COVID-19

Airlines can’t recover until people start traveling like normal

Jack Stewart Apr 24, 2020
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A Southwest Airlines flight takes off as United Airlines planes sit parked on a runway at Denver International Airport. Michael Ciaglo/Getty Images
COVID-19

Airlines can’t recover until people start traveling like normal

Jack Stewart Apr 24, 2020
A Southwest Airlines flight takes off as United Airlines planes sit parked on a runway at Denver International Airport. Michael Ciaglo/Getty Images
HTML EMBED:
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Delta and United have posted their first quarterly losses in more than five years. Later Friday, American Airlines is expected to report heavy losses, as well.

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

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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