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COVID-19

How possible is a major airline failure due to COVID-19?

Andy Uhler May 12, 2020
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United Airlines planes sit parked on a runway in Denver in April.
COVID-19

How possible is a major airline failure due to COVID-19?

Andy Uhler May 12, 2020
Heard on:
United Airlines planes sit parked on a runway in Denver in April.
HTML EMBED:
COPY

Boeing CEO Dave Calhoun told NBC’s “Today” show that he believes it’s “likely” that a major U.S. carrier will go out of business this year. After making that prediction (and adding he didn’t want to “get too predictive on the subject”), Boeing’s spokespeople downplayed the statement, insisting Calhoun was simply speaking to general uncertainty in the sector. But those are big words coming from a guy whose company sells planes to airlines. Given current market conditions, is there a chance that might happen?

According to the trade group Airlines for America, passenger traffic at airports is down more than 90%.

“Airlines are the caboose on the economic train. The economic train stopped, they got stopped,” said Michael Boyd, president of Boyd Group International, an aviation consulting firm headquartered in Evergreen, Colorado. “How they come back and where they come back will depend on how the economy comes back, and the shape the economy comes back in.”

Southwest Airlines said that it is expecting to lose $30 million to $35 million per day right now. American said it’s trying to cut its losses to $50 million a day by next month.

Rob Mark, a commercial pilot and aviation industry blogger, said most airlines are worried about having enough cash on hand to make good on lease payments at airports.

“Some airlines are stronger than others. And although we thought we would have no more mergers after the last round, I think we’re going to find that somebody is going to fail,” Mark said.

And if there is consolidation, Mark said it will eventually mean more expensive airfares. Gary Leff of the travel blog View From the Wing, said that could be compounded by pressure to accommodate more room between passengers on flights because of COVID-19.

“Dividing that space among fewer passengers is going to mean both actually fewer flights and an average higher average fare,” Leff said.

Last month, some airlines started getting federal grants and loans as part of the Coronavirus Aid, Relief and Economic Security Act. Those were meant to allow them to pay employees through the end of September. A clearer sense of where the industry is headed should emerge once that funding runs out.

COVID-19 Economy FAQs

What’s the outlook for vaccine supply?

Chief executives of America’s COVID-19 vaccine makers promised in congressional testimony to deliver the doses promised to the U.S. government by summer. The projections of confidence come after months of supply chain challenges and companies falling short of year-end projections for 2020. What changed? In part, drugmakers that normally compete are now actually helping one another. This has helped solve several supply chain issues, but not all of them.

How has the pandemic changed scientific research?

Over the past year, while some scientists turned their attention to COVID-19 and creating vaccines to fight it, most others had to pause their research — and re-imagine how to do it. Social distancing, limited lab capacity — “It’s less fun, I have to say. Like, for me the big part of the science is discussing the science with other people, getting excited about projects,” said Isabella Rauch, an immunologist at Oregon Health & Science University in Portland. Funding is also a big question for many.

What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?

Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”

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