Countervailing Cost Currents

Pushing Back: Inside This Issue

It was a week of waiting. Waiting for the results. What would they be?   

Finally, the world learned. They learned that Lufthansa, Singapore Airlines, and Turkish Airlines collectively suffered hundreds of millions of dollars of third-quarter losses. But a major theme for all three was the relief they got from cargo. Turkish almost broke even at the operating level thanks to cargo. Same for cargo-heavy China Airlines in Taiwan. Cargo-heavy Korean Air? It managed another crisis-time operating profit.    

Asia’s international passenger market remains largely dormant with borders still closed. Yet confidence is building with the scourge of Covid nearly eradicated from most of the region. With vaccinations already underway in China and nearing distribution elsewhere, Asian carriers can finally see light at the end of the tunnel. With more and more carriers pointing to travel restrictions as the key factor suppressing demand, their eventual lifting augurs well for a quick demand recovery. Will that translate to a quick profit recovery? That will partly depend on other factors like capacity, costs, and the degree to which corporations buy business class tickets again.

Europe’s airlines are hopeful that vaccines will come to the rescue just in time to save next summer’s peak season. With Covid under decent control during this past summer, carriers with shorthaul-dominant networks did relatively well. Ryanair even managed an operating profit. Covid has since spiraled out of control, however, and tighter travel restrictions once again have European airlines suffering this fall and bleak about the winter. England won’t even let its citizens travel abroad for leisure this month. But again, every time travel restrictions do disappear, the demand recovery is swift and sharp.

Covid cases are dropping, meanwhile, in South America, where it’s almost summer. That gives Gol confidence as it steadily rebuilds its schedule. The state of Sao Paulo plans mass inoculations soon using vaccines from China.

U.S. Covid cases, by contrast, are skyrocketing across the country. Reversing that trend will be job number one for the country’s new president.    

Verbulence

“This pandemic will not be over in a few months. We cannot simply wait this crisis out. It will burden our business, our industry for years to come.”

Lufthansa CEO Carsten Spohr

Earnings

July-September 2020 (3 Months)

• Lufthansa: -$2,3b/-1.6b*; -48%
• Singapore Airlines: -$2.5b/-$891m*; -79%
• Korean Air: -$325m; 1%
• China Airlines: -$28m; -1%
• Turkish Airlines: -$132m; -4%
• Ryanair: -$262m/-$26m ;1%
• Wizz Air: -$281m/-$102m*; -11%
• Gol: -$314m/-$226n*; -78%
• Latam: -$574m; -110%
• Jazeera Airways: -$18m; -107%

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

Skift Aviation Forum November 19

Join us for the inaugural Skift Aviation Forum, held online in partnership with Dallas Ft. Worth International Airport. Guests include Air Lease Corp. Executive Chairman Steven Udvar-Hazy, American Airlines President Robert Isom, Southwest CEO Gary Kelly, and United Chief Commercial Officer Andrew Nocella. You can check out the latest list of confirmed speakers here. Registration is free for annual Airline Weekly subscribers.