The economic impact of the Coronavirus lockdown paints a bleak picture for businesses everywhere. For many sectors, the end of domestic restrictions will herald the start of a gradual recovery. Airlines are less optimistic, though. While we may regain the freedom to move around our towns and cities, restrictions are unlikely to be lifted on international travel. Airline recovery plans extend well into 2023. Coronavirus has sent London Gatwick Airport into an unprecedented spiral. Already reeling from a collapse in passenger numbers, it has now taken a couple of serious blows by major airlines. So, what’s likely to happen to Europe’s busiest single runway airport?
Excess capacity at Heathrow
Heathrow has long been the main UK base for British Airways and Virgin Atlantic. With Heathrow previously operating at capacity and slots at a premium, both airlines used Gatwick as a significant overspill for their operations.
Since flight movements dropped in March 2020, excess capacity has been created at all airports, including Heathrow. Seeing the opportunity to consolidate operations at a single airport, BA and Virgin moved their aircraft and crew over to Heathrow. This effectively closed operations for the two airlines at Gatwick.
Protecting valuable take-off/landing slots
In the UK, rules were imposed on airlines by regulators that forced them to use their valuable take-off and landing slots at Heathrow. If an airline didn’t regularly use a slot it owned, the regulator could take it off them. This policy prevented airlines buying slots, but not operating them, simply to stop competitors having them. During the pandemic, the “use it or lose it rules” were suspended. This stopped airlines having to fly empty aircraft, fearful of otherwise losing their slots.
As aviation recovers, the policy on slot usage will need to be reinstated, or unfair practices may creep in. When this happens, we can expect all airlines operating at Heathrow to defend their slots. For BA and Virgin, this will mean ensuring their flight schedule fills slots at Heathrow ahead of Gatwick. Where a flight can be operated at Heathrow, Gatwick will lose out.
North Terminal closed
Gatwick closed the North Terminal on 1st April 2020. Virgin Atlantic, Emirates, and Qatar Airways all operated flights at North Terminal before its closure. With travel bans at home and abroad, the three airlines suspended flights in and out of Gatwick. This left the terminal deserted. Other airlines choosing to operate were moved to South Terminal, before the airports operators locked the doors. At the same time, Norwegian suspended its flights from South Terminal, creating plenty more space.
British Airways switched to operating its Gatwick flights from South Terminal in 2017. Should BA resume operations at Gatwick, it will be able to use its dedicated check-in areas and lounges without any challenges.
Virgin closing Gatwick operations
On 5th May 2020, Virgin Atlantic announced it would be making 3,000 of its staff redundant and permanently closing its Gatwick operations. Its UK flight operations now focus on London and Manchester. On the same day, the airline also announced it would immediately retire its 7 remaining 747-400 aircraft.
Virgin has been at Gatwick since 1984, so its departure will be a huge blow to joint owners VINCI Airports and Global Infrastructure Partners (GIP).
This isn’t the full story, though. Hidden in the announcement was a small remark that could hint at a more positive outcome for the Virgin-Gatwick relationship. Virgin said they intend to keep their take-off and landing slots at Gatwick, at least for the foreseeable future. Whether they continue to retain the slots once “use it or lose it” regulation returns will be telling.
Airport management will be considering all options to retain Virgin operations. Favourable terms may be offered, once the threat posed by Coronavirus passes and London Gatwick Airport can ramp-up capacity.
BA hints it may not resume Gatwick operations
On 28th April, BA announced it may need to make 12,000 employees redundant. It also suggested it may never be able to resume operations at London’s Gatwick Airport.
That position was somewhat contradicted by IAG boss Willie Wash, when he gave evidence to a committee from the UK parliament on 11th May. He said he saw a future for BA at Gatwick, perhaps hinting that a deal could be done. Controversially, he went on to say that Gatwick airport was better than Heathrow and had a better management team. He also said the airport had an “attractive customer base” – tourists traveling to a variety of short-haul and long-haul holiday destinations. This is a slightly different segment to Heathrow, which sees a higher proportion of business travellers.
We think it’s highly unlikely BA will give up a substantial number of its slots at Gatwick. If they retain slots, that’s a strong indication of their future intention to return.
Competition from Amsterdam, Frankfurt and Paris
While London’s airports are largely closed for business, the race is on across Europe to be the first to reopen transport hubs. Amsterdam, Frankfurt and Paris will be acutely aware of first-mover advantage. If they can reopen full operations ahead of London, they will be well-placed to land extra flights that would’ve been bound for Gatwick and Heathrow. Airlines will have plenty of redundant capacity in their fleets, so will happily add flights to meet demand.
Single terminal Gatwick for several years?
Whether Gatwick reopens its North Terminal depends on a number of factors, many of which are outside of the airport’s control.
Until BA restores its normal flight schedule, there will be plenty of capacity at its South Terminal home for other airlines. There would be no rush to reopen North Terminal if BA doesn’t return to Gatwick or, more likely, only runs a small percentage of flights for a prolonged period of time. Airlines displaced from North Terminal continue to fly from South Terminal indefinitely.
Virgin Atlantic’s permanent departure from Gatwick leaves a massive gap in the occupancy rate of North Terminal, its former home. With the terminal’s other major occupants – Emirates and Qatar Airways – no longer flying to the airport, there’s little reason for it to reopen in the foreseeable future.
Third Runway at Heathrow unlikely to happen?
We recently commented on further delays to the long proposed 3rd runway at Heathrow. In a bitter-sweet twist for Gatwick, it’s looking even less likely that building work for Heathrow’s new runway will get the go ahead. With so much excess capacity now created in the south east of England, lawmakers and aviation regulators will be pressured to reverse approvals made in the preceding years. The third runway could be delayed, or even cancelled.
The cancellation of the third runway project at Heathrow could provide a boost to Gatwick. It could see increases in traffic as Heathrow is unable to expand. There’s even the possibility it could
While the effects of Coronavirus have hit London Gatwick airport hard, the future of the airport is assured by the UK’s thirst for travel. After a year of single terminal operations, we think it’ll return to previous passenger numbers and may even benefit from changes in attitude towards aviation expansion. With Heathrow certain to return to full capacity, Gatwick’s recovery will follow.