Will Airlines Recover From The Coronavirus?

The coronavirus has grounded flights and left millions of people too scared to board a plane. What does this mean for the industry?

In April 2019, there were more than 2 million jetsetters boarding planes at U.S airports every day. Fast forward to the present and the travel demand is basically zero as the world grapples with the coronavirus pandemic. Not only has it left many travelers anxious about catching the deadly virus, but it has also seen massive jobs cut within the industry and many requests for government bailouts.

How has the Coronavirus changed travel?

Many countries around the world have complete travel bans, like Australia, while a number of airports have mandatory temperature checks that you have to pass before boarding a flight, which could become the new norm. Airlines like Delta (NYSE: DAL) are considering asking for informal “immunity passports” to prove that you have already been infected. More recently, major U.S airlines including United Airlines (NASDAQ: UAL), Delta, and Southwest Airlines (NYSE: LUV) now require passengers to wear masks. Also, some flights are keeping the middle seats free so social distancing is easier.

Why United Airlines Reported Gains

This major airline is reportedly planning on slashing around 3,400 management and administration roles in October 2020 and up to 12,250 pilots could be made redundant too. United Airlines’ shares went up by 3.1% following the news that the job cuts could be imminent when the government’s rescue plan runs dry. However, the company’s share price is still down by 70% from December.

The carrier is struggling to stay afloat, with CEO Oscar Munoz revealing at its recent earnings call United Airlines will fly through $40 to $45 million each day during this year’s second quarter. It isn’t all bad news, United Airlines started the month of May with $7.2 billion in cash which includes the $2.5 billion injected by the government. But it is expected the company will burn through most of that cash over the coming quarters, and hence the large number of job cuts to come later this year.

Delta Air Lines

Investment magnate Warren Buffet caused a number of the major airlines’ stocks to plummet, including Delta, which slumped 6.4% after he sold his entire stake in the company. Buffet said that the $8 billion he had put into the country’s four biggest airline stocks was a “mistake.”

The coronavirus has really hurt the business which was clear after Delta reported its first quarterly net loss in more than five years, a huge $534 million. In April, there were around 115,000 flights canceled and the company was burning through about $60 million a day. The government has provided $5.4 billion of support for Delta, and it is unclear how long the airline can survive on a fraction of its usual commerce.

Southwest Airlines

The CEO of Southwest Airlines, Gary Kelly, has been trying to get people flying again, saying they have ramped up their cleaning regime, and also staff and passengers have to wear a mask. He is clearly far more optimistic than Warren Buffet, who was the second-largest shareholder in the company!

Southwest was able to raise $6 billion recently and is also expecting the help of the government. For now, the airline is remaining positive, as it started 2020 with the best looking balance sheet compared to the other 5 major U.S airlines and the lowest total long-term debt. The company will now wait until September to reassess and see if it will be asking for more help.

For now, many of the world’s airlines are just trying to make sure they aren’t grounded permanently. As for the future of the industry, it will greatly depend on governments around the world and advice from health professionals. As a traveller myself, it was quite intimidating having your temperature checked and everyone wearing masks on a flight out of Rome.

I think people will want a nice relaxing holiday once the worst of the coronavirus is over, but it could be a very slow process with a vaccine still at least a year away.

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