billion this year and expects strong activity next year as well as booster shots and injections for children roll out. One analyst said: “Pfizer is already dominating the Covid vaccine race and is expected to consolidate its position in the coming months. They consistently outnumbered their rivals, and they did everything without tangible government support – hats off. ”
Coal miners are taking advantage of soaring prices for thermal coal, which is used in power plants to generate electricity. Shareholders of some companies can expect big profits this year and possibly in the future, as demand in Asia strengthens and banks refuse to fund new coal mines. Rising oil and gas price propelled a sharp rise in quarterly profits at BP. “When the market is strong, when oil prices are strong and when gas prices are strong, it’s literally a cash machine,” CEO Bernard Looney told the Financial Times.
Ernst and Young became the last of the major accounting groups to report gains from the wave of M&A activity as companies sought advice on reorganization in response to the pandemic. Its UK partners this year received a record share of the profits of £ 749,000 each.
The world of work
Would a puppy party tempt you to return to the office? The new edition of our work it podcast deals with the weird and wonderful world of employee benefits.
And if puppies aren’t your thing, how about a cute rooftop garden? Joshua Chaffin takes a look at how companies like Google design workplaces to help people connect with nature.
As a reader of Road to Recovery, you are undoubtedly familiar with the effects of shortage of truck drivers. But could you cut it as a trucker? UK Chief Correspondent Daniel Thomas climbs into the passenger seat for a 13 hour shift.
Covid cases and vaccinations
Total global cases: 246.7m
Get the latest global image with our vaccine tracker
Thinking of a fall break? Check out our Globetrotter city guides covering everything from where to find the best pasta in London to the best places in Rome for live music.
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