Issue No. 766
Flight Path Unknown
Pushing Back: Inside This Issue
The carnage is now plain to see. Some of the largest airlines from the U.S., China, Japan, and Europe showed just how much money the wicked coronavirus is bleeding from their coffers. A few like Southwest and Japan Airlines escaped the ugly first quarter with negative operating margins in the single digits. Others had a much bloodier story to tell.
The horror show began in China first, robbing airlines of their normally lucrative Lunar New Year profits. Their only consolation, perhaps, is the notion of what starts first should end first. There is, in fact, evidence of modest demand recovery. But it’s domestic only, and a far cry from where things will need to be for carriers to make money again.
The most comforting aspect of the moment for U.S. airlines is the extended period of survival they’ve guaranteed themselves, by borrowing billions, slashing costs, selling assets, and successfully lobbying for government aid. Bookings are a bit better than their low point a few weeks ago. But everyone agrees: Full recovery will be measured in years, not weeks or months.
They won’t get any arguments from Europe. There, Finnair’s heavy China exposure triggered early alarms. IAG didn’t wait for its earnings release to share gory Q1 figures. As its British Airways unit joins SAS and others in prepping unions for big job cuts, Lufthansa is fending off government attempts to drive a hard bargain — Berlin wants a big slice of the company in exchange for any aid. Norwegian, meanwhile, got bondholder buy-in, in advance of a fateful meeting of shareholders this week. If that’s all not enough to exhibit the gravity of the crisis, consider this: Ryanair — the always profitable Ryanair — warned of losses this spring and summer.
Will there be any summer travel, which so many economies, let alone airlines, depend on for sustenance? Add that to the many questions the world still faces as it fights the twin evils of pandemic and recession.
Verbulence
"The virus will be defeated. There will be recovery. We just don't know when. "
United President and soon-to-be CEO Scott Kirby
Mondays With Skift Airline Weekly
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Earnings
January-March 2020 (3 months)
- American: -$2.2b/-$1.1b*; -16%
- United: -$1.7b/-$639m*; -11%
- Southwest: -$94m/-$77m*; -3%
- All Nippon: -$539m/-$579m*; -15%
- Japan Airlines: -$210m/-$176m*; -7%
- Air China: -$802m/-$945m*; -24%
- China Eastern: -$599m/-$760m*; -31%
- China Southern: -$859m/-$955m*; -24%
- Hainan Airlines: -$947m/-$1b*; -77%
- Juneyao/9Air: -$71m/-$81m*; -18%
- Spring Airlines: -$33m/-$52m*; -17%
- Finnair: -$158m; -16%
- Cebu Pacific: -$23m/-$8m*; -4
October-December 2019 (3 months)
- Hainan Airlines: $7m/-$86m*; -11%
- Spring Airlines: $17m/-$81m*; -16%
Net result in USD/*Net result excluding special items/ Operating margin