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Pushing Back: Inside This Issue

It’s going to be a smaller airline industry. That much seems sure, for at least the next few years as carriers adjust to a world with less travel. Fewer planes. Fewer routes. Fewer airline workers. It’s not a pretty picture.

From Europe to North America to Latin America, airlines last week lined up to share grim details about their first-quarter trauma, which will only get worse in the current quarter. Virgin Atlantic is exiting London Gatwick. Two more airlines, Colombia’s Avianca and South Africa’s Comair, are bankrupt. What in the world will Emirates do with all of those A380s? Despair, despair, everywhere.

Fortunately, most big airlines have enough cash to wait the crisis out. But that’s only because they’ve borrowed gargantuan sums of money, often with government backing. Even the industry’s most muscular balance sheets pre-crisis are now larded with debt. So even if demand comes roaring back tomorrow, the industry will take years to recover its pre-crisis health.

Demand, unfortunately, won’t come roaring back tomorrow. Not with travel restrictions still in place, economies in shambles, unemployment lines growing, and the virus still killing thousands of people every day. Airlines, are however, planning a gradual restoration of flights this summer and into the fall.

Chinese carriers, providing a possible window on what carriers elsewhere might expect as the outbreak dissipates, are showing some modest signs of demand recovery. U.S. carriers say they’ve at least bottomed out a few weeks ago, with bookings tricking in at a slightly higher rate in May. Norwegian has a new lease on life after pointing a gun at the heads of creditors and shareholders. IAG is preparing to take drastic restructuring steps, just as it did with great effect after the global financial crisis. All airlines have at least some restructuring efforts underway, be it downsizing their aircraft order books or approaching unions for permanent concessions. Revenue from robust cargo demand, meanwhile, won’t put a meal on any airline’s table. But every little breadcrumb counts.    

There’s a hint of life on international travel too. Australia and New Zealand, both largely Covid-free now, may create a “travel bubble” allowing flights between the two countries. The concept is under discussion elsewhere, including parts of Europe and East Asia. 

This week, Singapore Airlines will be among the carriers reporting their first-quarter carnage. Let’s hope it provides an inkling of hopeful news as well.

Verbulence

"If history is any indicator, low cost, low-fare travel is where the recovery comes first."

Spirit CEO Ted Christie

Mondays With Skift Airline Weekly

Join Airline Weekly Editor Madhu Unnikrishnan and special guest Airline Weekly co-founder and current "Airline Confidential" host Seth Kaplan this Monday at 11:30 a.m. Eastern for a livestream broadcast. Can't make it? We'll post a replay after the event every week at airlineweekly.com. Registration is free for subscribers here, at forum.skift.com.

Earnings

January-March 2020 (3 Months)

• Air France/KLM: -$2b/-$1.5b*; -16%
• IAG: -$1.87b/-$618m*; -12%
• Air Canada: -$783m/-$293m*; -12%
• Alaska: -$232m/-$102m*; -9%
• JetBlue: -$268m/-$116m*; -8%
• Hawaiian: -$144m/-$34m*; -8%
• Spirit: -$28m/-$59m; -8%
• Gol: -$514m/$39m*; 7%
• Copa: $74m; 17%
• Icelandair: -$240m/-$73m*; -44%
• SkyWest: $30m/$69m*; 9%

October 2019-March 2020 (6 Months)

• Emirates: $235m; 6%

October-December 2019 (3 Months)

• Frontier: $56m; 10%
• Sun Country: $5m; 7%

Net result in USD/*Net result excluding special items/ Operating margin