Decommissioned and suspended commercial aircraft will be stored at Pinal Airpark in Marana, Arizona on May 16, 2020.
Christian Petersen | Getty Images News | Getty Images
The Covid-19 pandemic has been brutal for U.S. airlines, and significant relief is not expected until the second half of 2021.
FactSet analysts estimate that U.S. airlines’ net losses for 2020 are likely to exceed $ 35 billion. That includes Southwest Airlines’ anticipated first annual loss in more than four decades.
The pandemic ended a decade of profits that the historically booming industry saw through 2020. During that time, they hired tens of thousands of workers, bought new planes, and expanded their networks.
In 2020, airline stocks fell the most in years. American Airlines ‘stock price was down 45%, the largest percentage decline since the airline’s merger with US Airways in 2013. Delta Air Lines’ stock was down 31% while United Airlines was down 51% over the past 12 months. This was the biggest drop since 2008. Southwest lost 14%. The S&P 500 rose more than 16% in 2020.
The pandemic forced transportation companies to rapidly shrink, cut routes and park hundreds of jets. According to the Airlines for America trade group, US airlines increased their total debt by $ 67 billion to over $ 172 billion in 2020 to weather the crisis. The repayment will face headwinds for the next few years.
The good news is that demand for air travel has rebounded sharply from the levels seen at the start of the pandemic. On April 16, the Transportation Security Administration screened 95,085 people at US airports, less than 4% of the 2.6 million people who had passed through those checkpoints a year earlier. TSA airport screenings, triggered in part by the year-end holidays, hit more than 1 million people a day for the last five days through Wednesday, though that’s still about 45% fewer than last year.
As lucrative business and international travel largely got out of hand, vacation travel became the most important market.
Airlines are expected to reduce their losses and in some cases – including Southwest, Delta, Alaska – analysts estimate they will become profitable next year. The approval of coronavirus vaccines has contributed to optimism about future demand for travel, although it is not yet clear when more people will resume flying.
Airline executives recently warned that difficult months await as they have set breakeven point targets and say they will continue to operate limited capacity to meet weak demand. American Airlines President Robert Isom said earlier this week that the airline’s capacity is expected to be 45% of 2019 levels in January and February.
Many potential customers are still not flying as coronavirus infections rise to ever higher records, new travel restrictions are introduced and government officials recommend avoiding travel to slow the spread of the disease.
US officials said last week that all passengers must test negative for Covid-19 before flying to the US after a highly contagious strain of the disease was found in the UK, although this was also found in California and Colorado.
Carriers recently received $ 15 billion in additional wage support under the latest coronavirus relief package that President Donald Trump signed on Sunday. This requires airlines to keep their staff by March 31st and recall more than 30,000 workers they took on leave when the terms of the last $ 25 billion package expired on October 1st.
United Airlines executives believe this will only be temporary.
“The truth is, we don’t see anything in the data that shows a huge difference in bookings over the next few months,” said CEO Scott Kirby and President Brett Hart in a December 21 employee statement. “So we expect the recall to be temporary.”
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