What Could Come Next After Covid?

Pushing Back: Inside This Issue

By now, airlines hoped the Covid crisis would be over. Or at least that the world would be a lot further along in the recovery. September has arrived, almost nine months since Chinese carriers began facing Covid’s wrath. For the world at large, the crisis is now about seven months old. Conditions, it’s true, are not quite as dire as they were in April. Governments have relaxed restrictions on domestic travel and in some cases shorthaul international travel (within Europe most notably). Here and there are mild signs of green shoots: leisure travel in China, intra-state travel in Australia, low-cost travel in Russia, etc. There’s still a decent amount of travel to U.S. and European tourist spots like the Rocky Mountains and the beaches of Greece. Global aircraft utilization is certainly up from its April lows. But total demand — everywhere — remains a fraction of what it was. And airlines, even in China where the recovery is most advanced, continue to lose mammoth sums of money.

The virus, meanwhile, continues to spread, even in places where it was once well controlled. India is a current hotspot. Parts of Europe like Spain are seeing a second wave. The U.S., worst affected among all countries, faces new surges in midwestern states. When will the nightmare end? Hopefully with the arrival of vaccines, likely available in mass quantities next spring or summer. 

August finished with a lineup of airline earnings announcements, which of course featured no actual earnings. Just losses. Massive losses. Some like Qantas seemed relatively upbeat, with plenty of cash and ample exposure to areas of the business poised to recovery quicky, most importantly leisure and family-visit shorthaul demand. Exposure to cargo is a huge plus. In some cases — Qantas is one — loyalty plans are still contributing positively. China’s major airlines, for their part, all posted heavy Q2 losses. Domestic traffic is recovering but still down sharply from year-ago levels. Domestic capacity, in any case, is returning much faster. And intercontinental flying remains largely dormant.

Even amid the quietude, airlines are busy with post-pandemic strategizing. Southwest, joining the parade of carriers beefing up on leisure exposure, will head to Miami for the first time. Intercontinental giants like United, also chasing leisure, are trying to fit themselves into LCC-like clothing. Virgin Atlantic seeks family-visit traffic in Pakistan. Wizz Air will challenge easyJet at London Gatwick. India’s Vistara began realizing its global ambitions with flights to London Heathrow.

The fourth quarter ahead looks bleak. Much bleaker, sadly, than airlines hoped would be the case by then.

Verbulence

“But just as we’ve done in the past, there will be some reinvention required to succeed in a different world.”

Qantas CEO Alan Joyce

Earnings

May-July 2020 (3 Months)

• SAS: -$252m; -58%

April-June 2020 (3 Months)

• Air China: -$739m; -34%
• China Eastern: -$682m; -60%
• China Southern: -$488m; -19%
• Hainan Airlines: -$833m; -101%
• Juneyao Airlines: -$26m; -24%
• Spring Airlines: -$27m; -27%
• Latam: -$890m; -122%
• Aeroflot: -$497m/-$541m*; -162%
• AirAsia: -$270m; -1,318%
• AirAsia X: -$71m/-$102m*; -354%
• Norwegian: -$151m (pretax); -370%
• El Al: -$105m; -27%
• Philippine Airlines: -$227m;-186%
• VietJet: -$48m; -59%
• Bangkok Airways: -$94m; -248%

January-June (6 Months)

• Qantas: -$1.6b/-$431m (pretax ex items); -11%
• Air New Zealand: -$347m; -20%
• Kenya Airways: -$135m; -28%

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

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