Issue No. 772
Bad Math for Cath
Pushing Back: Inside This Issue
The airline recovery continues, but so does Covid’s spread. In the U.S., airport traffic remains on a steady upward trajectory, especially in states that reopened their economies and tourist attractions early. Those same early openers though, including the giant Florida and Texas markets, are now experiencing Covid outbreaks, threatening the recovery. China, much further along in controlling the diseases, discovered a new cluster of cases in Beijing last week. Far more widespread is a surge of new cases in South America (led by Brazil and Mexico) and the Indian subcontinent.
Europe, meanwhile, where the outbreak is mostly receding, hopes to salvage some of the peak summer tourist season by opening internal borders this month. But some countries like the U.K. are moving slower, effectively forbidding inbound tourism by imposing mandatory two-week quarantines on arriving passengers. A few other places worldwide are already welcoming international tourists with few or no restrictions, including Mexico’s beach resorts. But in general, international borders still remain closed for all but essential travel. That even includes the U.S.-Canadian border, and borders within East Asia where many countries have the virus under control. Still, across the world, airlines are restoring flights, some like American rather aggressively, and some like Cathay Pacific more conservatively.
In terms of the industry’s financial health, or absence thereof, IATA expects carriers to collectively lose $84b this year, followed by a $16b net loss next year. That’s of course subject to a lot of unknown variables, like the price of fuel and — perhaps most importantly — progress in developing and administering a Covid vaccine. It’s not inconceivable that some airlines, most notably U.S. airlines, might earn domestic profits next year, if the economy recovers, if travel demand recovers, if industry input costs stay depressed, if the virus is contained or defeated, and if carriers maintain current plans to greatly shrink capacity. Lots of “ifs.” But “if” is better than “no chance,” which defines the probability of any airline making money this year.
Healthy recovery next year will also depend on an upcoming battle with unions to extract contract concessions. It’s a battle shaping up at airlines across the world, amid universal downsizing. Already, tensions are flaring, as the example of British Airways shows. Its rival Virgin Atlantic, meanwhile, remains on bankruptcy watch, unable to secure meaningful government assistance. The same goes for LOT Polish and Azul in Brazil. Not Cathay Pacific though. Last week, it joined another group of European airlines (i.e. Austrian and TAP Portugal) in the club of carriers relieved of immediate liquidity stress by generous government saviors.
"One thing is certain: The travel industry is going to be profoundly transformed."Transat CEO Jean-Marc Eustache
Mondays With Skift Airline Weekly
On Monday, June 15, Chris Jones, McCarran International Airport chief marketing officer, discussed how the pandemic affected traffic to one of the largest leisure destinations in the country, and how things look now that Las Vegas is reopening. You can watch a recording of the event here.
January-March (3 Months)
- Philippine Airlines: -$182m; -20%
*Net result in USD/*Net result excluding special items/ Operating margin