Aviation Industry Updates: October 27, 2020

Terrain Terrain Pull Up, Pull Up! | Management Adjusts Strategy, Will It Be Enough?

DELTA:

• Delta has lost more than $11 billion in the last two quarters.

• Delta’s third-quarter revenue came up short of analysts’ expectations at $3.06 billion, down more than 75% from a year ago.

• Although travelers are getting more comfortable flying and demand is starting to inch higher, the carrier warned it could take years for sales to recover.

• Kicking off third-quarter reporting for the beleaguered airline sector, Delta said its net loss was $5.4 billion in the third quarter, compared with a profit of $1.5 billion in the year-earlier period. Including its second-quarter results, Delta has lost more than $11 billion during the pandemic so far.

• Bastian said Delta would likely get its cash burn down to $10 million to $12 million a day in the fourth quarter. The carrier could break even and even turn cash-flow positive in spring 2021, he added.

• Delta has spent recent months retiring dozens of aircraft and reducing its footprint to cut costs. About 18,000 Delta employees, about a fifth of its pre-pandemic workforce, accepted buyouts and early retirement packages, prompting a $3.1 billion restructuring charge.

CNBC - Delta Earnings

AMERICAN:

• Revenue dropped 73% in the three months ended Sept. 30 to $3.17 billion from $11.9 billion a year earlier.

• The carrier swung to a $2.4 billion net loss in the third quarter from a $425 million profit a year earlier.

• American shares were down 1.4% premarket. The company said it has authorized a stock sale to raise up to $1 billion.

• American trimmed its cash burn to about $44 million a day in the third quarter from $58 million in the previous three-month period. It expects that to go down to $25 million to $30 million a day in the fourth quarter.

• The airline said it will defer deliveries of 18 Boeing 737 Max planes, taking them as late as 2024.

CNBC - American Earnings

UNITED:

• United Airlines posted a $1.8 billion net loss in the third quarter.

• United was able to further trim its cash burn but still lost about $25 million a day in the quarter.

• Wider-than-expected third-quarter loss as the coronavirus pandemic continued to hammer air travel demand, but the carrier trimmed its cash burn.

• The Chicago-based carrier swung to a net loss of $1.8 billion in the three months ended Sept. 30, from a $1 billion profit a year ago.

• Revenue in the period dropped 78% to $2.49 billion from $11.38 billion in the third quarter of 2019, roughly in line with Wall Street expectations, after the airline cut capacity 70% from last year.

• The airline ended the quarter with $19.4 billion in liquidity. Like other carriers United has raised billions to help weather the coronavirus, through stock and debt sales, including $6.8 billion in debt it backed by its MileagePlus frequent flyer program.

• United’s cargo business was a bright spot in the quarter, with revenue growing 50% to $422 million, highlighting how certain corners of the airline are becoming more important in the pandemic.

CNBC - United Earnings

SOUTHWEST:

• Despite its biggest loss ever, Southwest Airlines was able to cut its cash burn.

• The carrier recently asked unionized employees to take a 10% pay cut to avoid furloughs through next year.

• “We are encouraged by modest improvements in leisure passenger traffic trends since the slowdown in demand experienced in July,” CEO Gary Kelly said in an earnings release. “However, until we have widely-available vaccines and achieve herd immunity, we expect passenger traffic and booking trends to remain fragile.”

• Southwest’s revenue dropped 68% to $1.79 billion from $5.6 billion a year earlier. The Dallas-based carrier lost $1.2 billion in the three months ended Sept. 30, compared with a $659 million profit a year earlier.

• Southwest said it will soon stop blocking middle seats, a measure it had in place to calm travelers worried about traveling during the pandemic. The change comes as Kelly reported during Thursday's third-quarter earnings call that the policy cost Southwest $20 million in lost revenue.

• Southwest trimmed its cash burn to an average of $16 million a day in the three months ended Sept. 30, from $23 million in the second quarter. Southwest said operating revenue would need to recover to 60% to 70% of 2019 levels, double the third quarter’s sales, to break even.

CNBC - Southwest Earnings

Management Admits Empty Middle Seat Safety is BS | What Now?

KEY QUOTES:

• In a Thursday earnings report, Southwest announced it will no longer limit capacity on flights starting December 1. The change marks an end to Southwest's pandemic policy and allows it the opportunity to fill planes through the typically busy holiday travel season.

• "This practice of effectively keeping middle seats open bridged us from the early days of the pandemic, when we had little knowledge about the behavior of the virus, to now," Southwest said. "Today, aligned with science-based findings from trusted medical and aviation organizations, we will resume selling all available seats for travel beginning December 1, 2020."

• Southwest Airlines President Tom Nealon said on the airline's earnings call Thursday that it will take time for passengers to warm up to the idea of fuller planes again because travelers love the idea of an empty middle seat, pandemic or not. "Just to be clear, the open middle seat, it was really not one of our safety components,'' he said. "This was really about customer confidence and getting them comfortable traveling again."

• Southwest said it will notify customers on a flight ahead of time if more than 65% of seats are sold.

• United Airlines and American Airlines have been selling every seat for months.

• That leaves Delta Air Lines as the final remaining big four carrier to limit capacity in aircraft cabins.

• Alaska Airlines announced Thursday it will extend its policy of blocking middle seats until January 6, 2021.

CNN
USA Today

Chinese Aviation Recovering | What Does This Mean For You?

KEY POINTS:

• China Southern Airlines has taken its place as the world’s largest airline, climbing above U.S carriers Delta and American Airlines.

• With the domestic aviation market remaining relatively unfazed in China, the airline has capitalized on the global downturn in aviation to claim the top spot.

• China Southern has almost managed to return to its pre-COVID levels. Whether or not the airline will stay on top remains to be seen, as just last week Delta Air Lines celebrated becoming the world’s largest before being overtaken.

• Other Chinese airlines, including China Eastern Airlines and Air China have also managed to get close to pre-COVID levels.

• By the middle of February, up to 80% of flights were canceled as China’s aviation industry shrunk to Portugal’s size. However, by early September the Chinese market had all but recovered to pre-COVID levels while markets around the world floundered.

• What will help China Southern’s numbers are initiatives like its ‘Fly Happily‘ pass. This pass offers passengers unlimited travel up until 6 January 2021, in an effort to stimulate recovery and restore public confidence in flying.

• China Southern Airlines may keep the No.1 spot for the foreseeable future but are unlikely to hold it once U.S airlines bounce back.

Simply Flying

Southwest Looking at A220 | What Does This Mean for Delta?

KEY POINTS:

• Southwest, having flown the 737 nearly exclusively since 1971, may finally be ready to add a new aircraft type to its fleet. The airline is evaluating its next small jet — one seating around 140 to 150 passengers — and both Airbus A220 and 737 MAX 7 are on the list.

• “We absolutely do need the smaller airplane,” Southwest CEO Gary Kelly said during the airline’s third quarter earnings call on Thursday, Oct. 22. “We have a ton of 737-700s that are coming up for retirement over the next several years.”
  Deliveries would begin around 2025.

• Planemakers are often desperate for new deals as orders tend to dry up and deliveries slow as airlines struggle.

• Boeing, for one, has lost 757 orders for the 737 in 2020 alone, according to its orders and deliveries data through Sept. 30. The cancellations are likely a combination of the jet’s grounding and the COVID crisis.

• At the end of September, Southwest had orders for 30 MAX 7s due by 2024, its latest fleet plan shows.

• The MAX grounding appears to be the straw that broke the back of Southwest’s long-standing exclusive relationship with Boeing. Shortly before the suspension began in March 2019, Kelly told investors that the airline was not considering alternatives to the 737. Things changed quickly. By that April, The Air Current reported that Southwest representatives had visited Airbus to “kick the proverbial tires” on the A220.

The Points Guy

Weekly TSA Numbers Stalling | Will the Holidays Help?

[image_with_animation image_url="2357" alignment="center" animation="None" hover_animation="none" border_radius="none" box_shadow="none" image_loading="default" max_width="100%" max_width_mobile="default"]