Airlines can’t recover until people start traveling like normal
Airlines can’t recover until people start traveling like normal
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.
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