COVID-19

Airlines face their ‘darkest time’ because of COVID-19

Jack Stewart Apr 21, 2020
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Demand for air travel has taken a nosedive amid the coronavirus lockdown. Justin Sullivan/Getty Images
COVID-19

Airlines face their ‘darkest time’ because of COVID-19

Jack Stewart Apr 21, 2020
Demand for air travel has taken a nosedive amid the coronavirus lockdown. Justin Sullivan/Getty Images
HTML EMBED:
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The travel industry has been hit hard by the movement restrictions imposed to help control the spread of COVID-19. This week we’re hearing more about just how bad it is for the airlines and what they’re doing to try to weather this downturn.

United revealed Monday it lost $2.1 billion in the first quarter of this year. Delta, Southwest and American are expected to release their numbers this week.

The federal CARES Act set aside $25 billion for passenger airlines, but that will only keep them going for so long. 

The International Air Transport Association, or IATA, said the shutdown due to the coronavirus is worse for plane travel than any previous event, including 9/11 and the Great Recession of 2008. 

“It’s the industry’s darkest time,” said Perry Flint, a spokesperson for IATA. He said globally, demand will be down 48% for the whole year compared to 2019.

“And passenger revenues will be down $314 billion,” Flint said.

Airlines in the U.S. have started to agree upon conditions for getting billions of dollars in government support. The Treasury Department sent the first $2.9 billion out on Monday. Richard Aboulafia, aviation analyst at Teal Group, said that will tide airlines over, for a while. 

“They look like they’re in good shape for a few months, but of course there are going to be big questions after that if you don’t see additional tranches of assistance,” he said.

Airlines have a lot of fixed costs like payments on leased aircraft, terminals and maintenance facilities, Aboulafia said. The federal money comes with the condition that it’s used to pay employees and not furlough anyone until September 30. 

Dawna Rhoades, professor of strategy at Embry-Riddle Aeronautical University, said airlines are anticipating having to make cuts to schedules, and that could mean layoffs later.

“If they have fewer aircraft, they need fewer pilots and they need fewer flight crews and all the people who support those aircraft,” Rhoades said.

Like the rest of the economy, the airline industry is waiting to see how deep this downturn goes and what the recovery looks like. 

COVID-19 Economy FAQs

How many people are flying? Has traveled picked up?

Flying is starting to recover to levels the airline industry hasn’t seen in months. The Transportation Security Administration announced on Oct. 19 that it’s screened more than 1 million passengers on a single day — its highest number since March 17. The TSA also screened more than 6 million passengers last week, its highest weekly volume since the start of the COVID-19 pandemic. While travel is improving, the TSA announcement comes amid warnings that the U.S. is in the third wave of the coronavirus. There are now more than 8 million cases in the country, with more than 219,000 deaths.

How are Americans feeling about their finances?

Nearly half of all Americans would have trouble paying for an unexpected $250 bill and a third of Americans have less income than before the pandemic, according to the latest results of our Marketplace-Edison Poll. Also, 6 in 10 Americans think that race has at least some impact on an individual’s long-term financial situation, but Black respondents are much more likely to think that race has a big impact on a person’s long-term financial situation than white or Hispanic/Latinx respondents.

Find the rest of the poll results here, which cover how Americans have been faring financially about six months into the pandemic, race and equity within the workplace and some of the key issues Trump and Biden supporters are concerned about.

What’s going to happen to retailers, especially with the holiday shopping season approaching?

A report out recently from the accounting consultancy BDO USA said 29 big retailers filed for bankruptcy protection through August. And if bankruptcies continue at that pace, the number could rival the bankruptcies of 2010, after the Great Recession. For retailers, the last three months of this year will be even more critical than usual for their survival as they look for some hope around the holidays.

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