Issue No. 776
Pushing Back: Inside This Issue
It was nice while it lasted. But the U.S. demand recovery has lost its momentum. After a near-complete freeze in discretionary air travel that started in late March, Americans gradually became more comfortable getting on planes, to popular fun spots like Florida and Arizona. May was better than April. June was looking better than May. By late June though, Florida and Arizona were among the new global epicenters of the Covid-19 pandemic. Would-be travelers grew increasingly wary. Just as damagingly to the recovery, states like New York and Illinois told anyone returning from a hotspot like Florida to quarantine in their homes for 14 days. For most people, that’s not a practical option.
For the U.S. airline industry, the stalled recovery means fading hope of avoiding mass layoffs this fall. United warned it could slash its workforce by nearly half. It won’t be alone. In Europe, Lufthansa is preparing for mass layoffs too, though playing a bit of JetBlue-like offense as well. As JetBlue attacks L.A., Lufthansa is launching a new low-cost unit under the code name Ocean. Elsewhere in Europe, SAS isn’t getting the bondholder buy-in it needs to recapitalize. Virgin Atlantic, on the other hand, appears close to securing new rescue capital.
The virus is a tough foe, resurfacing with mini-outbreaks even in countries with the most success in containing it, like South Korea, Australia, and Japan. The virus is gaining bigger victories in parts of the ASEAN region, where AirAsia’s existence hangs in the balance. Ironically, the historically much flimsier Garuda is on firmer ground, with support from its government and lenders.
In the Covid cauldron of Brazil, Gol surprisingly said it would report a Q2 operating profit, minus extraneous accounting items. Cargo’s helping a lot. Gol’s rival Latam, as it navigates bankruptcy, hasn’t lost any enthusiasm for planned cooperation with Delta. Israel’s El Al will live to see another day with government help. This week, Air Arabia and Etihad will launch their new joint venture.
International borders, meanwhile, remain largely closed, some relaxation within Europe notwithstanding. Is there any way of safely reopening before a vaccine? Is there any way of stabilizing airline cash flows? Is there any way of avoiding a prolonged global depression?
I want to be clear to every pilot notified today of an expected furlough: This is not your fault, you are not alone, and you have your union’s support throughout this terrible ordeal.”United pilots union chief Todd Insler, in a message to members
Mondays With Skift Airline Weekly
Skift Airline Weekly's editors this week discussed the stalling recovery, as coronavirus cases around the U.S. spike. And is now a good time to launch an airline? Register for free to watch the replay here. We'll post an audio podcast as well on airlineweekly.com.
January-March 2020 (3 Months)
- AirAsia: -$313m/-$153m*; -13%
- Garuda: -$124m/-$301m*; -23%
*Net result in USD/*Net result excluding special items/ Operating margin