Issue No. 787
European Recovery Derailed
Pushing Back: Inside This Issue
Buckle up, everyone. It’s time for third-quarter earnings season, starting with Delta on Tuesday. The dominant theme across the industry, of course, will be the Covid crisis, and its ongoing decimation of travel demand. Seven months into the crisis — longer if you start from its origins in China — international demand is still largely a big zero. America’s domestic recovery leveled off at a fraction of normal. Internal demand within Europe is sadly trending similarly. The domestic skies are getting busy again in China, Vietnam, and a few other East Asian countries. Same for Russia, and to a lesser extent Brazil. Even where traffic is recovering, however, airlines aren’t earning nearly enough to arrest heavy losses. Not with sharply lower fares. And not without any contribution from international.
Hardly surprisingly, then, that IATA’s doom-laden warnings are only getting doomier and gloomier. It’s now concerned with the industry’s expected cash drain this winter. Promising new treatments for Covid might help. So might Covid testing. Vaccines will surely help in time. But maybe not fast enough to save carriers with weaker balance sheets, especially as government aid programs expire.
EasyJet, despite a strong balance sheet and ample cash, wants more government help. So does Southwest, which absent an extension of federal payroll support, is asking unions for concessions. It’s separately adding new routes and destinations with the goal of generating more leisure and family-visit traffic. Back in Europe, things are getting interesting in Norway as Wizz Air adds domestic routes, Norwegian pleads for more survival aid, and a new startup prepares to enter. AirAsia X is in a last-ditch survival effort, as AirAsia itself retreats from Japan and reassesses things in India. India’s SpiceJet is going to London. And Japan Airlines is launching its new low-cost carrier Zip Air.
Happy Q3 earnings season everyone!
Verbulence
“The crisis is deeper and longer than any of us could have imagined. And the initial support programs are running out. Today we must ring the alarm bell again.”
IATA Director General Alexandre de Juniac, calling on governments to provide more relief.
Earnings
April-June 2020 (3 Months)
- Air Astana: -$40m ; -352%
*Net result in USD/*Net result excluding special items/ Operating margin
Airline Weekly Lounge Live
The pandemic has the hotel and airline industries reeling. But how has the pandemic been different for both, and how are their prospects for recovery different? Skift Hospitality Reporter Cameron Sperance joins us for our weekly livestream, at 12 p.m. EDT, Monday, October 12. Registration is free for subscribers.
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Correction/Clarification
On the earnings board atop last week’s issue, we incorrectly stated TAP Air Portugal’s loss figures for the first half of 2020. The figures we showed ($439m net, or $189m excluding special items) were actually for just the first quarter of the year. The correct first half figures, as accurately shown in the Weekly Skies section, were a $647m net loss, or $431m excluding items. Operating margin for the half was negative 66%.