Issue No. 762
'Aviation's Darkest Hour'
Pushing Back: Inside This Issue
The questions are more numerous than the answers. Will warm weather stunt the spread of Covid-19? Can victims be re-infected? When, if ever, can the world produce and administer a vaccine? How fast before the population develops herd immunity? Can improved testing capabilities allow more people to go back to work? Will the virus do to other cities what it’s done to places like Wuhan, Milan, and New York? Can hospitals cope? How many more people will die? How long before the world can return to everyday life again?
The economic questions are just as profound. Is the world experiencing something akin to a Great Depression? Can it recover quickly once the virus subsides and restrictions on movement are lifted? And how about air travel? How long can airlines survive under current conditions, even with government help? Is there a chance demand snaps back before the end of 2020? Or will demand remain depressed for years?
It’s a frightening time for everyone, not least the millions upon millions of people whose livelihoods depend on a functioning airline industry. Right now, there essentially is no airline industry. China’s largest airlines sound optimistic, but in a vague way. They gave no hard data about current yields, loads, or forward bookings, discussing only developments in 2019. Boy, does that seem like ages ago.
It’s safe to conclude, however, that even domestic demand in China (forget about international) is not even close to anything resembling normal yet. In the meantime, Boeing got its first taste of altered customer sentiment — a major lessor just cancelled a large number of MAX orders. American began tearing down its summer schedules, resigned to the reality that peak summer season is already a lost cause. Like other U.S. carriers, it’s now applying for federal aid money, with uncertainty still lingering about whether Uncle Sam will ask for an ownership stake in exchange.
Airlines elsewhere continue to ask their governments for more help. A gusher of cash is pouring from airline coffers. New revenues are negligible. Fixed costs remain. Many customers want cash refunds. What a first quarter it was.
But at least it’s over — the first quarter, that is. The second quarter starts with a few hopeful signs, including a slowdown in new Covid cases in Italy, Spain, and New York. Time, comfortingly, is working against the virus; as each week passes, testing improves, hospital preparedness improves, scientific understanding of the virus improves, and — hopefully — prospects for a successful vaccine improve. But it’s hard to see any light at the end of the runway just yet.
Verbulence
"The most difficult and arduous stage has passed… The impact of the epidemic is short-term and generally controllable... "
Statement from China Southern
Earnings
October-December 2019 (3 months)
- Air China: -$50m/-$197m*; 0%
- China Eastern: -$184m; -$465m*; -12%
- China Southern: -$209m; -$379m*; -6%
- Cebu Pacific: $46m; 13%
- Garuda: -$116m; -$98m*; -9%
- This post has been updated with China Southern's data.
Net result in USD; operating margin
*Net profit excluding special items (all operating figures exclude special items)