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Aviation Industry Updates: August 4, 2020

By Industry News

United Threatens 3,900 Furloughs and Concessions | Will Other Carriers Follow Suit?

You’ve seen the headlines, some places even reported it as actual WARN letters, but where did the United Airlines 3,900 furlough number come from? Bryan Quigley, United’s Senior Vice President of Flight Operations at United Airlines addressed the Flight Ops Team on Thursday, July 30. To date, United has notified 2,250 pilots, however, in this recent memo Mr. Quigley is making it clear that the situation could worsen.

In an effort to address consistent questions concerning the impact of furloughs related to CARES Act funding expiring after October 1, Mr. Quigley outlined; the current situation, furloughs, outlook, furlough mitigation, and a clear message addressing the “bottom line”. Read on, we’re just starting to get into the details of this memo.

The memo begins by addressing the modest strength United is showing over competitors. Across the industry, airlines have been reporting their devastating Q2 results. Mr. Quigley points out that despite the fact that United did better than peers by “matching capacity to demand, raising debt and preserving cash” they are still dealing with the greatest challenge in aviation history.

The memo highlights the honest approach the company has taken in communicating the state of the industry and the effects had on United. The “bleak picture” of the business shows that total revenue at United “is down 85% over the last seven-day rolling average” as is international traffic. Ultimately revenue is suffering at a higher rate; “despite the optimism, you may hear, demand is not meaningfully improved and without very tough decisions, this is simply not sustainable for us.” said Quigley. He states they will burn 2.3 billion dollars over 3 months.

Boldly, Quigley states that this puts United in a better position than “almost every other major U.S. carrier,” quite a diagnosis of the state of the industry.

As with everyone else in the industry United freely admits they do not know when demand will return, and they will need to back the loans. “Going forward we will be forced to focus on paying back these loans rather than buying new airplanes, hiring new pilots, or even returning pilots who may have been furloughed.” They are losing money at an unsustainable rate.

Recently, United decreased its schedule, the low demand caused by the resurgence of COVID-19 and accompanying restriction has had a real impact on the bottom line.

“This is a very real reminder that hope is not a strategy – and that we need to be prepared for very low demand for a long time to come.” – Bryan Quigley

Confirming the previously announced, and WARN Act notified, furlough number of 2,250, Mr. Quigley states that those numbers were calculated using a generally “optimistic outlook” which no longer exists. United does not expect “customer demand to exceed 50% of 2019 numbers until a vaccine is developed, mass-produced, and readily available.” The time-frame for this according to Scott Kirby? Late 2021.

“If 50% seems pessimistic to you, consider that even to get to that 50% level, revenue demand has to increase by about four times compared to where it is now.” – Bryan Quigley

The memo makes it clear that United has already conceived plans to furlough 1,650 additional pilots in 2021. Rolling furloughs will likely be continuing for quite some time unless we see a rapid reversal in travel demand. Additionally, the memo goes on to state that the previously released number of 2,250 pilots furloughed in 2020 will likely increase.

If the trend continues we could see 33% of United’s 11,675 active pilot seniority list on the street looking for work, a devastating blow to the industry when most were planning on a fast-track to their career position.

There has been a lot of talk concerning posturing for congress to approve another bailout. The memo’s furlough mitigation section addresses the fact that without a bailout the only course of action beyond furloughs will be through “a negotiated agreement with our unions to reduce the cost until we see a return of demand to our business.”

Keeping in mind United pilots have the strongest contract protecting against involuntary furlough in the US market, Bryan Quigley addresses the question of cost to furlough below.

“You have often asked me how quickly we are able to furlough and whether it makes sense to furlough so deeply. The answer is that it depends on demand and how long it takes to see signs of a recovery. As we have said, demand is severely impacted and we don’t expect a vaccine to be readily available until the last half of 2021. This is a consistently shared view throughout the industry. So, the answer is that if we do not get relief from the government, or find a solution together with our unions, we will have no option but to furlough these pilots quickly and we wouldn’t expect them to return for years.”

The memo closes with strong language driving pilots to consider mitigation of furloughs, the only two ways posed by flight ops are government bailouts or concessions.

It should be noted that late last week Edward Shapiro, United Board Member since 2016, and member of the board’s compensation and finance committees sold more than 182,000 shares of United stock in two transactions.

If you’re struggling with:
Finding a new job
Making it past the phone screen
Struggling in interviews
Or are unsure of what you should do next

13,589 WARN Notices Sent To Date | Here’s The Breakdown

Who’s been WARNed has been a popular conversation this week. 13,589 WARN notices have been sent to pilots; we are on the verge of losing the equivalent of an entire Legacy Airline to the job market. The threats raise the total to well over 15,000 pilots. This week saw multiple revisions upward of carriers and we still have a few airlines that have not made any mention of their downsizing plans.

Be sure to stick with us as we break down these numbers for you but first, let’s explore what is leading to the thousands of WARN notices being issued this week.

US airline passenger volume remains deflated by 75% year over year.

Aug 4 WARN 1

Airline daily departures remain 52% below 2019 levels.

Aug 4 WARN 2

On those flights that are only happening at 52% of 2019 levels, load factors continue to be remarkably depressed.

Aug 4 WARN 3

The ticket prices necessary to get passengers to fly are massively deflated and business travel is nearly non-existent leading to revenue to continue to be down 89% industry-wide.

Aug 4 WARN 4

The load factors and ticket sales only tell part of the story. We still have almost 2,000 domestic airline aircraft parked in storage.

Aug 4 WARN 5

The majority of wide-body aircraft are parked, but well over 30% of narrow-body and regional jets are parked as well.

Aug 4 WARN 6

Airlines are projecting their cash burn to decrease only nominally in the coming months.

Aug 4 WARN 7

This is why we have seen the failure of numerous airlines with more coming as the year progresses.

Aug 4 WARN 8

The world economy is projected to continue it’s retraction with the US economy projected to dip 5%.

Aug 4 WARN 9

Goldman Sachs expects it to take until 2023 to recover to 2019 levels of airline revenue.

Aug 4 WARN 10

Now that we better understand the state of the industry beyond the TSA numbers we regularly share let’s take a look at the casualties of this depression in travel.

As noted above we have seen the failure domestically of the following airlines:

  • Compass Airlines
  • Miami Air International
  • RavnAir Group
  • Trans States Airlines

Last week started with the announcement that United Airlines would be dropping their Fee For Departure agreement with either Commutair (37 ERJ-145s) or ExpressJet (97 ERJ-145s). By the end of the week, United announced that ExpressJet would be wound down by 2021.

A few of the major airlines have (as of today) offset the need to furlough with voluntary leave and early retirement programs, some have negotiated temporary contractual adjustments to offset furloughs.

  • JetBlue entered into an agreement that ensures no Furloughs until May 2021
  • Southwest Airlines does not see a reason to furlough in 2020
  • Alaska Airlines does not see a need to furlough in 2020

Even with some of the airlines having early retirement programs and voluntary leave programs, the following major airlines have issued WARN notices.

  • Allegiant (275)
  • American Airlines (2,500)
  • Delta Airlines (2,558)
  • Frontier Airlines (559)
  • Hawaiian Airlines (226)
  • Spirit Airlines (806)
  • Sun Country: we are unaware of WARN letters being issued
  • United Airlines (2,250) As we mentioned in another article this week United Announced they have plans to furlough 3,900 pilots into 2021 which includes a likely increase in the number expecting furlough in 2020. However, the additional 1,650 pilots have not been issued WARN notices

The regional airlines are dealing with a non-stop rumor mill of consolidation, downgrades, furloughs, and unfortunately shut-downs. As of Monday afternoon, here are the total WARN notices sent to regional pilots.

  • Air Wisconsin (354)
  • Endeavor: we are unaware of WARN letters being issued
  • Envoy (350)
  • ExpressJet – Entire Seniority List (1413)
  • GoJet – Entire Seniority List (635)
  • PSA (730)
  • Piedmont The company has notified the pilot group to expect (120) furloughs, however individual WARN letters have not been issued because it is not required based on the total number of employees living ing CLT and PHL
  • Commutair: we are unaware of WARN letters being issued
  • Mesa: we are unaware of WARN letters being issued. However, the union has notified pilots to watch for letters
  • Republic (933)
  • Skywest: we are unaware of WARN letters being issued
  • Horizon: we are unaware of WARN letters being issued

About 13,589 pilots have been sent WARN notices already, this does NOT include the additional 1,650 pilots United is projecting to furlough, nor does it include Compass, Trans States, RavnAir Alaska, or Miami Air International.

13,589 does not include the layoffs of qualified ATPs from training centers like Flight Safety International, it doesn’t include pilots that accepted Voluntary Long Term Leaves, early retirements, or the hundreds of pilots that were sent home from initial training at numerous airlines earlier this year.

We are looking at a pilot market that has the potential to have between 15,000 and 20,000 qualified pilots potentially looking for work in a few short months.

Charts created by Airlines for America

If you’re struggling with:
Finding a new job
Making it past the phone screen
Struggling in interviews
Or are unsure of what you should do next

Weekly TSA Numbers | What’s The Trend Showing?

TSA Numbers Aug 4 Email

If you’re struggling with:
Finding a new job
Making it past the phone screen
Struggling in interviews
Or are unsure of what you should do next

Additional Resources

How to Answer “Will You Resign Your Seniority Number”?

If you’re struggling with:
Finding a new job
Making it past the phone screen
Struggling in interviews
Or are unsure of what you should do next

Why Applying for Jobs Online Won’t Work

How Does the Coronavirus Compare to 9/11?

How to Survive Disruptive Change

Are Furloughs Coming?

What Should Pilots Do In These Uncertain Times?

Aviation Industry Updates: July 28, 2020

By Industry News

US Airlines Brace For Volatility in Second Half of 2020 | Who’s Going To Fail?

KEY POINTS:

  • “We think it will take domestic traffic three to five years to recover to 2019 levels, and international traffic five to seven years to recover,” says Helane Becker, senior research analyst who covers aviation for Cowen Securities, “especially if the virus remains uncontained.”
  • “One lesson from the pandemic is that smaller airfields with just a handful of scheduled commercial flights will be more likely to lose puddle-jumper connections.”
  • “Ultra-low-cost carriers like Spirit, Allegiant Air, and Frontier Airlines will be prime beneficiaries…low-cost and ultra-low-cost carriers will be most successful as the crisis drags on, not only because they focus on cost-conscious travellers, but also because they have lower costs themselves.”
  • “They [ULCC] only operate one fleet type, they tend not to have widebodies, only narrowbodies – which are easier to mothball and redeploy,” he says. Additionally, ULCC “pilot salaries are much lower, they don’t have global alliance membership dues and they don’t have to maintain fancy airport lounges.”
  • “The backtracking [in June and July] is disappointing and unfortunate,” says Becker. “People want to travel, but quarantine rules are limiting where people can go and the fact that things aren’t really open means there isn’t a lot to do once you get there.”
  • “Business travel will be slow to recover, but leisure travel is likely to spike. Unemployment rates notwithstanding, there were millions of leisure trips cancelled in the first half of the year, [and] most of that money is still in the bank.”
  • “Ultimately, airlines and analysts agree sustainable recovery will require passengers to return – no amount of cost-squeezing and liquidity-injecting will end the crisis. Several carriers made clear this week they do not expect broad recovery until a Covid-19 vaccine becomes widely available.”

Click here to read the full article.

Gary Kelly: 5-10 Years for Business Travel to Recovery

Gary Kelly, CEO of Southwest Airlines was interviewed for Yahoo! Finance in an informative 13-minute interview.

KEY POINTS:

  • “At a point, you just can’t make people fly.”
  • “You can’t send out a memo and say, ‘thou shalt travel from A to B’,” he said. “In economic recessions, it’s classic that business travel will be cut very sharply.”
  • “I think business travel will be very slow to recover, and my guess is that it will take five to 10 years for business travel to fully recover to 2019 levels,” he said. “So it’s a low-cost environment for a long time.”
  • “I’m not sure there is a lot more that we can do differently.”
  • “The analogy is a patient in intensive care — you are just trying to get through it,” he said. “You’re trying to survive and you’ll worry about the future later.”

Click here to read & listen to the full article & interview.

Weekly TSA Numbers | What’s The Trend Showing?

Whether you are Ed Bastian of Delta expecting a “choppy” recovery, Scott Kirby at United looking at a “jagged” recovery, or Spirit looking at a “rocky” recovery, the dip in passengers numbers over the last week showcase what Gary Kelly said; “We are like a patient in intensive care.”

TSA Numbers July 28 Email

Additional Resources

Why Applying for Jobs Online Won’t Work

How Does the Coronavirus Compare to 9/11?

How to Survive Disruptive Change

Are Furloughs Coming?

What Should Pilots Do In These Uncertain Times?

Aviation Industry Updates: July 21, 2020

By Industry News

Delta Pushes Concessions To Save Jobs | Bait & Switch or Furlough Mitigation?

Delta decreased their plans for recovery this summer; cutting its growth forecast from 1,000 flights added per day to 500 daily in August. According to John Laughter “demand is still down about 80%, and we don’t expect to see measurable improvement until the U.S. infection rates fall again. We’ve pulled back some of the additional flying we had on the August schedule and don’t foresee adding much back through the remainder of the year.” Read More

Aviation Industry Updates: July 5, 2020

By Industry News

Airline Recovery Slower Than Expected | Who’s Winning? Who’s Losing?

KEY POINTS:

  • “The recent uptick in coronavirus cases in the U.S. has many wondering about the economic impact of the continuing pandemic, especially how it plays out for the travel industry.”
  • “Goldman Sachs now expects the recovery in air travel to take at least an extra year — to 2023 instead of 2022 — to return to 2019 levels, according to the latest update to the firm’s COVID-19 recovery forecast”

Read More

Aviation Industry Updates: June 28, 2020

By Industry News

Delta Preparing to WARN 2,558 Pilots | Just Another Negotiating Tactic?

This past Friday (June 26) Delta Air Lines and DAL ALPA released LOA #20-02, “2020 Voluntary Early Out Program (VEOP)” to “incentivize pilots to retire in lieu of a possible involuntary reduction in pilots.”

In a separate memo from Director of Flight Operations, John Laughter, he reiterates his message from previous communications “early retirements alone likely won’t be enough to avoid pilot furloughs altogether.” Read More

Aviation Industry Updates: June 21, 2020

By Industry News

Will the Legacy Airlines Declare Bankruptcy? | Crazy Talk or Probable?

KEY POINTS:

  • “The nature of the airline business causes enormous operating leverage. For a given flight almost all of the costs are fixed. Thus, a small decline in revenue causes a very large decline in operating profit.”
  • “On top of enormous operating leverage, the capital intensity of the business, causes most legacy airlines to also use tremendous financial leverage. Financial leverage is the use of debt, or debt-like instruments such as financial leases, to acquire the assets required to operate the business.”
  • “The combination of operating and financial leverage, usually means that a 15% decline in revenue is enough to send an airline into chapter 11 bankruptcy.”
  • “Events such as Hurricane Katrina, the 9-11 terrorist attacks and recessions have typically caused reductions in revenue that pushed some legacy airlines into bankruptcy and wiped out the shareholders.”
  • “A 15% decline in revenue has been fatal for many airlines. Covid-19 has reduced airline revenue by 80%. There has been some recovery in bookings. However, normally most reasonable estimates of legacy airline revenues for the next 12-month period, are such that would have caused at least one legacy airline bankruptcy, and brought the share prices of the others down to single-digit levels. That has not happened this time. Yet.”
  • “Doug Parker, head of American Airlines is probably the one airline CEO who is likely to resist bankruptcy the most, even if he could personally benefit from it. Unfortunately for Mr. Parker and AAL shareholders, American Airlines is probably the weakest major US airline, as it already has negative book value and thus no equity. It will probably the first to be insolvent, although other airlines may file for bankruptcy first.”
  • “Without massive infusions of cash from the government, there is no possibility that any of the legacy airlines could ever get to breakeven as long as Covid-19 is still a significant factor.”
  • “Most of the legacy airlines have assets on their books whose value is now far overstated. Before Covid-19 slots and landing rights were very valuable assets. That was because airport capacity was constrained in many markets. Whether air travel is at 15% or previous levels, or at 50% previous levels, there is still substantial over-capacity at every airport. Not only do slots and landing rights have no market value now, but airport operators are going to be looking to the airlines to pay higher fees, to offset the airport’s vastly reduced revenues.”
  • “Even a vaccine would not turn ALL’s book value positive, but it probably would boost all share prices including the legacy airlines. However, unless the legacy airlines are able to use such a rally to sell new shares to the public such a medical advance might be too late for the legacy airlines.”

Click here for the full article.

U.S. Travel Spending Not Expected to Recover to Pre-Covid Numbers Until 2024

“Total travel spending from both domestic and international travelers in the U.S. is forecast to plunge 45 percent by the end of 2020, and not expected to recover to pre-Covid numbers until into 2024, with international visitor spend maybe until 2025, according to new research from analytics firm Tourism Economics commissioned by the U.S. Travel Association.”

US Travel Forecast June 21 Email
  • “There is some hope that would-be U.S. outbound travelers who can’t go abroad this year will pivot to being domestic travelers, but these new numbers still predict a significant loss.”
  • “The data is telling us that travel and tourism has been more severely damaged than any other U.S. industry by the economic fallout of the health crisis.”
  • “Given that travel employed one in 10 Americans and was the No. 2 U.S. export before the pandemic, supporting this industry through to the recovery phase ought to be a national priority.”

Click here for the full article.

Corporate Aviation Continues to Surge on Health Fears, Lower Prices

KEY POINTS:

  • “While commercial airlines are having a slow recovery, private-jet companies are seeing a surge in business from new customers.”
  • “Commercial traffic is running about 15% to 17% of last year’s totals, but private flights are running at up to 70% or more of normal, according to industry data and Private Jet Card Comparisons.”
  • “The private-jet industry is seeing a rapid rebound from the coronavirus crisis, as new customers who had never flown private splurge to avoid the crowds and lines of commercial flying.”
  • “New customer sign-ups with industry leader NetJets in May were more than double the typical May, according to Pat Gallagher, the company’s president of sales, marketing and service.”
  • “While business travel remains almost nonexistent, private-jet companies say personal travel by wealthy affluent fliers — many of them older — have more than taken up the slack. They say that while many families who could afford to fly private couldn’t justify the costs, they are willing to spend the extra money for greater health safety.”
  • “Prices for certain flights are now 30% to 50% cheaper than they were a year ago, bringing private-jet flights closer in line with first-class or business-class seats.”
  • “Because commercial airlines have also suspended flights out of certain smaller airports, private jets have become more attractive to fliers who don’t want to travel to larger airports.”

Click here for the full article.

Does JetBlue Have Enough Cash To Support Losses In 2020?

KEY POINTS:

  • “JetBlue Airways stock has lost nearly 36% of its value since the beginning of the year.”
  • “At $5 million of daily cash burn and gradual demand recovery possibly in Q3, the company has a strong liquidity position to cover fixed costs and repay its short-term debt obligations.”
  • “Even in the pessimistic scenario, where demand recovery happens by October and the cash burn rate remains the same, the $3 billion of liquidity can address operating losses.”
  • “However, if the demand does not recover by October, the daily cash burn rate would surge by $6 million just from employee costs. While the company can raise $1 billion in additional debt under the CARES Act, it would have to re-negotiate with all stakeholders to further reduce the cash outflow.”

Read on to see Forbes break down two possible scenarios for JetBlue.

Weekly TSA Numbers:

“There’s a lot you can do far above and beyond being positive. There is no reason to be hopeless here, you can take control over how you adapt and react to highly unfair circumstances…Hopium, irrational or unwarranted optimism, is a dangerous and addictive drug. Friends don’t let friends do Hopium…it’s equally as dangerous as hopelessness but for different reasons.”

-James Onieal

TSA Numbers June 21 Email

Mega U.S. Business Travel Buyer Looks to Shrink Air Travel Post-Pandemic

Will EY’s decision ring true with the other Big Four accounting firms? Airlines depend on corporate travel and with billions of dollars to lose, the repercussions could be staggering.

KEY POINTS:

  • “Ernst and Young LLP sees an opportunity to cut its carbon footprint measurably when pandemic travel restrictions end by not returning to the amount of air travel its accountants and consultants used to do.”
  • “For EY, $1 billion worth of air travel amounts to 85% of the firm’s carbon footprint normally.”
  • “We don’t think we need to be back to spending a billion dollars and creating the carbon footprint that we had. We think we can do our jobs with less of that.”
  • “The pandemic offers companies like EY the chance to rethink how they conduct business and will accelerate efforts to meet long-term sustainability goals.”

Click here for the full article.

Additional Resources

Why Applying for Jobs Online Won’t Work

How Does the Coronavirus Compare to 9/11?

How to Survive Disruptive Change

Are Furloughs Coming?

What Should Pilots Do In These Uncertain Times?

Aviation Industry Updates: June 14, 2020

By Industry News

American Publishes Preliminary Displacement | Why So Different Than United & Delta?

The Preliminary American Airlines Displacement award for the September 2020 vacancy run has been published and it affects approximately 2,291 pilots. The final award is expected to be published on June 18th with an effective date of August 31, 2020. We will continue to monitor the airline and Allied Pilots Association union (APA) communications, as well as input from our clients, to provide you with accurate final results.

Bottom line, if you’re an airline, military, or corporate pilot looking for work, American’s displacement bid is optimistic news for you. While American may very well furlough enough pilots to significantly increase competition they may still furlough less than United and Delta. We will find out more as their bid process progresses. Read More

Aviation Industry Updates: June 7, 2020

By Industry News

United Publishes Second Displacement Bid | Management’s Math Inconsistent

Disclaimer: Our writers have spent the past week painstakingly verifying all information contained below and recognize a few limitations in United’s data. United does not publish dates of hire, only seniority numbers on their seniority list. Because of previous mergers, seniority numbers don’t easily correlate to dates of hire. Additionally, United’s bidding system is very complex which leads to constantly changing information. As such, we commit to keeping you updated as information changes and recognize some information may become inaccurate as bidding progresses.

United published their 2nd Pilot Displacement Bid on June 4, 2020 uprooting approximately 1,591 pilots. According to a memo published by United Airlines ALPA “this displacement was reduced more than 50 percent from what was originally planned only hours ago.” This comes on the heels of United’s first bid which occurred on May 2, 2020 and displaced over 4,700 pilots, as part of the company’s plan to cut the airline by 30%. Read More

Aviation Industry Updates: June 2, 2020

By Industry News

Delta Publishes 7,000+ Pilot Displacement Bid | What Does This Mean for Furlough?

KEY POINTS & HISTORICAL CONTEXT:

  • This displacement will affect 7,096 pilots of which 6,633 of those pilots will be displaced by force, not choice. This equates to over 47% of the Delta seniority list.
  • Anyone hired after December 2016, within the past 2 years and 3 months, will not be assigned an aircraft. This means approximately 2,327, 16% of their pilots, are in severe danger of possible furlough.
  • For historical comparison, post 9/11, airlines saw a 30% traffic decline, similar to the projections airline executives are currently making for the Covid-19 recovery.
  • Prior to 9/11, if you were to combine their seniority lists, Northwest and Delta employed 13,753 pilots. Post 9/11 they furloughed a combined 1,988 pilots which was 15% of their seniority list.
  • Currently, the most junior Captain at Delta was hired in mid-2018. After displacements and furloughs are complete, a junior Captain will be around a February 2001 hire date.

BOTTOM LINE: Read More