Issue No. 758

The Corona Crunch

Pushing Back: Inside This Issue

It’s not just a problem for Chinese airlines anymore. Or just airlines in Asia. The Covid-19 virus outbreak is now obliterating demand for travel across the entire world. Suddenly, airlines even hearty and healthy just a week earlier find themselves burning through cash as planes to cities like Milan and Seoul run empty, and as ticket sales evaporate. For the already distressed, the virus could prove lethal, as it already has for one small U.K. carrier: Flybe.

There’s still a chance for the industry to surmount the crisis with just some first and maybe second quarter bruises, if the outbreak slows and life returns to normal by early summer. Perhaps it’s just airline demand delayed, not destroyed. China, it seems, shows some faint signs of a rebound. But right now, the world is a scene of cancelled business meetings, cancelled trips, panicked travelers, government travel warnings, disrupted economies, and tanking stock markets.

And events are moving fast — just as Skift Airline Weekly is preparing to publish, Air New Zealand is scrapping its financial guidance, Korean Air is expressing concerns about its survival, JetBlue is announcing emergency measures to preserve cash, and oil prices are taking another huge tumble. Financial markets open the week in disarray.   

Airlines like Turkish, Thai, and Aeroflot, all with significant exposure to China, gave their latest assessments of the damage the virus is inflicting. This week, Cathay Pacific reports financial results. And U.S. carriers will provide more commentary at a JPMorgan investor event in Atlanta. Assuming that is, it isn’t cancelled.

Verbulence

The world is facing a huge challenge to prevent the spread of COVID-19 while enabling the global economy to continue functioning. Airlines are on the front line of that challenge and it’s essential that the regulatory community work with us to ensure airlines are able to operate in the most sustainable manner, both economically and environmentally, to alleviate the worst impacts of the crisis.

IATA Director General Alexandre de Juniac

Earnings

  • October-December 2019 (3 months)
  • Turkish Airlines: $336m/$28m*; 4%
  • LATAM: $227m; 12%
  • Thai Airways: -$30m; -1%
  • Aeroflot: -$107m; -8%
  • Air Mauritius: $9m; 1%

Net result in USD; operating margin
*Net profit excluding special items (all operating figures exclude special items)

Covid Crisis 2020

As late as Jan. 17, IATA expected worldwide airline profits to top $29b this year, with an operating margin close to 6%. The optimism extended even to Asian carriers, which IATA thought would benefit from easing trade tensions between the…

Weekly Skies

Through the first nine months of 2019, Turkish Airlines displayed its usual seasonality: Terrible Q1 losses, followed by a decent spring and robust summertime profits. Yet all throughout, its results were sharply down versus prior-year levels. The reasons: Turkey’s troubled…

Sky Money

Flybe became the first airline casualty of the Covid-19 public health emergency — the carrier ran out of funds and filed for bankruptcy on March 5. It entered the crisis on extremely shaky ground, unable to find a profitable business…

Fleet

Needless to say, the spreading Covid-19 outbreak was the dominant topic of discussion at the ISTAT Americas conference in Austin, Texas, last week. The more pessimistic attendees pointed to China’s massive demand destruction in February, severe traffic declines in markets…

State of the Unions

Australia’s Jetstar ended a simmering labor dispute with ground workers by reaching a new deal, which the union says members were “blackmailed” into taking. It provides 12% pay raises over four years and changes to scheduling and work hours. But…

Landing Strip

Finally, after years of delay, Berlin’s new Brandenburg airport will open. Lufthansa, Germany’s largest airline, said it will start transferring flights from Tegel airport on Oct. 31 (happy Halloween!), with Tegel operations stopping completely on Nov. 7. The city’s busiest…

Distribution

Virus fears are reaching even Latin America, about as distant as you can get from Wuhan. Despegar, a leading online travel retailer in the region, expressed concern in its latest earnings call about two second-order effects. One is what the…

Marketing

Airlines around the globe are responding in many ways to the current demand crisis: they’re cutting capacity, cutting budgets, grounding planes, deferring capex, postponing aircraft deliveries, freezing employment, suspending ticket restrictions, and so on. AirAsia X is doing a lot…

Routes and Networks

Volotea is quietly operating under the radar, a European carrier focusing mostly on smaller cities that larger carriers ignore. Its latest move involves Spain, where it pledges to open two to four new bases next year. Why Spain? Because of…

Feature Story

A blessing in disguise? Throughout 2019, airlines struggled mightily with an aircraft shortage. Now, with worldwide traffic demand in freefall, not having all those additional aircraft might be a good thing.