Issue No. 771
The Crane's Pain
Pushing Back: Inside This Issue
The devastated airline industry continues its comeback, in some respects faster than expected. American, for one, is adding back flights at a rather bullish pace, chasing the small bursts of leisure and family-visit demand now crawling out of its cave. Beachgoers are returning to Florida. Other Americans are headed to the mountains. For an airline more dependent on international traffic, premium traffic, and business traffic, however, a meaningful comeback isn’t yet happening. Here’s looking at you, Lufthansa.
Lufthansa’s low-cost rival Wizz Air is in a better position. It’s almost perfectly positioned, in fact, to take advantage of the early recovery in shorthaul, price-sensitive, leisure demand. Russia’s Aeroflot thinks it can get things going again by focusing on its large domestic market and utilizing its impressively profitable LCC Pobeda. India’s large domestic market will be advantageous for IndiGo. Back in the U.S., airlines like Southwest are seeking creative if still-painful solutions to avoid autumn layoffs. Generous severance packages might do the trick. A more confrontational management-labor relationship is unfolding at British Airways. Virgin Australia, meanwhile, took another step closer to finding a new owner.
"We have two years of liquidity on hand. If we don’t operate a single flight [or] carry a single passenger in the next two years, we are still in business without any capital requirements from government or private investors. And I think that's a very important statement with regards to the resilience of the company."Wizz Air CEO József Váradi
Mondays With Skift Airline Weekly
January-March 2020 (3 Months)
- Lufthansa: -$2.4b/-$781m*; -19%
- Aeroflot: -$337m/-$339m*; -17%
- IndiGo: -$120m; -2%
- Wizz Air: -$124m/-$53m*; -10%
- Pegasus: -$54m/-$40m*; -8%
*Net result in USD/*Net result excluding special items/ Operating margin
- Lufthansa, as discussed in this week’s cover story, had an awful first quarter highlighted (or should we say lowlighted) by a negative 19% operating margin. The Lufthansa-branded passenger operation itself suffered a negative 23% operating margin. Swiss was much less bad at negative 9%. Austrian was a disaster (negative 47%). Eurowings was even worse (negative 53%). Brussels wasn’t much better (negative 27%).
Flattering the groupwide bottom line was a slightly positive result for Lufthansa Technik, a giant provider of maintenance and repair services. Cargo and catering posted Q1 operating margins of negative 4% and negative 8%, respectively. As the feature story below explains, there’s a deeper degree of structural stress at Lufthansa, beyond the big shock administered by the Covid pandemic.
- In Russia, Aeroflot started the first quarter with positive demand momentum. But it was no less affected by the Covid scourge than the rest of the industry, ending the period with a negative 11% operating margin, or negative 17% if you take out revenue from foreign airline overflight fees. Total Q1 revenues excluding these fees dropped 9% y/y, on 5% less ASK capacity. Operating costs also declined just 5%. Consistent with what other airlines are seeing, cargo was and continues to be a bright spot for Aeroflot.
But the real shining star is Pobeda, its low-cost carrier. Even last quarter, it earned a positive 6% operating margin, growing its revenues 33% on 23% more ASK capacity. For all of 2019, recall, Pobeda earned a fantastic 19% operating margin, which if independent, would have tied it with Gol and Pegasus as the third-most profitable airline in the world (only Allegiant and Air Arabia were better).
Pobeda in any case thought it best to suspend operations in April and May. But the LCC began flying domestically again on May 31, filling more than 90% of its 189-seat B737-800s right off the bat. Aeroflot sees Pobeda as “uniquely positioned to bring back capacity to the market thanks to its value proposition, appealing to cost-conscious passengers.” Aeroflot itself faces a tougher road to recovery given its exposure to intercontinental markets, and sixth-freedom markets connecting regions like Europe and northeast Asia, or North America and the Middle East.
But it does have a large home market ripe for domestic expansion. In fact, Aeroflot plans to add some new domestic destinations this year, namely Chita, Orsk, and Yaroslavl. Markets served by its Aurora unit in Russia’s far east are less affected by Covid-related demand declines. That said, the virus is hitting Russia hard overall. Aeroflot and other Russian airlines did receive $118m in government subsidies, which isn’t much. More could be forthcoming, with Aeroflot eligible for extra help as a systemically important company to the economy.
Speaking of the economy, lower oil and gas prices always mean trouble for Russia, though Aeroflot recalled how the 2015 oil bust saw Russians merely shift their international travel to domestic, rather than simply foregoing vacations altogether. In the meantime, the airline, which is 51% government owned, is busy cutting costs, securing more capital from Russian banks, suspending all advertising activities, and discussing aircraft deferrals with Airbus. It certainly doesn’t want any more A350s right now. It’s prior goal of taking 30 planes overall this year is no longer valid. Almost all of its planes, by the way, are leased rather than owned.
IndiGo Bullish on Recovery, and Wizz Sees Opportunity
- On May 25th, India’s national government allowed its airlines to restart a third of their domestic flights, with a host of new protocols and guidelines to prevent the spread of Covid-19. But some states within the country retained their flight restrictions, meaning carriers like IndiGo — as of last week — had only returned about one-fifth of their domestic flying. In its calendar Q1 earnings call last week, IndiGo said it’s eager to build back schedules. Flights it already restarted are about 70% full, and one route in particular — Delhi-Ranchi — is already making money (Ranchi is a hub for mining coal and other natural resources).
The carrier’s outspoken CEO Rono Dutta, who once served as president of the U.S. giant United, said Indian family-visit traffic will recover rapidly despite the virus, joking that “Indians have family everywhere, and they’re like, ‘Hey, I don’t care if I die, I’m going to meet my sister or whatever.’”
Looking back at last quarter, January and February were profitable, but March saw operating losses ex special items of $52m. That led to an $18m operating loss for the whole quarter, which translated to a negative 2% operating margin. Revenues rose 5% y/y on 4% more ASK capacity. Operating costs rose 12%, even with fuel costs up just 3%. IndiGo does not do fuel hedging, a “dumb idea” for airlines, according to Dutta. “Airline after airline has got burnt terribly… What the hell do we know about the commodity market?”
Along with cheaper fuel, the airline is taking advantage of high cargo yields by converting ten of its A320s into freighters. In fact, it might even keep a dedicated cargo fleet even after the crisis ends. More importantly, IndiGo is experimenting with new network models for its core passenger business, and mindful of longer-term international opportunities as Gulf hubs — which gorged on Indian traffic — downsize significantly. Management does not, however, have any interest in buying another carrier. The immediate focus is cash and liquidity, as opposed to profitability and growth. But with hundreds of A320/21 NEOs still on order, IndiGo remains a long-term growth airline, with every intention of replacing its older-generation A320s.
While cutting pay across the company and introducing unpaid leave options for workers, it retains enough staff to quickly scale up flying when demand merits and governments allow. About 40% of its costs are fixed, including aircraft rentals with lessors, which are critical business partners — “Our relationship with our lessors is very, very critical to us; it’s one of our core success factors.” But what about all the new costs associated with extra cleaning and other new health protocols? There will be some effect, including a roughly 10% to 15% increase in airport staffing costs to manage the additional tasks.
But right now anyway, this is far outweighed by the sudden absence of airport and air traffic control congestion, normally a frustrating and expensive reality in India. Not having to circle around for lengthy periods while waiting to land in Mumbai means lower fuel costs, labor costs, and maintenance costs. In addition, some of the new procedures themselves actually lower costs, such as requiring all passenger check-ins to be done online rather than at the airport. The crisis separately led India’s aviation regulator to extend a deadline for replacing NEO engines that contained some early glitches (IndiGo has about 40 planes in which one of the engines still needs to be replaced). Long term, the airline remains bullish, comparing itself to Southwest in the U.S., which “took people out of cars.” IndiGo thinks it can succeed much the same as its planes “take people out of railways.”
- It’s emerging as one of the brightest stars of the post-pandemic airline industry. Wizz Air, one of the most profitable airlines in the world before the crisis, has the cash, the business model, and the determination to become even stronger now. The carrier’s negative 10% operating margin last quarter shows that it’s not immune to the crisis. Last year, its margin for the offpeak period was slightly above break even.
Recent months, frustratingly, have seen heavy fuel hedge losses, consistent with what other European airlines have experienced. Wizz was forced to suspend most of its flying in March, such that total ASK capacity for the quarter only increased 4% y/y, compared to a 22% increase in the preceding quarter (Q4, 2019). The ultra-LCC, owned by America’s Indigo Partners, saw revenues last quarter rise just 4%, while operating costs jumped 14%. But Wizz says it has enough cash to last it two years, even if it doesn’t carry a single passenger over that period.
And that’s without any significant government aid. It’s one of the few airlines worldwide still getting rated as investment grade. It’s one of the few airlines honoring its original commitments with Airbus. And though it’s cutting jobs, it still plans to grow seat counts 10% this year as more A321 NEOs arrive. Wizz is nothing if not bullish.
As rivals across Europe dramatically downsize (think Lufthansa), Wizz plans to open new bases in Milan Malpensa, Larnaca, Tirana, and Lviv. It sees opportunity to expand from London Gatwick. Other airports are practically “begging for capacity.” It will own 70% of a new airline venture it’s launching this month from Abu Dhabi, targeting eastern European cities at first. Wizz Air Abu Dhabi will grow from three to six planes within six months, a more aggressive expansion than originally planned. In 10 years’ time, it could have as many as 50 planes.
Back in Europe, Wizz is immaculately positioned to benefit from the price-sensitive, shorthaul, leisure demand revival expected to lead the recovery. In fact, it’s already seeing it. Booking patterns are starting to normalize, with half of reservations now coming in within 10 days of departure, rather than very far out. It’s adjusting revenue management algorithms to learn the new patterns. At the same time, its surveys show that 65% of customers intend to travel in the next six months, and 30% within the next two months.
Wizz says the average age of its customers is 36, and that its many younger travelers “tend to be more adventurous, more agile, and seeking more adventures.” The airline sees great opportunities to grab traffic from downsizing rivals. It sees great opportunity to lower its costs; “This is the time to bargain,” said CEO Jozsef Varadi. He does however worry about governments not coordinating their reopening policies. “We are opening to 45 countries, and there are no two countries with the same set of measures in place or the same interpretations of those measures.”
Make no mistake: Ryanair, the king of European low-fare travel, has its wary eyes on Wizz. That’s why it’s expanding with its Polish unit Buzz, for example. Indeed, Wizz Air is trying to out-Ryanair Ryanair. Varadi even has a little of Michael O’Leary’s acid tongue, as he demonstrated with a verbal lashing of Italy’s insufferable flag carrier. “So with regard to Alitalia, I think Alitalia is kind of the joke of the industry for quite long now… personally, I’m a little tired of following it, to be honest, and I don’t really care what’s happening to Alitalia.”
- Turkey’s largest low-cost carrier Pegasus unsurprisingly lost money last quarter as the Covid pandemic struck the industry. Its operating margin, however, at negative 8%, wasn’t as bad as the negative 12% figure posted by its more global rival Turkish Airlines. The LCC’s revenues fell just 1% y/y despite 7% less ASK capacity — ancillaries (including a jump in ticket cancellation fees) helped with that. Operating costs, meanwhile, increased 1%.
Pegasus joined Turkish in restarting domestic flights last week, hoping to get a least something out of the typically busy summer tourist season. Turkey happens to be one of the most visited countries in the world, and the pandemic’s impact on tourism has been economically devastating. Eventually, international flying will resume too, important because it typically generates more than 40% of the company’s revenue. Domestic accounted for just 21% last quarter, with the balance mostly ancillaries. Pegasus still has lots of A320 NEOs on order.
Helpfully, one of its local rivals called Atlas Global collapsed just before the Covid crisis. On the other hand, Turkish intends to follow through on using its LCC Anadolujet to replace all of its flying from Istanbul Gocken airport — that’s the main base for Pegasus.
Separately, Turkish press reports indicate that the first week of restored domestic flying saw pretty full planes. Pegasus, said one report, filled about 60% if its seats. One final note about the airline: Last year, as mentioned in the Aeroflot item above, Pegasus was one of the world’s five most profitable airlines, trailing only Allegiant, Air Arabia, and Gol. The simple explanation for that was its phenomenally lucrative peak summer season.
Q1 Operating Margins…So Far
|Airline||Q1 Operating Margin|
- Rankings of airlines that have reported so far (excludes special items)
- Delta CEO Ed Bastian spoke by video with Business Travel News (BTN), expressing grief over the death of George Floyd in Minneapolis, where Delta has a major corporate presence. Bastian also honored the 10 Delta employees who have died from Covid-19. As for business, Delta is seeing “modest green shoots,” carrying about 65k passengers on the day Bastian spoke (June 3). This was still far below normal but up considerably from the low point in mid-April.
As economies start to open, the airline is seeing more discretionary travel, notably to non-city leisure destinations like Florida, Arizona, and the mountain states (i.e. Colorado and Utah). Business travel is still very quiet, though a few auto company executives in markets like Detroit are starting to fly again, following personnel from transportation companies like UPS and FedEx. Longhaul international demand will take at least 12 months to meaningfully recover, but Bastian already has eyes on restarting some services, notably to Seoul where the virus is largely under control, where cargo demand is heavy, and where Delta has a close ally in Korean Air.
Systemwide, load factors are approaching 50%, which is close to the 60% cap the carrier has temporarily imposed to reassure travelers. So it’s adding back flights, with June departures scheduled to be up 20% from May levels. July should see double the number of flights operated in May. As schedules get rebuilt, of course, connectivity options will grow.
As casinos, restaurants, hotels, and theme parks reopen, meanwhile, this will stimulate more leisure travel. And leisure travel itself will stimulate some business travel, as executives from leisure and hospitality companies need to start moving again. Disney, by the way, ranked number 31 on BTN’s latest list of top 100 corporate air travel spenders (the consultancy Deloitte tops the list, followed by IBM, PwC, EY, and Apple).
One bright spot for Delta is its American Express partnership, with spending on Delta-branded Amex cards down for sure, but down a lot less than its air traffic. Looking ahead, Bastian sees the U.S. airline sector shrinking between 10% and 30% over the next two or three years. The economic recovery, he guesses, will look like the Nike Swoosh, gradually rising after a big dip. But the recession is a big one, and a deeper concern than the public’s current virus fear, which should dissipate as treatments and perhaps vaccines are developed.
On the separate topic of Delta’s overseas partners, Bastian says they’ll need Delta’s help more than ever as they navigate the crisis, and in Latam’s case bankruptcy. Bankrupt Virgin Australia is a Delta joint venture partner too, albeit one less strategically important. Much more strategically important is Virgin Atlantic, which is still fighting to avoid bankruptcy, looking for government aid in the process.
- Airlines are retiring more fleet types in response to the collapse in demand from the Covid pandemic. Air Canada is retiring its five mainline B767s, after 37 years of operating the aircraft. In addition, the company is retiring the 25 of the type operated by low-cost subsidiary Rouge. This leaves a hole in Rouge’s fleet as its B767s were the only aircraft it operated capable of flying transatlantic missions.
- Delta, meanwhile, retired the last of its MD-88 and MD-90 aircraft, two years ahead of schedule. The “Mad Dogs,” beloved by aviation geeks the world over, served as the cornerstone of Delta’s fleet for almost four decades, and was an important part of Northwest’s fleet as well. With the retirements, no U.S. mainline carrier operates the MD-80-series aircraft, which trace their lineage back to the DC-9; American retired its Mad Dogs last year. But don’t fret: Delta (and Hawaiian) continue to operate B717s, the last generation of the high-tail twinjet, rebranded after Boeing bought McDonnell-Douglas.
- Bombardier effectively exited the commercial aircraft market on June 2, when it completed the sale of its CRJ program to Mitsubishi. The airframer said it will complete the 15 CRJs still in its backlog, with deliveries expected in the second half of this year. The deal closed for $550m and included the assumption of debt. Bombardier sold its Dash-8 to Longview Aviation Capital, which revived the de Havilland brand for the type. It sold its CSeries program to Airbus, which renamed it the A220.
- Embraer reported its first-quarter results were, like almost everyone else’s, bifurcated to before Covid and after Covid. The company has not seen any cancellations from airlines due to the pandemic, although it says some carriers have deferred orders. The quarter was marked with some strengths, including an order for 20 E175s from SkyWest, and continuing deliveries of five commercial aircraft. Embraer reported $140m in Q1 revenues but a loss of $104m. It assures investors it has the liquidity to see it through the next quarter. In terms of cost-cutting, 50% of Embraer’s employees are either on furlough or have had pay cuts.
Notably, Embraer’s business aviation and defense units have not been significantly affected by the Covid pandemic. The company warns that the second quarter may be rougher than the first. Most frustrating of all is Boeing’s decision to back away from a joint venture covering its commercial jets.
- Southwest is joining the ranks of airlines that are seeking to reduce their workforces. The Dallas-based carrier famously has never had an involuntary layoff in its history, and it probably still won’t. Earlier this year, CEO Gary Kelly said Southwest was negotiating with its unions for some sort of voluntary package or concession, and a last resort would be layoffs.
Thus, the company is offering voluntary leave. Employees will have two options. The first is an extended emergency leave program that requires the employee to take a minimum of six months off, although the company will provide health and flight benefits and partial compensation. The second, a voluntary separation package, gives employees a cash severance based on years of service and maintains flight benefits for four years, in most cases. “Southwest is taking every action possible to protect the Southwest family and offer job protections to our valued employees,” the company said in a statement. “These new voluntary programs are designed to support both Southwest’s long-term success and the goal of avoiding furloughs or layoffs.”
- Members of Parliament in the U.K. are calling for the government to strip British Airways of some of its lucrative London Heathrow slots over what they allege is excessive job cutting by the carrier. BA had announced plans to reduce its workforce by 12,000 employees and to change the contracts of several thousand of those that remained. Unions blasted this plan when it was first announced and alleged that IAG was unfairly targeting its British employees while its Spanish employees got more favorable packages. The complaint caught the ear of lawmakers who are calling BA’s plan “unethical,” “immoral,” and “opportunistic.” They have called on the civil aviation regulator to investigate and to determine if punitive measures, like taking back Heathrow slots, are in order.
- Cowen & Co. analyst Helane Becker predicts the U.S. airline fleet to shrink by more than 20%, with another 337 aircraft retired or parked in addition to the close to 1,000 that already are grounded. This will result in airlines needing between 11,000-13,000 fewer pilots. Becker added that this reduction in force is more likely to be through retirements and buyouts than layoffs, however.
- Former Spirit CEO Ben Baldanza and former Airline Weekly editor Seth Kaplan, in their weekly “Airlines Confidential” podcast, make an important point about early-out packages, like the ones now offered by the Big Three and Southwest. The process carries the risk of adverse selection, in which the best and most skilled employees, with the greatest ability to find other jobs, wind up being the ones opting to leave. Baldanza thinks airlines will quietly tell their most valuable employees that their jobs are safe, to discourage them from leaving.
- Zurich Airport is pressing ahead with a terminal improvement project, using the near absence of passengers to complete the work. And it was indeed a near absence of passengers — the airport had almost no flights, except for cargo and a few passenger flights. Management expects traffic to begin returning in June and July, although it declined to forecast by how much. The airport is awaiting a court decision that would allow it to reduce fees by 15%. Although the airside is ready to go and meet any increase in traffic, concessionaires may choose to remain closed, as traffic may not return in sufficient levels to make business viable, the airport’s management said.
- Germany’s Nuremberg airport is launching an incentive plan to help airlines struggling with the collapse in demand caused by the Covid pandemic. The airport is reducing landing fees and airport infrastructure charges by up to 95% — on a sliding scale based on load factors — to maintain flights. The program will run until next March. The airport also is waiving all fees for airlines that launch routes to unserved cities.
- Delta is bucking an industry trend by committing to blocking middle seats on all flights through Sept. 30. It will maintain its capacity caps, too: 60% of economy and 50% in first class. The carrier also is requiring passengers and crew to wear face coverings inflight and is installing plexiglass shields at its ticketing counters. Inflight food and beverage service will be limited. JetBlue has committed to blocking middle seats until July and will reassess then. But other carriers, notably United, are not blocking all middle seats but are endeavoring to leave the seats empty.
- Alaska Airlines is adding a frequent-flier bonus for its Mileage Plan members who fly between now and the end of the year. The carrier will add a 50% bonus of its elite miles to any itinerary, allowing passengers to accrue points more quickly. The carrier also is upping its credit card benefits, including awarding two miles for every dollar spent at restaurants and takeouts from now till the end of July.
- Meanwhile, Frontier has instituted touchless temperature checks for passengers and crew at all the airports it serves. Anyone with a temperature above 100.4 degrees Fahrenheit will be denied boarding. Face masks or coverings are required onboard. Passengers booking tickets online will have to attest that they have not been ill or in contact with a sick person for 14 days and that they will heed the company’s temperature screening and facial covering policies, among other measures.
- China and the U.S. stood down from escalating tensions that caught airlines in the crossfire. The U.S. Transportation Department (DOT) moved to ban all flights by Chinese carriers to the U.S., in what it said was a response to the Chinese government’s capacity constraints on U.S. carriers. China had limited flights to the country to those that were operating on March 26, but U.S. airlines had suspended their flights to the country earlier in the year. This move by the CAAC effectively shut U.S. airlines out of the country, and the DOT said it would suspend flights by Chinese carriers (Delta, American, and United had said they wanted to resume China flights.)
After a few days of a standoff, the two sides backed down. Now, China is allowing each U.S. airline to operate one flight per week, while DOT has permitted Chinese carriers to operate two flights per week, with the decision on which carriers can perform the flights left up to the Chinese government.
- Emirates is inching back slowly to where it was, if still a long ways off. The carrier from June 15 will begin flights to 16 cities, bringing its total number of destinations to 29. Flights to New York, Brisbane, Taipei, Hong Kong, Singapore, Zurich, Amsterdam, and Copenhagen are among the routes the carrier will reopen. The carrier also will permit passengers to transit through Dubai across all the routes it is operating, bringing some semblance of its former worldwide one-stop network back. All flights will be on B777-300s. President Tim Clark said the carrier’s A380s will return, but not yet.
- IATA gave its review of air traffic trends for April, the “disaster” month in which aviation all but came to a standstill. Measured by revenue passenger kilometers (RPKs), worldwide traffic was down 94% on 87% less ASK capacity. Mercifully, airlines operated 30% more flights in May than April, though the number was still down 73% versus last May. The markets farthest along in recovery are China, Vietnam, and South Korea, where domestic flight activity is now within about three quarters of where it was this time last year. New Zealand is showing signs of life domestically as well.
IATA said separately that domestic fares throughout the industry were down 23% y/y in May, though keep in mind that fuel and other costs were much lower too. Signs of rising business confidence, talk of “travel bubbles,” and spikes in travel searches on Google are all encouraging. But IATA still worries that governments will ignore newly published guidelines on getting air travel restarted. China’s airlines, by the way, saw domestic traffic decline 67% y/y in April, little changed from March. Their February traffic was down 85%. Capacity in China, it seems, is recovering faster than traffic, which isn’t much helpful.
- IATA is calling on the world’s governments to coordinate and adopt ICAO’s recommendations on mitigating the spread of Covid-19. ICAO recently issued what it calls a layered approach to ensuring air travel is safer. It recommends social distancing; face masks or coverings; routine sanitation of all passenger areas in airports and aircraft; health screening, including body temperature and what it calls “visual observation;” contact tracing; health declaration forms; and testing, when an accurate rapid-response test is available. IATA can’t say it enough: Without a coordinated approach by governments worldwide, air travel will not return as quickly as it could.
- Here’s an interesting problem. Cargo demand dropped by the largest percentage IATA has ever recorded: 28% in April compared with the year prior. But because the Covid pandemic caused the cancellation of so many passenger flights, IATA reported a cargo capacity crunch. There simply wasn’t enough belly-hold cargo capacity to meet cargo demand. Available freight ton kilometers fell by 42% in April, y/y. Although many airlines the world over are temporarily converting passenger cabins and flying cargo-only flights, this has not been enough to meet demand, IATA says. “The result is damaging global supply chains with longer shipping times and higher costs,” IATA Director General Alexandre de Juniac said.
- In 2019, American had the most disruptive labor relations of the U.S. Big Three. It had the most disruptive fleet problems, owing to its large B737 MAX exposure (NEO delays didn’t help either). It had the most exposure to the difficult Latin American market. But it also had the highest reliance on the U.S. domestic market, which is suddenly a major plus in the radically altered world of 2020. Last year, according to Cirium schedule data, 66% of American’s ASM capacity was domestic, compared to 63% for Delta and 56% for United. (Measured by revenues, the percentages were 74% for American, 72% for Delta, and 62% for United). Not a huge difference with Delta, but perhaps enough to give American a slight edge as the industry tries to recover from the current crisis.
Last week. American gave a rather bullish assessment of its recovery, one certainly more bullish than its worst-case scenario laid out in April. During the last week of May, it was carrying an average of 110k customers per day, up from just 32k per day during April. As expected, the driver of the increase is domestic leisure traffic, especially to Florida and the mountain region covering Montana, Colorado, Utah and Wyoming, all home to popular national parks. American also mentioned Gulf Coast cities (the biggest non-Florida ones being Houston and New Orleans), and three specific southeastern leisure spots: Asheville, N.C.; Savannah, Georgia; and Charleston, S.C. In response, American will restore flights to these markets, especially from Dallas DFW and Charlotte, its two largest hubs.
Southeastern states like Florida and Georgia, by the way, have been quickest to reopen their economies. Next month, American will fly 55% of the domestic capacity it flew last July. It’s also reopening airport lounges and further tempting travelers by offering double AAdvantage miles and waiving any change fees for flights booked in June. Emphasizing its sunshine state credentials as theme parks like Disneyworld re-open, American said it will offer more Florida seats than any other airline next month.
As for international service, American restored a few Latin and European routes last week, with a few more coming back now through early August. Big South American routes to Brazil, Argentina, and Chile won’t return until the fall, and Asian routes perhaps not until 2021. American’s faster-than-expected domestic recovery, incidentally, sent U.S. airline stocks up again last week. Sharply up (see stock chart below). Stocks also got a lift from signs in the employment market and elsewhere that the U.S. economy is starting to recover from its late-March and April collapse.
- Alaska Airlines, largely quiet since the crisis began, broke its silence with a virtual appearance at an online conference hosted by the Swiss bank UBS. CFO Shane Tackett said load factors rose to 40% in May, from 15% in April, with signs of ongoing sustained demand recovery. Cancellation rates are down. Fewer customers are asking for refunds. And people are actively searching for winter vacations, signaling lots of pent-up demand. Alaska is selling its full schedule of flights for the Thanksgiving and Christmas holiday season, though like other airlines, with the intention of ultimately cutting a lot.
Looking back, capacity for both April and May was down close to 80% y/y. June will be down 70% to 75%, which isn’t much of a change (American, you can see, is restoring flights more aggressively). Alaska is pleased to rely more on leisure traffic than business traffic, which will play well in the recovery. But it also reminds industry watchers that many of its bookings during the next few months will be credit sales rather than cash sales, in other words, people redeeming credits they’ve accrued from having their March, April, and May flights cancelled.
In a normal period, Tackett said, customers hold about $50m to $70m worth of outstanding credit in their e-wallets. The amount right now is more like $500m to $600m (Alaska’s total revenue last quarter was $1.6b). It could take a year or so, Tackett estimates, before returning to normal levels of cash sales. Credit sales, to be clear, will count as revenue when passengers actually redeem their credits for tickets and fly. It’s just from a cash management perspective that they won’t be helpful. Having so many outstanding credits could affect pricing and revenue management. More importantly, prices will likely be depressed amid a glut of empty seats.
Of course, the single biggest downward driver of average fares is lack of close-in business demand, hurting even a leisure-heavy carrier like Alaska. Being in Seattle could help, as resilient companies like Amazon and Microsoft (if not Boeing) recover quickly. The state of Alaska itself is largely Covid-free and the type of outdoorsy wilderness destination that’s showing popularity amid the pandemic. Interestingly, Tackett seemed to downplay Alaska’s once-vaunted ambitions in California. And he said California-East Coast transcon flying is currently the most depressed part of its network.
The airline is still full-speed-ahead on its new partnership with American and its intention to join the oneworld alliance. It’s eager to shed A319s and A320s inherited from Virgin America but likes its A321 NEOs — they can be a very profitable part of Alaska’s future. That said, moving back to an all-B737 mainline fleet is an option too.
Alaska, meanwhile, is still pursuing additional liquidity, including $1.1b it’s negotiating to borrow from Uncle Sam. It’s hoping to never have to use the money it borrows and will try to repay it as fast as possible. It still thinks its operations can stop bleeding cash by the end of the year. It does emphasize, however, with employees and other stakeholders in mind, that the extra cash can’t justify complacency. Alaska will still need to thoroughly cut costs, in other words. The sentiment to avoid, Tackett explained, is: “Oh, I’ve got a safety net. I don’t have to make as many of the tough decisions.”
- At the same UBS event, JetBlue’s CFO Steve Priest joined the chorus of U.S. carriers reporting some positive traffic momentum. The airline’s northeast-to-Florida market is a notable bright spot (with two-thirds of bookings originating from the northern end). Another is the family-visit Puerto Rico market from northeastern cities and Florida. Differing a bit from Alaska’s comments, JetBlue sees relative strength in transcon markets too. “What is actually hurting more than anything else,” Priest said, “is the very short-haul-type business,” pointing to markets like Rochester and Syracuse to New York City. In these sorts of drivable markets, people are mostly choosing car over plane. Corporate demand is “quiet” too, but about 80% of JetBlue’s demand is family-visit or leisure oriented.
One positive sign is a slowly normalizing booking curve, after about six weeks of seeing only very close-in bookings or very far-out bookings (i.e. for Thanksgiving and Christmas travel). Southwest, Priest said, might have higher load factors right now because it’s not exposed to northeastern markets like New York, where most businesses are still closed. JetBlue’s number one financial priority is decreasing its cash burn, which now stands at about $10m daily, from $18m in late March. More than 60% of workers are on voluntary leave. Capital spending will drop by $1.3b between now and the end of 2022. Cutting labor and maintenance costs are key priorities.
One thing it won’t do is “throw in a crazy amount of capacity just because we’ve seen a few green shoots.” The recent lift in traffic notwithstanding, revenues won’t get back to 2019 levels until 2022 at the earliest, Priest believes. But the crisis will present opportunities, just as the 2009 financial crisis opened doors for JetBlue in the Caribbean and Puerto Rico markets (where American downsized) and the transcon premium market.
- It’s down to two bidders for Virgin Australia. One is Bain Capital, working with former Jetstar CEO Jayne Hrdlicka and the other is Cyrus Capital, which has a long history of doing deals with Virgin Group founder Richard Branson — they teamed up to buy Flybe, for example, which later collapsed. Branson himself might contribute some money to keep some ownership in Virgin. A high-profile bidder now out of the running is Indigo Partners, owner of Wizz Air, Frontier, Volaris, and JetSmart.
At Qantas, meanwhile, management reports signs of heavy pent-up demand and big increases in customers booking flights and Google searching for trips. Normally, Qantas said, it plans capacity months in advance. But with so much uncertainty right now, it’s taking a more flexible approach. It added that flights can quickly ramp up in time for the July winter school holidays if border restrictions have eased by then.
- South Africa’s Comair, in bankruptcy, is unlikely to fly again before November. It’s not any government restriction on flying that’s holding it back. Instead, it’s a shortage of capital — an airline needs cash to restart operations. The carrier’s business rescue practitioners, equivalent to bankruptcy administrators, are currently negotiating with more than 30 potential sources of funding, with six of these “progressing.” Comair had a long history of money making, flying locally on behalf of British Airways, and for its own sake with the low-cost brand Kulula. Some of its most profitable activities included airport lounge rentals, aviation training, and other auxiliary businesses.
When it does return to the skies in November, assuming it gets the new capital it needs, it will do so with 14 fewer planes. That will take it from 27 planes to just 13 (or 16 counting three older B737-400s it will keep as spares). Employees are currently on unpaid leave, with layoffs pending. The entire rescue plan is expected to be finished by March 2021, at which point control of Comair will revert to its board of directors and executive team.
- Also highly relevant to Comair’s future, of course, is the outcome of negotiations to relaunch bankrupt South African Airways, which now seems more likely. Requests for more government rescue funds were rebuffed earlier this year. But politicians are reportedly having second thoughts. The carrier’s bankruptcy administrators plan to present a turnaround plan June 8.
- At a Bank of America conference for investors, the Brazilian LCC Gol stressed its staying power in the crisis, and the aspects of its business model that will help it recover in the nearish-term and thrive in the longterm. Number one, it says, is the airline’s predominantly domestic exposure with great slot access at the nation’s most important airports. It also cited its proven ability to tap underpenetrated markets within Brazil. Third is its popular Smiles loyalty program and other manifestations of a strong customer following. Fourth, Gol has a “a highly defensible, low-fare, point-to-point network.” Fifth is its track record in operational reliability, cost control, and liquidity management. Sixth, its singular fleet of versatile B737s, including the MAX. And finally, Gol points to its committed controlling shareholder, referring to the Constantino family, which originally founded the airline in 2001.
- Even in the best of times, Aerolineas Argentinas loses lots of money. But it usually avoids any difficult restructuring steps with the help of sustained government subsidies. During the current crisis, one of unprecedented severity, the airline is furloughing more than 7k workers for two months, though still paying three-quarters of their salaries. Unions, though, oppose the measure.
Aerolineas said its revenues are down 97% y/y, without much hope of reviving until September at the earliest. Only then will its government allow flights to restart, though the carrier is lobbying to operate some non-Buenos Aires domestic flights before then. Modestly helpful is the fact that June, July, and August are the offpeak winter months in Argentina. But some of the country’s mountainous areas in the Andes range depend heavily on winter ski tourism, near Bariloche and Mendoza for example.
Last month, Aerolineas was merged with state-owned Austral, a domestic-focused carrier. Now, according to Bloomberg, it could get at least $880m in government subsidies to cover its 2020 needs. It received $680m in subsidies last year. Its CEO, in an interview with Bloomberg, said it would be two years until demand would recover, and many years thereafter before the airline would make any money.
Aerolineas was privatized in 1990, sold to a Spanish tour operator after 9/11, and re-nationalized in 2008. It has made some important strides in recent years, in areas like fleet renewal. But its chances of becoming a strong airline were dashed by Argentina’s repeated financial disasters.
Lufthansa, rescued by its government, tries to reset
At least it’s not alone.
Having to take $10b in aid from its government was no easy pill to swallow, coming at a steep cost. But Lufthansa, suddenly 20% owned by the German state, has plenty of company. Its three main rivals, noted CEO Carsten Spohr, have at least as much government ownership, which was the case even before the crisis. He’s referring to Air France/KLM (28% owned by the French and Dutch governments), IAG (25% owned by state-controlled Qatar Airways), and Turkish Airlines (51% owned by its government in Ankara). All around the world, meanwhile, airlines are receiving huge doses of emergency government aid. If misery loves company, then that Lufthansa has.
What it doesn’t have is a particularly promising profile for the new industry conditions created by the Covid crisis. Lufthansa — nicknamed “the Crane” for the bird on its logo — has long relied more on premium intercontinental demand than its rivals, and more on a cargo market that’s yielding unique opportunities for the moment but simultaneously shrinking and challenged longterm by diminishing world trade. Lufthansa’s giant maintenance arm, along with its catering unit, will have fewer clients and less revenue in a sharply contracting airline industry. Lufthansa’s passenger business too, entered 2020 already burdened with deep structural challenges, not least the incessant losses at Eurowings, a low-cost unit with nearly $5b in revenue last year (that’s similar to what Scandinavia’s SAS produced). Austrian’s problems were no less severe. Ditto for Brussels Airlines.
The group’s sickly 5% operating margin last year reflected these weaknesses. Lufthansa’s core mainline operation did somewhat better. Swiss, the all-star of the group, did better still. But it was a tough year in general, clouded by labor tensions, Brexit fears, NEO delays, cargo weakness, and vicious shorthaul LCC battles in Germany and Austria. By year end, longhaul routes to North America, Latin America, and Asia were all experiencing significant yield declines, in part because Germany’s largest exporters (think companies like Volkswagen, Daimler, and Siemens) were cutting their travel budgets as overseas markets like China weakened.
Speaking of China, Lufthansa and its affiliates were operating 11 routes to five mainland cities (from Frankfurt, Munich, Zurich, and Vienna) when the Covid virus started spreading from Wuhan in January. Among Europe’s airlines, only Air France/KLM and Finnair had more China exposure. Soon, Lufthansa’s entire Asian franchise was in freefall. Next, the virus spread to Italy, and wealthy northern Italy more specifically, a critical market for Lufthansa — it even owns a small Italian carrier there called Air Dolomiti. To its great relief, the group refrained from satisfying a pre-crisis temptation to invest in Alitalia. Whew.
All of this made for a nightmarish first quarter. As it belatedly reported last week, Lufthansa suffered a monstrously bad negative 19% operating margin for the period, substantially worse than even Air France/KLM’s negative 16%. A year ago, the group’s Q1 operating margin was negative 4%, which was bad enough. It was forced to slash passenger ASK capacity by almost a fifth y/y, with revenues falling nearly as much. But costs were much slower to disappear, dropping just 6%. Fuel hedging proved toxic, costing the airline $148m in the quarter, while causing massive negative accounting adjustments that ballooned the company’s net losses. Its net result would have been worse still if not for heavy income tax relief.
The big relief though, was the $10b in government aid that Lufthansa’s board approved last week. Without that help, cash would have emptied quickly — it’s currently burning through nearly $900m a month, which includes cash outflows from those toxic hedges. Raising capital from private markets was possible, management said, but extremely expensive. So to the state it was forced to turn. Of the $10b, Berlin will pay some $330m in cash to the airline for the 20% stake. The airline gets another $3b-plus in the form of guarantees for a three-year loan. A more substantial $6b lifeline comes as additional taxpayer equity that Lufthansa needs to repay, with interest. It gives the government certain rights such as options to take an additional 5% stake in the event of a takeover attempt, or if the company fails to meet its repayment obligations.
These obligations, make no mistake, are massive, exceeding $10b including interest and coupon payments, with incentives to repay sooner rather than later — interest rates will rise over time. Berlin won’t get to influence the management of Lufthansa, pledging not to exercise the voting rights of its two new board members except in a takeover scenario. It also intends to sell its shareholdings in full by the end of 2023. The arrangement does contain some restrictions on Lufthansa’s right to pay dividends, pay bonuses, and buy other companies. There are some environmental conditions too, but not as strict as what Paris imposed on Air France. The E.U., meanwhile, is requiring Lufthansa to surrender some Frankfurt and Munich airport slots to new entrants, or incumbents if no new entrants are interested.
The group also secured $1.6b in loan guarantees from Switzerland’s government. It’s close to getting aid from Austria too, and perhaps Belgium. Europe’s competition authorities still need to sign off on the deal with Berlin. So do Lufthansa’s shareholders later this month. But assuming the likely scenario that everything goes through, Lufthansa next has the arduous task of rebuilding its already-shaky business while burdened with huge new financial obligations. And it must do so in the middle of a health pandemic, depression-like levels of global unemployment, and a freeze in corporate travel that could take years to thaw.
This isn’t of course unique to Lufthansa. But many of its key rivals, including Turkish and IAG, have a lower cost base, less debt to repay, and arguably less competitive pressure. Most key non-European rivals, furthermore, don’t have toxic fuel hedge contracts draining company coffers. Within Europe, as the quick recovery in shorthaul, low-cost, leisure markets plays to the strengths of LCCs like Ryanair, Wizz Air, and easyJet, it’s the opposite case for Lufthansa, whose shorthaul leisure network is the weakest part of its business.
All of this makes its current restructuring efforts extra critical. Lufthansa already says it might have to sell assets to service its new debt obligations. Fortunately, it owns most of its planes. It still plans to sell its international catering activities. Before the crisis it was considering a partial sale of its maintenance unit. Might it look to sell one of its airline units? Now is no time to sell aviation assets though, and it’s unclear if and when markets will recover.
Like other airlines reacting to the crisis, Lufthansa has already cut its aircraft commitments, implemented government-assisted part-time work programs for 87k workers, and deferred some non-essential maintenance. But uncomfortably, Lufthansa’s single biggest path to longterm survivability, let alone prosperity, is reworking labor contracts. That, to put it mildly, won’t be easy. It’s telling unions that layoffs might yet be avoided, but only with meaningful pay, benefit, and work rule concessions. The group remembers all too well what unfolded after the global financial crisis, when IAG for one addressed labor cost inefficiencies early and thoroughly, helping it produce a decade of superior margins versus its slower-moving rivals Air France and yes, Lufthansa.
Cargo will be a lone bright spot this year, with higher yields expected to generate a y/y increase in profit margins. But things will be tough for maintenance and catering. And recovery in the passenger airline business will take “multiple years.” Lufthansa still intends to pursue its pre-crisis restructuring of Eurowings, including an exit from longhaul flying. But it will be a lot smaller than the original turnaround plan prescribed, having entered the crisis with 191 planes (including the Brussels fleet, plus planes it acquired from Air Berlin). Eurowings will now fly fewer than 100 planes. The group, meanwhile, still seems keen on creating a new brand for low-cost longhaul flying from Germany, including Frankfurt and Munich, modeled on its Edelweiss operation in Switzerland.
Groupwide, Lufthansa expects to downsize its fleet by a massive 300 planes next year. In 2022, it expects to have some 200 fewer planes. And even by 2023 and beyond, after traffic has fully recovered, it will be some 100 planes smaller, though with more seats per aircraft. The point is, it wants to do more with less. Already, it’s decided to permanently retire six A380s, five B747-400s, and 11 A320s. Its 17 A340-600s will be temporarily grounded for at least another 12 months. At Austrian, three B767s and 18 Q400 turboprops have already been retired. Brussels, whose specialty is sub-Saharan Africa, will no longer be part of Eurowings. Management hasn’t yet said what it plans for the 20 giant B777-9s due to start arriving next year. In total, Lufthansa began the year with 198 planes on order, including 30 A350s, 20 B787s, and 126 A320-family NEOs. These are state-of-the-art jets that will serve it well as it simplifies and downsizes.
The carrier does point out that even pre-crisis, it was moving away from its overreliance on premium business demand, reducing the size of its longhaul premium cabins for example (most of its U.S. rivals were doing the opposite). On many aircraft, it removed first-class cabins. Separately, executives hinted that its five hubs, all located relatively close together, might be too many. Many of its largest connecting traffic flows, it said, can be handled by any of its hubs (think flows between say, Milan and New York, which can go through Frankfurt, Munich, Zurich, Vienna, or Brussels with similar ease).
Lufthansa admits that the pace of its own recovery will depend a lot on the health of the critical transatlantic market, where it works closely with United and Air Canada. Naturally, Japan and China are major markets too, served in partnership with ANA and Air China. It works closely with Singapore Airlines as well. The troubles of leisure-oriented rivals like Condor and TUI will help, though they too received lots of government help. Eyes will be upon the continent’s three top LCCs — Ryanair, easyJet, and Wizz Air — to see what they have planned post-crisis for the German and Austrian markets.
Lufthansa, meanwhile, hopes to redefine its relationships with airports, air navigation providers, and aircraft suppliers, demanding they share the burden of rebuilding from the industry’s greatest-ever demand shock. Its relationship with Germany’s government, of course, is already thoroughly redefined. But the most important negotiations of all — with labor unions — is the next big focus. No, it won’t be alone in having to ask its workers for deep concessions. But that’s small comfort for an airline with big problems.
Lufthansa Annual Operating Margins
Source: Company reports; excluding special items.
Around the World: June 8, 2020
|Airline Name||Change From Last Week||Change From Last Year||Comments|
|American||77%||-39%||Filled 15% of its seats in April, 41% in the first 23 days of May, and 55% from May 24-29|
|Delta||36%||-38%||Look at those stock gains last week! Delta jumps less than American or United but investor bullishness rising all around|
|United||51%||-48%||Latest U.S. jobs report better than expected but unemployment rate still high at 13%|
|Southwest||19%||-24%||Still intends to open its newest city, Steamboat Springs, Colo., sometime before the end of this year|
|Alaska||25%||-31%||Of its roughly 70 Airbus planes, all but about 10 are leased rather than owned; inherited with Virgin America takeover|
|JetBlue||36%||-24%||Sabre, the big GDS, announces big restructuring that includes job cuts|
|Hawaiian||34%||-27%||Has its website in four different languages: English, Japanese, Chinese, Korean|
|Spirit||75%||-55%||Load factor for all North American airlines was just 15% in April, IATA reports; U.S. obligation to maintain service to all markets depressed figure|
|Frontier||(not publicly traded)||Restoring aircraft and flights more aggressively than others; will have 75% of its planes back flying by next month (Travel Weekly)|
|Allegiant||16%||-14%||Las Vegas, its home city, open to tourists again; ad campaign to lure people back delayed due to nation’s civil unrest|
|SkyWest||33%||-30%||Leisure and hospitality, including restaurants and hotels, by far the biggest source of job losses in current unemployment crisis|
|Air Canada||28%||-48%||Raised more than $1b by issuing new bonds and convertible shares; some reports suggest it might be losing interest in Transat|
|WestJet||(not publicly traded)||Changes refund policy; some customers now being given cash refunds rather than future flight credits if requested|
|Aeromexico||22%||-58%||Mexico’s government says it and other big companies haven’t paid their share of taxes; demanding payment in time of crisis|
|Volaris||29%||-19%||Announces another round of new flights as it builds back schedules|
|LATAM||83%||-75%||Layoffs begin; almost 1,000 workers (based in Chile, Peru, and Colombia) will leave company|
|Gol||55%||-34%||Talking to unions about extending temporary pay cuts (Valor)|
|Azul||48%||-48%||Aerolineas Argentinas CEO tells Bloomberg he’ll focus on expanding cargo operations even beyond current crisis|
|Copa||30%||-38%||Jump in Covid cases leads Panama to reimpose quarantines|
|Avianca||49%||-90%||LCC rival Viva Air asking Colombia’s government for $50m in credit support, local news sources there report|
|Emirates||(not publicly traded)||Will decide on the future size of its fleet in the coming weeks, Reuters reports|
|Qatar||(not publicly traded)||Boasts of being the world’s largest carrier right now, with more than 15k flights operated since crisis began; giving it experience in protecting pax health|
|Etihad||(not publicly traded)||Wizz Air said its new Abu Dhabi-based unit will be indistinguishable from the rest of the airline in terms of service, branding|
|Air Arabia||8%||12%||IATA singles out Tunisia for a scolding: help your airlines or else, big hit to jobs and GDP|
|Turkish Airlines||1%||2%||As of April 1, its fleet featured 25 all-cargo planes, including seven on wet-lease|
|Kenya Airways||5%||-36%||Precision Air, a regional carrier in Tanzania, reports big losses for 2019|
|South Africa Air.||(not publicly traded)||Air Mauritius not making much progress in restructuring, Bloomberg reports; employees resisting concessions|
|Ethiopian Airlines||(not publicly traded)||Ethiopia still in five-month state of emergency to curtail Covid-19 spread|
|IndiGo||23%||-29%||Says it typically has a one-year planning horizon (for staff, network, fleet, etc.); currently planning just three months in advance|
|Air India||(not publicly traded)||Pilots resisting management efforts to cut pay and enact other cost-cutting moves|
|SpiceJet||17%||-65%||One of the few carriers that hasn’t yet announced its calendar Q1 results|
|Lufthansa||19%||-38%||Tells FVW that Eurowings still aims to break even next year|
|Air France/KLM||37%||-31%||Likely to announce new turnaround plan next month; KLM unions bracing for layoffs|
|BA/Iberia (IAG)||43%||-30%||British Airways and others threatening to sue the U.K. for imposing 14-day quarantine on incoming travelers; Ireland has same policy|
|SAS||18%||-18%||Growing from 15 to 30 planes this month; revival includes 16 new shorthaul int’l routes from Copenhagen|
|Alitalia||(not publicly traded)||Relaunch plan running into E.U. regulatory headwinds; Brussels pushing back (Il Sole 24 Ore)|
|Finnair||28%||-29%||Filled 30% of its seats in May, operating only passenger flights within Europe; all Asia and North America flights grounded|
|Virgin Atlantic||(not publicly traded)||Will recommence flights on July 20; first routes back will be Heathrow to New York JFK, Los Angeles, Orlando, Hong Kong, Shanghai|
|easyJet||31%||-1%||Tourism giant TUI reaches MAX compensation deal with Boeing; also allows carrier to push back future MAX deliveries|
|Ryanair||16%||23%||Buzz, its Polish unit, says it’s talking to tour operators about offering them charter flights to various sunshine spots for this winter, next summer|
|Norwegian||13%||-88%||Expects longhaul B787 operation to be about 40% smaller than what it originally planned for 2020|
|Wizz Air||9%||2%||Only interested in grabbing available Lufthansa Frankfurt slots if fees there drop; abandoned earlier Frankfurt expansion for cost reasons|
|Aegean||5%||-44%||The Economist: 59% of all tourism-related revenue in Greece are booked from July to September|
|Aeroflot||15%||-7%||Hasn’t made a final decision yet on whether to pay dividends this year; surprising it’s still even an option given cash burn|
|S7||(not publicly traded)||Russian oil giant Lukoil says Q1, 2020 aircraft fuel sales fell nearly 20% from Q4, 2019|
|Japan Airlines||12%||-31%||New LCC Zipair postponing launch of pax service but will temporarily fly cargo only to Bangkok BKK from Tokyo NRT|
|All Nippon||7%||-24%||Allowing loyalty plan members to exchange accrued mileage for donations to healthcare workers fighting Covid-19|
|Korean Air||0%||-36%||Large cargo business could make it one of the industry’s better performing airlines in Q2|
|Cathay Pacific||13%||-21%||Beijing’s latest attempt to assert control over Hong Kong could trigger exodus of residents; U.K. may offer quick path to citizenship|
|Air China||17%||-24%||China’s Big Three have issued about $13b in new debt since start of crisis, according to the South China Morning Post|
|China Eastern||8%||-25%||According to Bloomberg, China hasn’t bought any Boeing planes in two-and-a-half years|
|China Southern||8%||-24%||China thinking about creating open skies area covering island of Hainan; would give unrestricted flight rights to foreign airlines|
|Singapore Airlines||13%||-52%||Singapore positioned to benefit if Hong Kong becomes less friendly to foreign capital|
|Malaysia Airlines||(not publicly traded)||Indonesia’s Garuda said average domestic mainline fares rose 25% last year; Citilink’s fares rose 40%; result of gov’t fare regulations|
|AirAsia||25%||-70%||Indonesian unit won’t start flying again until June 19|
|Thai Airways||7%||-57%||Officially informs bondholders that it won’t be able to make repayments; default comes as it attempts turnaround in bankruptcy|
|VietJet||1%||-6%||Vietnam getting widespread praise for its handling of Covid virus; puts it on track to welcome tourists soon|
|Cebu Pacific||27%||-50%||Philippine gov’t says unemployment rate reached 17% in April; highest on record|
|Qantas||16%||-15%||Announces more mainline and Jetstar domestic flying for June and July; could reach 40% of pre-crisis domestic capacity by end of July|
|Virgin Australia||0%||-49%||The Australian profiles founder of Cyrus Capital, one of the remaining contenders to buy Virgin; has done past deals with Richard Branson|
|Air New Zealand||20%||-36%||Assures investors it has no financial covenants attached to any of its borrowings, and no significant debt maturities until 2022|
|Brent Crude Oil||6%||-34%||Brent prices back up to $40 per barrel; still cheap but consistently rising in tandem with demand recovery; note also that U.S. dollar is starting to weaken|
Some stocks traded on multiple exchanges; not intended for trading purposes.