The coronavirus is muddying the outlook for London’s second-biggest airport.
Richard Branson’s Virgin Atlantic Airways Ltd. became the latest carrier to back away from London Gatwick, saying Tuesday it will shutter its operation at least temporarily to focus on the much larger Heathrow.
Business was booming before the health crisis crushed demand and prompted groundings of entire airline fleets. Gatwick, traditionally a hub for the leisure set, had aspired to snag some of London Heathrow’s full-service passengers. Owner Vinci SA is seeking to convert an emergency runway for regular use, while Heathrow has also targeted expansion.
Read more: Virgin Atlantic to Cut Third of Its Workforce, Quit Gatwick
With operations by IAG SA-owned British Airways and trans-Atlantic specialist Virgin Atlantic now in doubt, Gatwick will be forced to evolve with more services focused on the low-cost end of the marketplace, said Peter Morris, chief economist of Ascend, which tracks air travel.
Low-Cost Reliance
London Luton-based Easyjet Plc, the biggest operator at Gatwick, may decide to locate more services there in the aftermath of the lockdown, he said, as could discount giant Ryanair Holdings Plc, which has its main hub at Stansted, north of the capital.
“With excellent access for catchment to London and the South East, Gatwick is better placed than Luton or Stansted to meet recovering passenger demand,” Morris said. “It could be the case that Ryanair and Easyjet choose to concentrate more services there, at the expense of the other two—although airport charges may be an issue.”
Traffic at Gatwick fell 23% to 7.5 million passengers in the first quarter. The airport has put over 90% of eligible staff on a U.K. furlough plan and is considering permanent reductions, it said last month.
Second Runway
Still, its expansion plans are proceeding. The airport moved a step closer to adding the second runway when the U.K. Civil Aviation Authority, in a decision published this month, said that the proposal wouldn’t require any changes to airspace use. The decision doesn’t authorize the start of physical works or dual-runway operations.
Read more: London’s Crowded Gatwick Hub Plans Flights From Emergency Runway
The decision by Virgin to retain its slots at the airport is an indication of Gatwick’s competitiveness, Vinci said Wednesday.
“We remain confident in the desire of our clients to remain mobile and the perspective of a rebound in traffic when confinement and border restrictions are lifted,” Vinci said in a statement.
The French builder paid $3.7 billion in December 2018 to acquire control of Gatwick, currently the world’s second-busiest single-runway airport.
Norwegian Air plans to ground its fleet of 787 Dreamliners that serves U.S. cities such as Los Angeles and New York until next year. The struggling airline this week won shareholder approval for a debt-to-equity swap and share sale that’s aimed at unlocking a state bailout that would get it through the next several months.
Recovery Timing
The airline industry may lose $314 billion in revenue this year because of travel shutdowns and increasing toll on the global economy, the International Air Transport Association has forecast.
Morris expects a recovery to be “pushed further and further out into 2021.”
Gatwick established itself as Britain’s chief leisure hub with the rise of the package holiday in the 1960s and 1970s through carriers including Dan Air and British Caledonian.
British Airways became a major player at the airport with the purchase of BCal in 1987, and from the 1990s began to build it into a secondary hub, albeit with a leisure focus.
