Uncle Sam to the Rescue

Pushing Back: Inside This Issue

The counterattack is underway. Governments around the world are spending trillions of dollars to cushion their economies from the wrath of Covid-19. In the U.S., the rescue mission will cost a mammoth $2t, with $50b of that allocated for airlines rocked by a near-shutdown of the entire travel sector.

Will it be enough? That depends on how long the crisis lasts and when people start travelling again. Across the industry, some like Ryanair are optimistic — the experience in China suggests a three-month period before the virus is contained, it says. Others like Air New Zealand are more pessimistic, worrying the industry might never be the same. Some, meanwhile, are better positioned than others to endure a long road back to healthy travel demand. U.S. carriers have their government money and their intact borrowing capacity. Singapore Airlines just received massive financial support from its government. Qantas, with much less taxpayer support but a war chest of cash, is gutting its cost base while planes sit idle.

Public support for Europe’s airlines has thus far been uneven. U.K. carriers are begging London to do more. On the other hand, some of the most vigorous rescue efforts have involved desperate cases like Alitalia and Norwegian. China, which is subsidizing international flights and waiving various fees and charges, is the market everyone is watching. Covid containment efforts there appear to have worked well, leading to a gradual recovery of economic activity, including air service. This week, Chinese airlines will report their fourth-quarter financial results, perhaps shining more light on just how durable the recovery there is.

Verbulence

"These are uncertain times, and our challenge is to hold on to as much cash as we can so that if this goes beyond three months, that we are a winner on the back side of this."

Azul CEO John Rodgerson

Earnings

• EVA Air: $32m; 5%
• China Airlines: -$24m; 0%

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