Issue No. 770
Latam: The Biggest Bankruptcy Yet
Pushing Back: Inside This Issue
The month of May, to the great relief of airlines, was considerably better than April. June and July are trending better too as cancellation rates drop, bookings increase, and flights resume. The recovery will be long. But it’s now underway.
With massive amounts of government aid — Lufthansa just got a big dose — some airlines won’t have to worry about bankruptcy. Others like Latam weren’t so lucky. In the U.S., American even raises the prospect of making money next year, which doesn’t sound all that crazy in light of the massive cost- and capacity-cutting underway. Revenues thus won’t have to be strong, or anything even close to it. Keep in mind too that a vaccine might have solved the Covid problem by the end of 2021. Ironically, the mighty Delta, along with United, might be least well positioned to profit given their heavy intercontinental exposure. The action for now is domestic and shorthaul. Outside the U.S., easyJet is seeing shorthaul demand start to recover. Air New Zealand is seeing it. Chinese carriers are seeing it. And so on.
Any profits achieved in 2021, of course, will be bittersweet. Announcements last week by Delta, American, easyJet and others were reminders of all the aviation jobs that will disappear, in an industry becoming significantly smaller. Nor has the risk of further Covid outbreaks gone away. Far from it. Governments are not reopening borders in a coordinated way as IATA is asking. In the geopolitical realm, U.S. tensions are boiling. Within the U.S., there’s unrest in the streets, with a heated presidential election just months away. Economies across the world are experiencing depression-like conditions. Airlines themselves are racking up debt.
It’s getting less bad out there. But not yet close to good.
"What is certain is that we need to rethink our model, rethink our network, our markets, our services, our products and our customer relationships."Air France/KLM CEO Ben Smith
Mondays With Skift Airline Weekly
Join Airline Weekly Editor Madhu Unnikrishnan and Senior Analyst Jay Shabat to hear about Latam and what it might mean for the airline industry's web of alliances.
You can watch a recording of the livestream here.
February-April 2020 (3 Months)
- SAS: -$354m; -63%
January-March 2020 (3 Months)
- Latam: -$2.1b/-$318m*; 4%
- Turkish Airlines: -$327m; -12%
- Norwegian: -$345m pretax; -24%
January-December 2019 (12 Months)
- Kenya Airways: -$127m; -1%
*Net result in USD/*Net result excluding special items/ Operating margin
- As discussed in this week’s feature story below, South America’s Latam reported a massive Q1 net loss due to special accounting items. But its operating margin was positive 4%, which actually marked a y/y improvement. The company was scheduled to discuss the results in a conference call on June 1. But the call was cancelled after Latam filed for bankruptcy, the biggest filing yet of the Covid era.
The airline entered the crisis challenged by currency, cargo, debt, and other headwinds. But the tailwinds were just as significant, including lower fuel prices and bumper profits in the consolidated Brazilian domestic market. It was hopeful of greater international profitability as well, following its blockbuster alliance with Delta announced last fall. That alliance will remain a bedrock of Latam’s future strategy as it works to lower its cost base in bankruptcy.
- Turkish Airlines, which earned a modest 4% operating margin in 2019, is a highly seasonal airline that almost always loses money in the offpeak first quarter, even in good years. There’s nothing too alarming, therefore, about its negative 12% operating margin last quarter, which compares to its negative 7% margin in the same quarter last year. Revenues dropped 8% y/y as Turkish cut ASK capacity 10%. Operating costs declined only 5%.
Results for the current April-to-June quarter, unfortunately, will be alarmingly bad, as they will be for every other airline on Earth. The peak summer quarter will be bad too, though hopefully salvageable to some degree as Turkish resumes flying this month. Domestic flying will be first, initially from five cities this week (Istanbul, Ankara, Izmir, Antalya, and Trabzon). Next week, it plans to restart a few shorthaul international routes, though as of Sunday hadn’t yet said which ones. It only said they’d be destinations where the Covid outbreak is largely under control.
Turkey itself was late to see an outbreak, but then mostly commended for handling it well. The airline in fact hopes the experience will burnish Turkey’s image as a top spot for medical tourism. That’s for another day though. And it could be years, in management’s estimation, before the airline’s long-bustling sixth-freedom market returns to form. This refers to its transport of passengers from one foreign country to another via Istanbul, a city recognized for its strategic geographic centrality for centuries.
During its Q1 earnings call, management mentioned North America and Asia as its most profitable markets during normal times. So it will be keen to resume flying there as soon as possible. But longhaul markets, almost everyone in the industry concedes, will take longer than shorthaul to recover. The two are of course not mutually exclusive — a large portion of Turkish Airlines shorthaul passengers are connecting to or from a longhaul flight. Still, the carrier thinks it will be among the earliest to recover, based on expectations of an early return of vacationers to Turkey’s beaches (most of the country’s Covid cases have been in Istanbul).
Officials are eagerly reopening resort destinations like Antalya, balancing health concerns with Turkey’s heavy economic dependence on tourism. Foreign exchange troubles, meanwhile, continue to plague the country, but much less so its national airline, which generates a large majority of its revenues in euros, dollars, or dollar-linked currencies. The impact of forex movements on operating results was actually positive last quarter.
Importantly, Turkish entered the crisis with a significant cost advantage relative to European competitors. And it’s now lowering costs even more. It plans to negotiate longterm wage concessions with unions. Many of its workers are currently on unpaid leave or part-time employment. Labor costs could thus fall as much as 30% this quarter. Last quarter, it cut sales and marketing costs by 30%. Though it hasn’t received any meaningful direct government aid, Turkish is benefitting from sharp tax reductions and lower airport fees. It’s also freezing recruitment, cutting back airport project spending, and talking to Boeing and Airbus about delivery deferrals. Executives say they have enough cash to cover its needs through 2020 but are exploring additional ways to raise capital, including aircraft sale-leaseback deals. A key goal is to not have any layoffs this year or next.
One bright spot is cargo, which accounted for 18% of Q1 revenues. April and May cargo revenues were in fact up y/y on sharply higher yields. And low fuel prices are making cargo flights all the more profitable. They’re big cash generators too: $150m worth in both April and May. Turkish still intends to replace mainline flying at Istanbul’s Gökçen airport with low-cost flights operated by its wholly-owned subsidiary Anadolujet.
One concern is the domestic fare caps Ankara is imposing. But longterm, Turkish expects to emerge a winner from the pandemic as the crisis “eliminates insolvent players.”
Trouble Brews in Scandinavia
- Norwegian’s near-implosion is only small consolation for SAS, which itself is in trouble. The carrier reported an ugly negative 63% operating margin for its fiscal quarter covering the months of February, March, and April. During the latter half of that period, demand was all but nonexistent. April ASK capacity decreased 95% y/y. For the entire three months, ASKs were down 47%. More than 90% of employees are on temporary leave. It’s the first gory look at Covid’s impact on airline finances for a period that includes April, with other airlines having reported results only through March.
SAS, remember, was a weak airline even before the crisis. It made money in 2019, but not much (a 2% operating margin). Momentum was building as Norwegian’s downsizing and Europe’s MAX and NEO shortages lifted unit revenues. But Nordic currency weakness was a big drag, and chronic strategic shortcomings like lack of longhaul heft and undersized hubs persisted. The only real bright spots now are cargo and some government travel in Norway.
Things should get somewhat better this summer; SAS sees enough positive demand trends to double its aircraft in service by the middle of this month. That’s still just 30 planes, flying to selected destinations within Scandinavia and to points in greater Europe and the U.S. But the weak Norwegian and Swedish currencies remain a major problem (Denmark’s krone has been more stable). Hedges are another pernicious problem, and the combined impact of forex and hedges caused fuel costs to increase 15% y/y, despite flying almost 50% fewer ASKs.
Management sees the recovery unfolding in three phases, the first with minimal traffic. Phase two will start later this year, evident first in domestic markets but delayed internationally due to uncoordinated government policies on lifting travel restrictions. Sometime in 2022, phase three will bring a more meaningful recovery, but still leave traffic depressed versus pre-crisis levels for many years due to economic factors and anticipated changes to corporate travel behavior. SAS did receive some government financial support.
But it still expects to burn through $50m to $70m in cash a month for the remainder of 2020. It will need cash to rebuild schedules as demand returns. And current projections show potential liquidity troubles this fall. So SAS is talking to shareholders, including the Danish and Swedish governments, about contributing more equity. It absolutely needs more capital, management insists. It’s at the same time rethinking its business model, while delaying Airbus deliveries, phasing out older planes, cutting 5,000 jobs, renegotiating supplier contracts, and again turning to unions for concessions, most importantly more flexibility to adjust its staffing by season.
Copenhagen will remain its chief longhaul hub, with incoming A321 LRs potentially useful for Oslo and Stockholm. It’s still bullish on Eurobonus, its loyalty plan. Consolidation should come but not until airlines start recovering. SAS is happy that Norwegian will be a shadow of its former self in terms of size, but surely concerned as well about its extreme cost cutting.
Looking ahead, pricing and revenue management will be difficult for a while because the forecasting and optimization algorithms airlines use make heavy use of past demand patterns, which the crisis is rendering irrelevant (i.e. the systems will see near-zero demand this spring and factor that into forecasts and pricing recommendations for future flights).
On a more encouraging note, SAS says corporate clients are eager to get flying again, and that companies already cut their travel to a minimum even before the crisis. Videoconferencing as a travel substitute, the airline said, will be marginal.
- Norway’s government took a carrot-and-stick approach to saving Norwegian. It would help with credit guarantees, but only if the airline greatly cleaned up its balance sheet. In most cases, doing so would require aid from the bankruptcy courts. Ask Latam and others about that.
But Norwegian managed to get the job done by getting enough creditors to voluntarily swallow big concessions. Aircraft leasing companies, for example, rather than repossess their planes in a deeply depressed market, agreed to take substantial ownership positions in the newly-restructured Norwegian. The long-struggling LCC reported a negative 24% operating margin for Q1, without providing as much detail as usual, or even holding an earnings call. It’s more importantly focused on awakening the airline from “hibernation mode,” and creating a slimmed-down and less-ambitious but more financially sustainable version of its former self. It won’t be easy.
But understand that the reforms Norwegian was able to achieve are highly significant. It will exit the crisis a much leaner, less complex, and lower-cost airline. It expects to have lower unit costs than easyJet, in fact. Crazy ideas like flying locally in Argentina are in the distant rearview mirror. Unions granted much more flexible contracts which help with managing seasonality. Also helping with seasonality are power-by-the-hour aircraft leases, in which payments vary with hours flown.
The new Norwegian wants to be more aggressive with ancillary revenues. It will focus its B787 flying on the largest markets of Europe and the U.S. Much like a bankrupt company, it’s only paying “absolutely vital operational invoices.” At the close of Q1, Norwegian had a fleet of 147 planes, including 18 grounded MAXs. It has another 92 MAX 8s on order, plus five more B787-9s, 63 A320 NEOs, and 30 A321 LRs. Surely, it will try to negotiate a downsizing of its order book.
Kenya Airways’ Struggles Continue
- In Africa, Kenya Airways was already struggling long before Covid. It was forced to restructure its balance sheet in 2017, aided by a group of local banks that agreed to take a large ownership stake in the company. Last year, the government stated its intention to fully renationalize the carrier in 2020, which foreshowed an end to Air France/KLM’s ownership stake. The plan also included the establishment of an entity to jointly manage the airline and Nairobi airport.
It’s in this context that Kenya Airways last week disclosed its financial results for all of 2019, which showed a modest negative 1% operating margin but heavy net losses. The burden was weighty enough to require more taxpayer money to keep the carrier aloft. Management in fact issued a profit warning in December, months before the current crisis. It’s now largely grounded but hoping to partly relaunch this month. Oddly, the airline increased ASK capacity 15% last year, which accounts for a full-year of B787 flying to New York JFK, a route that likely lost lots of money. It also added routes to Geneva and Rome. And it took back a Dreamliner it was sub-leasing to Oman Air.
Kenya Airways is now run by the executive who previously ran the group’s LCC JamboJet. He’s not terribly optimistic about a speedy recover. But a shift to relying more on cargo and maintenance revenues should help.
- As Thai Airways makes its way through bankruptcy, Thailand’s largest domestic airline is considering a merger. Thai AirAsia tells the Bangkok Post that combining with another local LCC could be the cure to a weak fare environment. According to the Post, the airline gets a full 40% of its total revenue from Phuket, one of the region’s most popular beach destinations. But the beaches are empty of foreign visitors with Thailand’s borders closed.
Merger talks have already taken place, the airline’s co-founder and chairman Tassapon Bijleveld said. In the meantime, domestic flights have restarted but load factors are low. Operating costs have risen all the while, due in part to the implementation of new cleaning practices. International tourism won’t restart until October. Currently, Thailand has six major airlines (AirAsia, Thai/Thai Smile, Nok, Bangkok, Thai Lion, and Thai VietJet.)
- Sara Nelson, president of the Association of Flight Attendants, spoke online with Skift founder Rafat Ali last week. She said 2020 was supposed to be the year that airline crews recaptured concessions they gave in earlier rounds of contract negotiations. But while acknowledging that the current crisis makes that difficult in the short-term, the union and its members will not accept another long-term “ratcheting down” of pay, work rules, and benefits. Job cuts, she concedes, might be necessary given the inevitable fact that airlines will be smaller post-crisis.
But Nelson wants to ensure that most of these job losses are voluntary, accepted by workers nearing their retirement, for example, or uncomfortable about flying while the virus is still a threat. She accused Delta (whose flight attendants have long refused to a join a union) of violating the federal CARES Act by cutting work hours involuntarily. Nelson was a key player in supporting passage of the CARES Act, which she said saved the U.S. airline industry from collapse. She wants Washington to provide additional aid going forward, to avoid mass layoffs after CARES Act job protections expire this fall.
- A dispute over furloughs is threatening to get more contentions as British Airways moves ahead with plans to lay off as many as 12,000 employees. Under British labor law, the company has to meet with union representatives in order to make the cuts, but the Unite and GMB unions have said these meetings are impossible due to the ban on large groups during the country’s shelter-in-place order.
The unions say they may take the airline to court to force a “meaningful consultation.” In a scathing letter to IAG’s board, Unite General Secretary Len McCluskey wrote, “BA’s plan to use the worst health crisis in a century to strip loyal workers of their terms and conditions is a betrayal of workers and of Britain.”
- Delta is planning for a smaller future, one that CEO Ed Bastian warned about several weeks ago. The carrier is offering voluntary early outs to employees close to retirement age or who have 25 years or more of service. A second voluntary separation package would be available to all employees. The carrier has begun talks with its pilots — who are unionized, unlike the majority of Delta’s employees — for concessions and separation packages. The voluntary opt-out packages would include cash severance, healthcare, and flight benefits. Employees can apply for the programs on June 1, with retirements beginning Aug. 10.
- In his letter to employees, Bastian applauded the U.S. government for stepping in with state aid to airlines, noting that Latam declared bankruptcy because of the absence of aid from the countries where it operates. The CARES Act prevented that in the U.S., but Bastian warned that without voluntary separation, the carrier may have to resort to involuntary furloughs. “While we never dreamed just a few months ago that we would be talking about a smaller Delta — this was expected to be a year of growth, after all — this is the reality we are facing,” Bastian said.
- American is also planning for a smaller future. In a letter to employees, Elise Eberwein, executive vice president of people, said cost-cutting measures so far have not gone far enough. Although 39,000 American employees have taken voluntary leave or early retirement, the company says that management and corporate staff will be reduced by 30%. The carrier is asking for voluntary separation before it begins restructuring “all levels” of the company, and before it starts to restructure front-line workgroups. If not enough employees take voluntary separation, the company will begin layoffs, which would go into effect on Oct. 1, after the CARES Act funding (and its stipulation to maintain staffing levels) expires. “We must plan for operating a smaller airline for the foreseeable future,” Eberwein wrote.
- A bit of a split is emerging between airports and airlines in the U.S. on passenger health screening. Airports Council International argued that temperature checks and other health screens at security checkpoints will create bottlenecks in airports and result in longer lines.
The Memorial Day long weekend in the U.S. suggested this idea is correct. Due to social distancing, lines for security stretched through the terminals in many airports.
But Airlines for America, the industry’s main trade lobby, argued that health screening should become another component of the TSA’s security checks. No federal mandate yet exists to settle this dispute.
- Airlines are focusing much of their public-relations efforts on allaying passenger fears and reassuring the public that flying is safe. Delta last week detailed the many steps it is taking to reduce touchpoints in the airport — at check-in, bag drop, and in its lounges — and on board. The carrier changed its process to board passengers back-to-front, rather than in groups based on status. Delta is disinfecting aircraft between every flight with electrostatic sprayers and is wiping down all surfaces with disinfectant. Food and beverage service is limited to snack bags.
Most controversially, Delta remains committed to blocking the middle seats of its aircraft and booking only 50% of the first-class cabin. United CEO Scott Kirby, by contrast, told an investment conference that the Chicago-based airline will not be blocking middle seats.
- For inflight connectivity company Viasat, its most recent quarter was, as has become depressingly familiar across the industry, a tale of two quarters. The company reported a record 2019 and first two months of this year, followed by a historic collapse.
Viasat is cutting $100m in costs and has furloughed or laid off 300 employees. But this is not enough to offset the decline in revenues. With almost no one flying, almost no one is buying inflight internet access.
But the company shared an interesting tidbit. The wave of aircraft retirements is unlikely to affect its revenues, executives said. Airlines mostly are retiring older fleet types, which may not have had inflight connectivity installed in the first place. Viasat thinks as airlines recover, they may invest in new aircraft, which will bring more business its way.
- Memorial Day weekend in the U.S. confirmed the hopes of America’s low-cost carriers: That leisure demand is in fact bouncing back significantly. In response, Frontier is getting itself back into expansion mode. To be clear, it’s still just operating a fraction of its normal schedule and will be for some time. But it’s adding new routes this summer, 18 new routes in fact, charging one-way base fares as low as $29.
All but two of the 18 involve (guess where?) Florida, namely Tampa, Fort Myers, Orlando, Pensacola, Sarasota, Miami, and Palm Beach, with service from Boston, Newark, Islip, Philadelphia, Chicago ORD, Dallas DFW, Cleveland, Cincinnati, and/or Los Angeles. Some of these are routes it served at some point in 2019, others completely new.
The two newly announced routes that don’t involve Florida are Newark and Philadelphia to Myrtle Beach, a popular golfing spot in South Carolina.
- Wizz Air, which, like Frontier, also is owned by Indigo Partners, is taking the same approach. In other words, it’s betting on a lift in summer sunshine leisure travel. It’s also positioning itself to grab market share from shrinking legacy carriers and taking advantage of attractive deals from traffic-starved airports. Wizz will open new bases in Larnaca in Cyprus (with two A320s), Albania’s capital Tirana (three A320s), and at Milan’s Malpensa airport (five A321s) in July. That’s assuming of course that these places open for inbound tourism by then.
Currently Wizz is operating just about one-tenth of its overall capacity (but not closing any bases). A decision to cut about one-fifth of its workforce suggests it won’t get back to pre-crisis size for a while. But CEO Josef Varadi tells the Israeli tech news site Calcalist that demand is not the issue, but rather the travel restrictions put in place by governments, which he adds are frustratingly uncoordinated. The economy, much more than the virus, will be the bigger constraint on consumers going forward, but economic difficulties benefit low-cost carriers. He says young people will travel again first, followed at some point later by families. A recent promotion offering 16% discounts to celebrate the airline’s 16th birthday generated “huge demand.”
Varadi speaks of “hysteria and overreaction” that will soon pass, as it did after 9/11 and other shocks. Far from eyeing just the new bases announced last week, Varadi tells Reuters that he’d like Wizz to expand from London Gatwick. And don’t forget about the new airline venture it’s launching in Abu Dhabi.
- Back in the U.S., another LCC called Southwest (you may have heard of it) published its flight schedules for November and December. It’s subject to change of course, and late changes have become somewhat routine for the airline as it dealt with pre-crisis MAX uncertainties. The new schedule does contain some new routes though, including three from Delta’s bastion of strength in Atlanta (Oklahoma City, Louisville, and Omaha) and three from United’s Denver stronghold (Birmingham, Wichita, and Little Rock). Long Beach to Phoenix and Austin are two other adds.
Notice that these are mostly business-oriented markets, signaling Southwest’s expectation of some revival in this segment. “We anticipate business travelers will hit the road with a heightened focus on costs,” said Chief Commercial Officer Andrew Watterson in a statement. “Never before has Southwest been more primed to emerge as the preferred choice of corporate travel as the business climate across America begins its recovery.”
As for its international routes, some like Cancun, San Josedel Cabo, Havana, Montego Bay, and Nassau will restart on July 1.
- What’s the focus of IATA’s latest discussion of the Covid crisis? It’s the emergency government aid airlines are receiving. By IATA’s count, carriers have received $123b in cash assistance so far. But half of that has come in the form of loans (direct or via guarantees) that need to be repaid. Wage subsidies account for another 28% of that $123b. Other categories of aid include tax relief, route subsidies, and direct cash grants. The fact that so much of the relief involves borrowing, IATA warns, means airlines will enter the “restart” phase with very high levels of debt. Add private sector borrowing to the government credit help and airlines have added $120b in new debt this year, taking the industry’s total debt total from $430b at the start of this year to a projected $550b by the end of this year.
What’s more, the government aid airlines are getting isn’t getting disbursed evenly across the world. A few wealthy countries like the U.S., France, Germany, and Japan stand out for their generosity. In terms of airline aid as a percentage of 2019 ticket revenue, no country has been more charitable than Singapore, a blessing for Singapore Airlines. On the other end of the scale are Latin American, African, and Middle Eastern markets, where help for airlines has been negligible.
One more point IATA makes is that there’s no correlation between the aid airlines are getting and their pre-crisis financial health. Recipients include a mix of healthy and sickly carriers, implying market distortions. Viewed another way, public subsidies have become a new competitive advantage, establishing a new category of haves and have nots. Think about U.S. carriers, with their lavish aid, competing in the years ahead with Latin American rivals largely facing the crisis on their own. Then again, bankruptcy restructuring will create a separate set of advantages (i.e. lower costs) for Latin carriers like Latam and Avianca.
- A few other notes from IATA: The airline industry right now (the current April-to-June quarter) will burn through an estimated $61b in cash. The entire sector will generate a similar amount of revenue. But roughly double that amount will be spent on operating costs (i.e. wages and fuel), fixed costs (i.e. aircraft debt and lease payments), taxes, and — this is a biggie — ticket refunds. The cash burn should ease in the second half of the year, with cash inflows from bookings picking up a bit.
Separately, IATA is still spending much of its time working with governments, airports, and other stakeholders on restarting the industry. It’s five guiding principles are 1) safety and security first, 2) flexibility to respond as the science of Covid-19 evolves, 3) airlines must be an important part of the world’s economic recovery, 4) environmental responsibilities remain a top priority, and 5) restart standards, regulations, practices, and protocols must be harmonized across different countries.
This last point is a concern for airlines around the world, including Asia-Pacific carriers. Their regional advocacy group, AAPA, warned last week of “patchy, uncoordinated measures across countries.” It mentioned inconsistent screening protocols and onerous quarantine requirements, both of which are deterring passengers from flying and slowing the process of restarting air travel.
- No way. Don’t even think about it. That was Doug Parker’s message to anyone worried about American going bankrupt. Speaking to the Bernstein Annual Strategic Decisions Conference last week, the head of America’s second-largest airline by revenues vigorously affirmed his responsibility to protect shareholders, a task completely at odds with the notion of using the bankruptcy courts to shed debt and lower costs. It’s something of concern to some investors, judging from the rising cost of insuring against the risk of American defaulting on its debt.
Boeing’s CEO didn’t help when he suggested a U.S. airline might be headed for bankruptcy. And to be clear, American does have a greater debt burden than its peers Delta and United. “One of the things I’m most proud of is that I’ve never worked for a bankrupt airline,” said Parker, who began his career running American West, which purchased bankrupt US Airways, which in turn merged with bankrupt American. In fact, he says all U.S. airlines will make it through the crisis without having to file for bankruptcy, in part because carriers aren’t trying to push each other out of business as was the case in prior downturns. Then, unlike now, excess capacity was the big problem.
Today, “it’s a demand problem, not a capacity problem.” And besides, it will feel as if a big airline went away because of all the industry capacity cutting underway. American sees industry capacity shrinking between 10% and 20% next summer, relative to summer 2019. “The effect is going to be as though a large airline went away.” In the meantime, American has $11b in liquidity. It’s close to securing a low-interest loan from Washington. It still has a valuable portfolio of unpledged assets. It’s on track to reducing its daily cash burn to about $50m. It’s slashing its management ranks (see labor section above). It’s shedding old planes. And demand is definitely improving. Load factors, just 15% in April, rose to 56% during Memorial Day weekend.
The figures look better still as American looks into June. A survey of corporate clients shows more and more are lifting travel restrictions. Last month, net bookings turned positive, and that’s true now for even tickets purchased two-to-four weeks prior to departure — in April, bookings tended to be very close to departure or very far out. “What that says to us is people are now sitting down and making plans… saying I’m going to travel two, three weeks from now. That’s encouraging,” Parker said.
Of course, American is still just flying one-fifth of its normal capacity. And demand even next year won’t be anything close to what it was in 2019. But Parker still thinks American can make money in 2021, thanks in part to all of its cost cutting.
Just as importantly, American has a unique advantage versus Delta and United: It has less intercontinental exposure. Indeed, roughly 70% of American’s pre-crisis capacity was domestic or shorthaul international. It’s also happy to have two of the country’s three largest hubs in Dallas DFW and Charlotte (Delta’s Atlanta hub is number one). During downturns, “big hubs win,” said network chief Vasu Raja. He gave the example of Nashville, which in normal times might generate some 2,000 air travelers a day. Half are going to either New York or Florida, and the other half to a wide array of some 200 markets that can only be served via a hub like DFW or Charlotte.
Looking ahead, the trickiest part about planning 2021 capacity is the balance between shedding planes, people, and facilities to save costs on the one hand, while still being able to capture demand if it recovers more bullishly than expected. The key periods of focus are this fall, after the CARES Act and its employment conditions expire, and next summer, when airline demand peaks.
- United’s newly anointed CEO Scott Kirby, speaking to the same Bernstein event, was no less spirited in his response to the bankruptcy question. “It’s like the dumbest question possible,” he said. “We are not going to go file a bankruptcy. It would be the absolute last thing we would do. I can’t imagine why people think that’s a good business strategy… Zero percent. No chance.” He went on to say that bankruptcy would make things worse for shareholders, creditors, employees, and just about every other United constituency. So pretty clear on how Kirby feels about that.
How does he feel about the prospects for recovery? Ultimately, he sees a full return to normal demand levels if and when a Covid-19 vaccine is developed and administered (there’s hope one or more could start circulating this fall). Until then, it’s anyone’s guess at how demand will behave, but United is planning for the worst-case scenarios. As other U.S. airlines report, bookings and traffic are up considerably form their mid-April lows. Efforts to reduce cash burn are progressing and should stand at about $40m to $45m this quarter, and $20m by Q4. A key milestone would be demand recovering to 50% of pre-crisis levels, at which point United has restructured itself enough to stop bleeding cash.
There’s still more work to do, however, on variabaliziing the airline’s cost base, and becoming more flexible to respond to different degrees of recovery. Doing that, most importantly, involves reworking labor contracts, a process now underway in conjunction with unions. Unlike American, which mass-retired multiple fleet types, United is holding off for now on any big phaseouts — it can wait a bit longer to see how the recovery is unfolding before deciding.
Longer term, with its balance sheet now loaded with more debt, it will tend to keep its planes longer rather than aggressively replace units. Pre-crisis, it was buying new planes with low-interest debt, to replace planes that were sometimes only 15 years old. Going forward, it won’t start scrapping planes for parts until they’re past 20 years old.
Financially, the top priority when demand normalizes will be repaying debt. Another key priority will be environmental sustainability. Is Kirby concerned about having so much international exposure? Well, international routes are probably more profitable than domestic right now due to cargo demand. Longer-term, United will shape its network based on where passenger demand is greatest. It will, however, always be larger internationally than most of its rivals just because its hubs are in big global cities like New York/Newark, Washington, and San Francisco.
- Southwest CEO Gary Kelly, in his latest message to employees, spoke of a “brutal low-fare environment” likely to take shape as traffic starts to recover. There will be many more seats than passengers for some time, he said. The airline’s Chief Commercial Officer Andrew Watterson, meanwhile, said May’s increase in traffic corresponded with various marketing campaigns, including fare sales, mileage bonuses, and promises to keep middle seats open.
The travel rebound is clearly correlated with lockdown measures in different markets — places with the most relaxed policies and earliest re-openings, like Florida, are seeing the most activity. Other leisure destinations like Phoenix are seeing some recovery too.
On the other hand, a market like Hawaii is still effectively closed to visitors, though Watterson expects to see a lot of pent-up demand when restrictions there ease. As for business markets, most of Southwest’s travelers so far have been workers in the transportation, health care, or government sectors.
- JetBlue CEO Robin Hayes, interviewed online by the Washington Post, expressed optimism that leisure travel will recover quickly. “We weren’t wired to sit in our homes.” Business demand, by contrast, will take longer to revive. He sees an L-shaped recovery overall, with demand currently coming back but still nowhere near pre-crisis levels. Many people who previously vacationed abroad, he adds, will now vacation within the U.S.
So what about JetBlue’s London plans next year? As he mentioned during the carrier’s Q1 earnings call, Hayes said transatlantic flying with A321 LRs (and later XLRs) is still on the agenda, albeit likely pushed back a few months. JetBlue hopes to be operating about a quarter of its normal schedule by the end of this month.
- The latest U.S. GDP estimates show the economy shrank 5% in Q1, with household spending down 7% and business spending down 11%. Partially offsetting that was a 16% drop in imports (compared to a 9% drop in exports). Most importantly, government spending rose 1%, or 3% excluding defense. Q2 figures will look much worse given the widespread suspension of many economic activities in April and May.
There’s a clear rebound underway though, as the uptick in air travel shows. Household savings, too, are showing signs of a big increase thanks to government stimulus measures. In a big milestone, Disney World in Orlando will reopen next month, albeit with strict limitations on the number of visitors. Orlando is a massive market for JetBlue, Spirit, Sun Country, Southwest, Frontier, and Allegiant.
- It’s finally done. Lufthansa has its $10b federal bailout, relieving liquidity concerns. But it’s a bitter pill to swallow, with Berlin now taking a 20% ownership stake in the airline, going perhaps as high as 25% in the event of a hostile takeover. Lufthansa’s board originally rejected the deal with Germany’s Economic Stabilization Fund, which contained some harsh airport slot divesture requirements to placate EU competition authority concerns. The demands were scaled back however, and Lufthansa now has to surrender fewer Frankfurt and Munich slots. They’ll go to new entrants, unless there aren’t any, in which case others can bid. But they must be European carriers that have not received substantial government bailouts.
- Lufthansa’s rival Air France/KLM, also a big government aid recipient, held its annual shareholders meeting by conference call last week. Its four top shareholders, remember, are the French and Dutch governments, each with a 14% stake, and Delta and China Eastern, each with a 9% stake. Two U.S. investment firms own another 12%. Employees own 3%. Much of the remaining 39% is publicly traded.
During the meeting, executives reviewed the reforms of 2019, including the pacification of French labor unions, historically Air France’s greatest challenge. This and other reforms, in areas like fleet efficiency and seating configurations, were showing clear dividends. Until the “horrendous” crisis. In response, Air France/KLM immediately slashed operating costs by about $380m per month, aided by the adoption of part-time work policies. It negotiated tax relief and supplier invoice relief. It cut capital spending for this year by $1.3b. Air France received nearly $8b in French government financing. KLM is confident of finalizing talks on getting between $2b and $4b worth of help from the Dutch government.
But CEO Ben Smith was quick to stress that this state aid is “not a blank check.” It means lots of new debt, most importantly. And the assistance comes with several conditions, most importantly a requirement to reduce carbon emissions. This will primarily impact Air France’s long-unprofitable domestic network, which will see a 40% capacity cut. Routes with a sub-2.5-hour high-speed train alternative will close, unless they’re feeding traffic to international flights from the airline’s Paris Charles de Gaulle hub. Management hopes the restructuring will allow the French domestic network to break even by next year.
Overall though, the group expects the recovery to be “slow and gradual,” taking two to three years at least, under any scenario. Under more pessimistic scenarios, the company would have to sell additional shares to have enough cash to repay debt. Sometime this summer, Smith and his team will announce an updated business plan.
It will likely give Transavia heightened importance, for several reasons. Firstly, the LCC is allowed to expand without limits from France now, following pilot concessions last year. It also obtained valuable Paris Orly slots, along with new North Africa route rights, in the wake of Aigle Azur’s collapse. Transavia also seems well positioned for a recovery phase that will likely see a disproportionate share of price-sensitive shorthaul traffic. It currently flies chiefly from bases in Amsterdam, Paris Orly, Nantes, Lyon, and Montpellier.
Aside from Transavia’s development, Air France/KLM’s latest business plan will also feature voluntary retirement offers to reduce seniority and headcount (KLM’s early-out program will take effect this week; Air France is still negotiating one with unions, encouraging them to accept the re-location of many jobs from provincial cities to Paris). Fleet restructuring remains high on the agenda, with Air France’s A380s, A340s, and B747s leaving forever. The group still greatly values its alliances (i.e. the joint venture it has with Delta and Virgin Atlantic).
KLM will more generally look to build on pre-crisis advantages like its brand, its competitive costs, and its formidable Amsterdam menu of connecting flights. Air France, which management admits had a “broken model” in the past, will seek greater efficiency through greater simplicity, while focusing on its most profitable traffic flows to, from, and through Paris. Consolidation? Air France/KLM will be ready “if there is something that is appropriate within our risk profile.” But it’s not a focus.
On the immediate agenda, of course, is schedule recovery, with the associated incorporation of new cleaning procedures, temperature checks, mandatory mask requirements, and social distancing efforts (load factors are temporarily capped at 50%). Air France will move from operating just 5% of its normal schedule currently to more like 15% by the end of June. KLM is already operating around 30% of its network. This week, Transavia will return to the skies, flying to six Greek, Spanish, and Portuguese destinations from Amsterdam.
- EasyJet said booking trends for the domestic British and French flights it plans to resume on June 15 look encouraging. Demand for summer 2020 is also looking better, and bookings for the winter are “well ahead of the equivalent point last year.” Nevertheless, the LCC doesn’t see passenger volumes recovering to pre-crisis levels until 2023. So it’s starting the process of reducing headcount by up to 30%.
- As Europe opens up to foreign travelers, country by country, China is likewise starting to open up international airline markets. Carriers, both foreign and domestic, can now apply to serve “green channels,” covering a selected group of countries. Ostensibly, they’re countries that have the Covid virus more or less well controlled, like South Korea, China’s first green channel market. Already, some Korean business travelers are allowed to visit selected Chinese cities like Shanghai and Tianjin.
The next group reportedly includes Japan, Singapore, and several countries in Europe, like Germany, France, Switzerland and even the U.K., where the virus had been particularly lethal. Conspicuously absent for now is Australia, perhaps reflecting recent Sino-Australian tensions.
And speaking of tensions, those between Beijing and Washington have rarely if ever been greater, and are sure enough affecting commercial aviation — the U.S. accuses China of blocking United and Delta from restarting flights.
- One interesting side note as China’s market recovers: Its airlines in May, a Cirium analysis shows, for the first time ever operated more passenger jet flights than their U.S. counterparts. Through May 27, Chinee carriers operated nearly 200k flights, compared to fewer than 170k for U.S. airlines. China, of course, was hit by the Covid virus earlier than the U.S., so its airline market is further along in its recovery. China’s flight departures were down roughly 35% y/y in May, compared to a 74% decline in the U.S.
- China’s Trip.com, formerly Ctrip, said in its Q1 earnings call that reservations for domestic shorthaul travel bookings have almost fully recovered compared to last year as more and more regions lift travel restrictions. The recovery is especially robust in secondary cities, as opposed to the biggest metros, like Beijing and Shanghai. The online retailer is talking not just about air travel but travel in general, including hotels, rental cars, and attractions. International travel is still extremely limited, but Trip did note some “small but positive” signs of recovery in markets where the virus is well contained, like South Korea. Back in the domestic market, airline reservations for future travel have recovered to about 70% last year’s levels.
- Air New Zealand (ANZ) gave investors a market update, which included some encouraging remarks. The carrier reports “positive early signals” from the domestic market, where it’s been able to restore flights following New Zealand’s easing of lockdown restrictions (it entered “alert level 4” lockdown on March 25, eased to level 3 on April 27, and eased again to level 2 on May 13 — the virus within New Zealand is largely under control). “We’re seeing actually pretty strong demand,” said CFO Jeff McDowall. “[It] looks stronger than we expected.”
Domestic flights, in fact, are producing positive cash flow, aided by government cargo contracts. The next step in recovery will likely be the trans-Tasman market, pending the creation of a “travel bubble” allowing travel between New Zealand and Australia. Given the importance of tourism to both countries, the idea is a top priority at the highest levels of government. ANZ also sees Pacific island resort destinations like Fiji joining the bubble and becoming “enormously popular” among Kiwi tourists. “You could see that actually recover quite quickly.”
On the other hand, executives don’t see most other countries opening their borders anytime soon. And that will even hurt domestic demand, given that about one-fifth of the carrier’s typical domestic passengers are foreigners flying within the country. It’s also conscious of how domestic demand will be hurt by economic weakness and greater corporate adoption of videoconferencing.
So ANZ will inevitably be a smaller airline in the coming years — maybe 70% of its former size by 2022 — forcing it to cut about 30% of its workforce, equivalent to some 4,000 people. It doesn’t want to cut too aggressively however, and not be ready to quickly ramp up flying when demand does recover. It’s still talking to unions about longterm contract concessions. It’s looking for other areas to cut costs as well. And it has a big government line of credit in case its cash balance gets too low. The state, remember, still controls the airline with a 52% ownership stake.
Covid sends another airline to the courts
Virgin Australia produced $4b in revenue last year. Avianca, roughly $5b. Thai Airways, $6b. All are now bankrupt. And they were joined last week by an even larger airline.
Latam, with more than $10b in revenue last year, became the latest bankruptcy casualty of the Covid pandemic. Latin America’s largest airline filed for bankruptcy protection in the U.S., where it can take advantage of helpful restructuring procedures under Chapter 11 of the U.S. Bankruptcy Code. The filing covers the airline’s subsidiaries in Chile, Peru, Colombia, and Ecuador. It does not apply to its Brazilian unit, which happens to be its largest revenue generator. Nor does it apply to units in Argentina or Paraguay. That’s mostly just a technical distinction — those units are no less keen on restructuring.
Latam, to be sure, will continue to operate as it reworks contracts with lenders, suppliers, unions, and other stakeholders. To finance current operations, two of its top shareholders — the Cueto/Amaro families and Qatar Airways — pledged to lend it $900m under debtor-in-possession privileges. This DIP financing, a feature of U.S. bankruptcy law, will ensure that the lenders are first in line to get repaid, ahead of all pre-bankruptcy lenders. Latam hopes to secure additional DIP financing, more than $2.1b in fact. Delta, which owns 20% of Latam, hasn’t provided any DIP money so far and likely won’t due to provisions in the U.S. CARES Act limiting investments in foreign companies. Delta, though, remains an important commercial partner, even if it does wind up losing the nearly $2b it invested in Latam just last fall.
Latam’s bankruptcy is not only the biggest of the crisis, but also its most surprising. Thai and Virgin were deeply flawed companies even before the crisis. Avianca, though profitable at the operating level, narrowly avoided bankruptcy just before the crisis. Latam by contrast was heavily indebted for sure, but nowhere near running out of money before the Covid crisis. In fact, it had a pretty good 2019, earning net profits of more than $300m and a respectable if uninspiring 7% operating margin. In fact, performance improved as the year progressed, with first half operating margins weak but second half margins reaching double digits.
The improvement, furthermore, continued into early 2020. Late last week, the airline reported its results for the year’s first quarter (January-to-March), which were better than its results — at the operating level anyway — from the same quarter last year. More specifically, Latam earned a 4% Q1 operating margin, up a point from its Q1, 2019 figure. The Covid crisis hit late in South America, with only the final few weeks of the quarter affected. Latam did have to slash capacity in March, such that ASKs for the entire quarter declined 7% y/y. Revenues declined 7% too. But operating costs fell 8%. Even with forex and hedge headwinds, the airline’s fuel bill came down by 13%. Labor costs dropped 15%, aided by the impact of currency depreciation on local wages.
But below the operating line, things got hairy. The company’s debt burden drove $127m in interest expenses during the quarter, equivalent to more than 30% of what it paid its workers. Net results, meanwhile, were disfigured by a massive impairment charge to Latam’s goodwill, an accounting concept designed to capture value obtained through a merger. This impairment caused a monstrous $2.1b net loss, almost equal to its total revenues for the quarter.
Latam’s pre-crisis problems weren’t negligible. Many were macroeconomic, including its extreme difficulties navigating Argentina’s battered economy. Currency depreciation, a frequent headache for Latin American companies, reared its ugly head again last year. The Brazilian real, most importantly, was worth about 30 U.S. cents at the start of 2018, only 27 cents at the start of 2019, and only 24 cents at the start of 2020. Last week it was worth just 19 cents. Separately, Latam’s sizeable cargo business encountered yield headwinds as global trade weakened. Chile, where the airline has its main headquarters, suffered civil unrest that erased tens of millions of dollars from earnings. Latam was still dealing with disruptive B787 engine problems last year. LCCs like JetSmart, Sky, and Viva were starting to spread across South America. Before arranging its autumn deal with Delta, Latam’s North American and European alliance strategy, then involving American and IAG, was stymied by Chile’s supreme court.
Even so, Latam entered 2020 with optimism. As late as March 3, when it reported Q4 earnings, management still believed it could hit its goal of a full-year 2020 operating margin of between 7% and 8.5%. It also planned to grow ASKs this year, by between 3% and 5%. Most pleasingly, the Brazilian domestic market had suddenly become a profit paradise after Avianca Brasil collapsed last May. Brazilian overseas routes, most importantly to the U.S., were also improving thanks to competitor capacity cuts. In Colombia, Avianca itself was retreating from markets like Peru. Latam managed to buy back full control of its loyalty plan, creating a unified program with close to 40m members. The carrier was spending $400m to upgrade its inflight product. This included new premium economy seats on shorthaul planes. Last year, it added 29 new planes while also deeply scaling back its future aircraft commitments. Notable route additions in recent years include Sydney, Melbourne, Boston, Tel Aviv, Johannesburg, and Lisbon. Then came the Delta deal, in which Latam received $1.9b for a 20% ownership stake and another $350m to support its transition from oneworld. It also agreed to sell Delta four of its A350s, plus future orders for another 10. After a quarter century at the helm, Enrique Cueto was leaving his successor with a new and exciting path to prosperity.
Unfortunately, Covid’s scourge was already evident during Latam’s March 3 earnings call, when it reported signs of softness in international demand and cancelled flights to Milan. By the time new CEO Robert Alvo took over on March 31, the crisis was in full swing. In April, Latam’s passenger ASK capacity was down 94% y/y. Even so, it filled just half its seats.
With minimal revenues and cash coming in, and $57m in dividends and $130m in debt repayments due in the coming days and weeks, the company on May 26 made its decision to seek refuge in bankruptcy. That allowed for immediate suspension of dividend payments and the rejection of 19 aircraft leases (four B787-9s, two A350-900s and the rest A319/20/21 CEOs.
The airline is currently operating just 5% of its normal capacity, hoping to increase that to 9% this month, and to 18% next month. The restoration partly depends on the lifting of government travel restrictions, which vary by country. In Argentina, airlines aren’t even allowed to sell tickets until September.
That could be one reason to pull out of Argentina altogether — it wouldn’t miss the many union and political headaches it’s faced there over the years. Overall, Latam aims to be about 30% smaller than its pre-crisis size, and 40% smaller intercontinentally. It’s currently chasing cargo revenues with success. It has assurances from Delta that their joint venture of the Americas, finalized just last month, will remain valid. São Paulo, Santiago, and Lima are likely to remain key hubs. Miami, New York, and Madrid are likely to remain key overseas markets. In Brazil, help is on the way — better late than never — in the form of government aid. Other governments might contribute to Latam’s revival as well.
Beyond all this, it will be management’s task to craft a new business plan appropriate for new post-Covid era realities. Bankruptcy will definitely make that easier, if painful for all existing stakeholders. One thing bankruptcy can’t change though, is South America’s susceptibility to currency volatility and broader macroeconomic distress, a major problem for all of the region’s airlines. South America, meanwhile, has in recent weeks become a new epicenter of infection, with Brazil alone having just surpassed Spain in Covid-related deaths. Recovery, both economic and medical, seems distant. But so too, just a few months ago, did the chances of Latam filing for bankruptcy.
Around the World: June 1, 2020
|Airline Name||Change From Last Week||Change From Last Year||Comments|
|American||8%||-63%||Says it’s “not the right time” to try to negotiate a new long-term contract with pilots; current contract became amendable on Jan. 1|
|Delta||11%||-53%||Extends change-fee waiver policy for new bookings through the end of June|
|United||10%||-65%||Recent failure to sell bonds backed by old planes a case of bad timing? Hit market the same day W. Buffett sold his airline holdings|
|Southwest||11%||-35%||New York Times refers to Elon Musk’s SpaceX as “the Southwest of the rocket business”|
|Alaska||10%||-42%||Sabre, which runs the largest GDS in the U.S. market, says bookings remain severely depressed; GDSs depend heavily on biz traffic|
|JetBlue||9%||-41%||60% of employees have taken voluntary leave; hopes to shrink the airline this fall with further voluntary payroll reductions|
|Hawaiian||8%||-43%||Estimates its 36 unencumbered aircraft are worth an estimated $800m|
|Spirit||27%||-72%||Southern Airways Express to offer 8-pax seaplane service between Manhattan and Long Island; operated by Tailwind Air|
|Frontier||(not publicly traded)||Orlando airport scaling back expansion plans in wake of Covid demand shock|
|Allegiant||22%||-25%||Has its CARES Act loan application in; qualifies for $276m if it wants it; has until end of September to decide|
|SkyWest||14%||-46%||Began Q2 with firm orders for 26 E175s, all due to arrive before the end of 2021|
|Air Canada||-5%||-61%||EU competition regulators announce review of its Transat takeover; Air Canada/Rouge and Air Transat compete across the Atlantic|
|WestJet||(not publicly traded)||Latest update on Toronto’s Porter Airlines: will stay grounded until late July|
|Aeromexico||-7%||-64%||Operated its longest-ever flight last week, connecting Mexico City with Shenzhen in China to ferry medical equipment|
|Volaris||3%||-37%||Parent Indigo Partners should find out this week if selected for final round of bidding to buy bankrupt Virgin Australia|
|LATAM||-59%||-85%||Realized $14m in fuel hedge losses last quarter; lost $9m on fuel hedges in last year’s Q1|
|Gol||-2%||-55%||ABEAR, the trade group representing Brazilian airlines, says aviation contributes about 3% of the country’s GDP|
|Azul||-4%||-63%||Partner TAP Air Portugal appears poised to get gov’t help but hasn’t come yet|
|Copa||6%||-52%||Latin America now a Covid hotspot; Brazil, Mexico, Peru, Chile among countries seeing jump in new cases|
|Avianca||228%||-94%||Initially rejected leases on 14 planes; later reduced that to 12 planes|
|Emirates||(not publicly traded)||Bank of America analysis says Dubai’s economy could contract by almost 6% this year|
|Qatar||(not publicly traded)||Like Delta, it will likely lose its entire equity investment in Latam; doubling down with DIP loan|
|Etihad||(not publicly traded)||Jet Airways, the defunct Indian airline that Etihad partly owned, reportedly received five bids to buy it out of bankruptcy|
|Air Arabia||5%||5%||In Turkey, VAT tax for air transportation was lowered from 18% to 1% to help carriers recover|
|Turkish Airlines||12%||4%||CEO İlker Aycı speaks to Hurriyet about concerns he has with government-imposed fare caps|
|Kenya Airways||-30%||-36%||AFP profiles the Covid-era trials of a small Senegalese carrier called Transair|
|South Africa Air.||(not publicly traded)||Bankruptcy administrators still trying to come up with plan to resurrect the airline|
|Ethiopian Airlines||(not publicly traded)||Congo Airways upgrades December E175-E1 order to E190-E2s; two firm and purchase rights for two more|
|IndiGo||-1%||-41%||Currently filling less than half of its seats, reports the Economic Times, citing a company executive|
|Air India||(not publicly traded)||Vistara operated its first B787-9 last week, from Delhi to Kolkata; obviously intended for intercontinental routes when market opens|
|SpiceJet||-2%||-69%||Hasn’t yet reported its calendar Q1 results; neither has IndiGo, the country’s other publicly traded airline|
|Lufthansa||13%||-48%||European Union proposes controversial $820m fiscal stimulus plan|
|Air France/KLM||13%||-48%||KLM has flexibility to downsize its A330 fleet in the event demand takes longer than expected to recover; will rely on B777s, B787s|
|BA/Iberia (IAG)||20%||-50%||Still pushing NDC distribution; adding some fares for longhaul flights that it won’t sell via old style-GDS arrangements (The Beat)|
|SAS||7%||-27%||Says base wages are competitive but needs more flexibility on work rules, seasonality|
|Alitalia||(not publicly traded)||Il Sole 24 Ore estimates that Italy has spent nearly €13b rescuing Alitalia over the last half century|
|Finnair||9%||-46%||Almost 90% of surveyed loyalty plan members said they’re expecting to fly at least once in the coming year|
|Virgin Atlantic||(not publicly traded)||Still no deal on new funding; bankruptcy filing a possibility if efforts don’t succeed|
|easyJet||22%||-23%||Spain to open its tourism sector July 1; follows Italy, Cyprus, Greece, and Portugal|
|Ryanair||4%||7%||“Laudamotion will be the last airline we’ll ever acquire.” -Ryanair CEO Michael O’Leary in an interview with Bloomberg News|
|Norwegian||27%||-88%||The leasing giant AerCap, now one of its big shareholders, postponing delivery of another 37 planes originally coming in 2021 and 2022|
|Wizz Air||9%||4%||Romania, a key market, will open to visitors from the U.K., Germany, France, etc. on June 15; Poland opens June 6|
|Aegean||-3%||-50%||Greece moving quickly to reopen tourism, a pillar of its economy; Aegean seeking gov’t subsidized bank loans|
|Aeroflot||7%||-14%||Cyprus opening to foreign tourists next week but not Russians (or Britons, residents of another Covid hotspot)|
|S7||(not publicly traded)||Moscow encouraging Russians to vacation domestically this summer; bookings recovering (Moscow Times)|
|Japan Airlines||12%||-39%||StarLux, the new Taiwanese carrier, aiming to launch flights to Okinawa in July|
|All Nippon||8%||-29%||Will borrow more than $3b from government-backed development bank|
|Korean Air||6%||-35%||Still looking to raise more capital with lots of debt payments coming due soon|
|Cathay Pacific||-3%||-31%||China, reports Reuters, obstructing Cathay’s plan to phase out Dragonair brand|
|Air China||0%||-36%||China starting to consider re-opening more international flights; risk is importing new Covid cases from abroad|
|China Eastern||2%||-32%||China was only allowing 134 international flight arrivals per week until this week; will now be 407 (Reuters)|
|China Southern||0%||-30%||Opened a new domestic route between Urumqi and Chongqing last week|
|Singapore Airlines||5%||-58%||According to The Edge, its calendar Q1 loss was just the airline’s sixth quarterly loss sever, dating back to its origin in 1972|
|Malaysia Airlines||(not publicly traded)||Association of Asia-Pacific Airlines sees some optimism in region’s restoration of domestic flights but warns of uncoordinated gov’t policies|
|AirAsia||-8%||-74%||Ishka, a consultancy, asks whether AirAsia X and its longhaul business model can survive the crisis; was struggling even pre-crisis|
|Thai Airways||-16%||-60%||Nikkei Asian Review looks back at why Thai Airways wound up in bankruptcy; politics, labor tensions, poor morale, fleet complexity, etc.|
|VietJet||-1%||-9%||Reports in Vietnam of Vietnam Airlines perhaps considering more aircraft orders to take advantage of lower prices|
|Cebu Pacific||2%||-59%||Domestic flights to resume this week; international remains dormant|
|Qantas||11%||-28%||Fiji Airways announces major job cuts; Qantas owns almost half of the company|
|Virgin Australia||0%||-51%||Liquidity still a concern while it navigates through bankruptcy; could run out of cash before finalizing sale|
|Air New Zealand||10%||-48%||Has operated at about 5% of total capacity for more than seven weeks|
|Brent Crude Oil||6%||-44%||Brent oil price now around $38 a barrel, still way down y/y but up from $19 in late April|
Some stocks traded on multiple exchanges; not intended for trading purposes.