Seoul Survivor

Pushing Back: Inside This Issue

A major merger between Korean Air and its weaker rival Asiana signals — perhaps — a new wave of airline industry consolidation. If so, the international landscape could see an easing of competitive pressures akin to what happened after a wave of U.S. airline consolidation from 2008 to 2016. What followed there was a half-decade of double-digit industry profit margins (with a big assist from cheap fuel). United, for one, relishes the prospect of consolidation on international routes, which in this case would get an assist from mass widebody retirements (and fuel too if prices stay anywhere near their current levels).

Levels of optimism are rising across the industry as vaccines to fight Covid prove highly effective in trials. Buttressing that optimism is abundant evidence that lots of people are willing and able to travel once restrictions are eased — the pent-up demand people speak of is real. EasyJet said as much in its latest financial review. The British LCC, along with its compatriot Jet2, have high hopes for next summer. They will, however, need to rough it through the current winter first. For Norwegian, the winter pressures proved too rough — it’s now in bankruptcy. 

There it joins Thai Airways, another carrier with grave problems long before the Covid calamity came. Like Norwegian, it’s still alive in the courts for now but uncertain of its survival prospects. That’s different from Copa and Azul in Latin America, both nursing wounds that are serious but not life-threatening. Azul, particularly, is on the mend as Brazilians pack domestic flights to beach spots like Recife. Copa, unfortunately, has no domestic flights. But it has a track record. For decades it’s earned princely profits thanks to advantages — most prominently Panama’s location and airport — that haven’t gone away. 

Virgin Australia never went away after it declared bankruptcy. Instead, it’s back with new owners, a new chief executive, and a new business plan. It’s been one year, by the way, since doctors in Wuhan, China, diagnosed the first case of Covid-19. As a new year approaches, the disease continues to ravage large parts of the globe, most ferociously across the U.S. There, health care facilities and medical professionals are so stressed that officials are telling Americans: Don’t travel. But it’s Thanksgiving, the busiest travel holiday of the year.     

Verbulence

“We will only grow when we can see that it’s profitable to do. And in the cases where somebody wants to attack us, we will attack back.”

EasyJet CEO Johan Lundgren

Earnings

July-September 2020 (3 Months)

• Asiana: $2m; 1%
• Azul: -$227m; -83%
• Copa: -$118m/-$122m; -330%
• Thai Airways: -$688m/-$518m*; -310%
• Bangkok Airways: -$51m; -127%
• Philippine Airlines: -$160m; -81%
• AirAsia X: -$73m/-$119m*; -712%

April-September 2020 (6 Months)

• easyJet: -$839m/-590m*; -96%
• Jet2: -$87m; -37%

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

Correction/Clarification: In the Nov. 16, 2020 issue, the SkyWest line of our stock updates should have said that nearly all of United's regional flying is outsourced, instead of stating that United does about 45% of its regional flying.