Airlines can’t recover until people start traveling like normal
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These are really dark days for airlines, says Richard Aboulafia, an aviation analyst at Teal Group.
“Just like the rest of the economy, the airlines are effectively in a medically induced coma,” Aboulafia said.
Airlines are starting to receive government money: $25 billion is earmarked for grants and loans that require companies not to furlough or lay off workers. But Peter McNally, at investment research firm Third Bridge, says the airline’s losses this quarter show just how big their cash needs are.
“While the government funds were good and helpful, there’s still the uncertainty as to when we’re going to get back, and how long the government-provided liquidity will last,” McNally said.
Airlines are also turning to banks for loans, and selling aircraft and leasing them back to raise funds.
Delta is closing lounges, reducing hours, parking planes and cutting advertising. It says that will help it reduce its cash burn from $100 million a day to $50 million.
Delta CEO Ed Bastian, told investors on the company’s earnings call that it could be up to three years before it sees a sustainable recovery.
“The truth is, our recovery will be dictated by our customers feeling safe, both physically and financially, to begin to travel at scale,” Bastian said.
There’s a cautionary note on that consumer confidence from a new survey of fliers conducted by the International Air Transport Association.
Spokesperson Perry Flint says 60% of travelers said they’d go back to flying within a couple of months.
“But 40% indicate they could wait six months or more, and 69% indicated they could delay a return to travel until their personal financial situation stabilizes,” Flint said.
He says that in China, air travel has recovered slightly now that movement restrictions have been eased, but it’s still at a much lower level than before the pandemic.
COVID-19 Economy FAQs
Will the federal government extend the extra COVID-19 unemployment benefits?
It’s still unclear. Congress and President Donald Trump are deciding whether to extend the extra $600 a week in unemployment benefits workers are getting because of the pandemic. Labor Secretary Eugene Scalia believes the program should not be extended, and White House economic adviser Larry Kudlow said the additional money is disincentivizing some workers from returning to their jobs. Democrats want to keep providing the money until January.
As states lift restrictions, are people going back to stores and restaurants?
States have relaxed their restrictions, and many of us have relaxed, too. Some people have started to make exceptions for visiting restaurants, if only for outdoor dining. Some are only going to places they trust are being extra cautious. But no one we’ve talked to has really gone back to normal. People just aren’t quite there yet.
Will surges in COVID-19 cases mean a return to lockdowns?
In many areas where businesses are reopening, cases of COVID-19 are trending upwards, causing some to ask if the lockdowns were lifted too soon, and if residents and businesses might have to go through it all again. So, how likely is another lockdown, of some sort? The answer depends on who you ask. Many local officials are now bullish about keeping businesses open to salvage their economies. Health experts, though, are concerned.
You can find answers to more questions here.
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