The Latest News by Region

North America

• Delta and WestJet received U.S. DOT approval to proceed with their planned joint venture. But it comes with caveats. WestJet’s lower-cost Swoop unit cannot be part of the agreement. The two carriers must surrender eight roundtrip slots at New York LaGuardia through a blind auction sale — new entrants or carriers with a limited LaGuardia presence will be eligible buyers. In addition, WestJet must be open to interlining with other U.S. airlines for at least the next five years. The competitive impact of the JV, meanwhile, will be subject to a DOT review every five years, though the carriers won’t have to reapply for extension. Together,
  
  Delta and WestJet have a 27% share of all U.S.-Canada transborder capacity. That’s still considerably less than Air Canada’s 45%, which would go to 57% with United. The two have a joint venture covering transatlantic itineraries but never developed one for the transborder market. Delta and WestJet began codesharing in 2011, with WestJet more recently dumping American as a partner.
  
  One oddity about the transborder market: U.S. LCCs are largely absent: Southwest doesn’t serve Canada. Neither does Spirit nor JetBlue nor Allegiant nor Sun Country. The exception is Frontier, with a lone Denver-Calgary route. Of course, U.S. LCCs do carry Canadians crossing the border to catch flights at airports like Buffalo, Plattsburgh, and Bellingham, just south of Toronto, Montreal, and Vancouver, respectively.  

• In a letter to employees, Delta CEO Ed Bastian explained that because of its load factor caps and middle seat blocks, the airline actually had 30% less capacity for sale than its three largest rivals last quarter. Even so, it produced 3% more passenger revenue, a testament to Delta’s ability to extract yield premiums even during the crisis. Bastian added that rates of cash burn are less severe at Delta than at major global competitors, and that cash flows from flying should turn positive sometime next spring. He points out that Delta, United, American, and Southwest combined have raised almost $100b in new cash since the start of the pandemic. The letter includes a plea to vote in Tuesday’s election, evoking words of the late Georgia Congressman John Lewis: “Your vote is precious, almost sacred.”   

• If vaccines are the ultimate salvation, airlines see testing as the next best thing to reviving normality in the age of Covid. United said last week it will trial free same-day Covid testing for passengers travelling on specific flights from Newark to London Heathrow between Nov. 16 and Dec. 11. Passengers can opt out of the testing by selecting a different flight. The point is, everyone aboard the targeted flights — and public health officials in the U.K. — can rest assured that everyone on board is Covid-free. That’s of course assuming 100% accuracy, which has been an issue with the sort of rapid-results test United is using. But the technology has improved.
  
  Governments aren’t yet fully convinced, which is why quarantines remain a primary if blunt and costly tool to avoid importing the virus from abroad. A little bit more about United’s trial: Passengers traveling on the targeted flights need to make a testing appointment, and have the test administered at least three hours before the flight. The testing site, run by Premise Health, is located near one of United’s lounges in Newark airport. Results are returned in roughly 30 minutes.

• Amazon, one of America’s largest spenders on air travel, said during its earnings call that it’s saved nearly $1b on travel this year. How much did it lose by not being able to send employees to meet with potential clients? That, it didn’t say. 

• After shrinking an annualized 31% in Q2, the U.S. economy rebounded to grow 33% in Q3. So concludes the Bureau of Economic Analysis, part of the U.S. Commerce Department, in an initial estimate of the country’s gross domestic product (GDP). Still, the economy remains about 4% smaller than it was this time last year. Certain parts of the economy remain strong, led by anything pertaining to houses and the things people do inside houses. That means residential real estate itself, technology that facilitates work from home, home entertainment products like video games and streaming video, supermarkets selling food consumed at home, furniture for the home, home exercise equipment, and so on.
  
  Auto sales are bouncing back nicely after a Q2 shock. Many businesses that were locked down in Q2 reopened in Q3. Non-urgent medical procedures deferred in Q2 were undertaken in Q3. Though government stimulus checks and generous unemployment benefits stopped in Q3, the money was still getting spent. The finance sector is doing fine. The energy sector less so. State and local governments are hurting. But worst hit is the labor-intensive travel market, and the leisure and hospitality market more generally.

U.S. Airlines Earnings

Sub-Saharan Africa

• South Africa’s fiscally strained government controversially authorized more than $600m in new funding for its national airline last week. It was hoping to find outside investors to do the dirty work but hopes dimmed when Ethiopian Airlines failed to bite. South African Airways (SAA), bankrupt before the Covid crisis ever began, plans to revive as a much smaller airline. Its fleet will go from 44 planes to six. Its staff will shrink by some 80%. The hope is that growth can be restored over time.
  
  In the meantime, rival Comair (a British Airways partner) secured the necessary financing and union agreements to itself exit bankruptcy. There’s now reports of another carrier, startup Lift Airlines, jockeying to enter the market. It’s backed by a former Comair CEO who founded the carrier’s LCC unit Kulula. SAA by the way, is still grounded but its own LCC unit Mango is flying again.