KEY POINTS:

• “The carriers [Spirit & Southwest] may be some of the biggest early winners in a recovery, according to Cowen analyst Helane Becker. She expects the domestic market to recover more quickly than international routes, and sees gains for low-cost carriers that focus on leisure travelers.”

• “Becker isn’t expecting air travel to reach anywhere near 2019 levels this year.”

• “As states open, we expect the airlines to see demand for regional traffic increase,” Becker wrote in a note published Thursday. Airlines are seeing stronger demand in Florida, Texas and Colorado, she wrote, and JetBlue Airways (JBLU) is seeing a pickup in sales in flights from the Northeast to Florida, one of its strongest markets.

• “Travelers might still be reluctant to take a long-haul flight to Europe or Asia. And it might be many months until international travel bans and quarantine procedures are lifted.”

• Southwest has approximately $13 billion in cash, which could last up to 20 months.

• Spirit has the ability to raise it’s total liquidity to $2.4 billion, which could last up to 20 months.

KEY POINTS:

• “Industry veteran and Managing Director of Indigo Partners William (Bill) Franke believes the two most pressing issues airlines are facing as they attempt to recover from the sudden onset of the COVID-19 pandemic are ensuring that they can achieve breakeven cash flow, and ensuring that passengers feel safe to travel.”

• “There will obviously be some marketplace changes as airlines work to adapt to a post COVID-19 reality, but Mr Franke remains bullish on the resiliency of the ULCC model.”

• “From now, Indigo feels reasonably comfortable with its large order book with Airbus, and Mr Franke said that airframers and lessors were working to find solutions that would work for everyone. However, there will inevitably be some pressure on aircraft pricing in the near term.”

• “Those airlines had significant unrestricted cash on hand, which is part of Indigo Partners’ strategy, “…but you have to measure the burn of that cash against a timeline, and in our case, we made the assumption just out of lack of knowledge that 85% of an airline might be on the ground for up to a year, and on that basis, we tried to calculate cash burn against cash availability and position the airlines for survival”.

• “The US ULCC Frontier, which is owned by Indigo, has stated that it could be operating close to a full schedule in Jul-2020.”

• “Airports and airlines needed to convince the traveller through a series of actions, before any vaccine is available, that it is safe to travel, said Mr Franke.”

• “Individual airlines are taking steps to fit what they think the market wants”, said Mr Franke. In some cases there have been false starts with empty middle seats, and that has resulted in politicians jumping on the issue, he remarked. There are also mixed messages on requiring passengers to wear masks. “There is a lack of integration around opportunities to manage the process with the passenger”, Mr Franke said, with everyone trying to find their own path forward.

• “Mr Franke said that, in his own view, there would broadly be a two-year period where aircraft would be available, and depending on the model, “there will be pressure on prices” until the situation is sorted out.”

• “It seems the airlines that make up the portfolio of Indigo Partners are in solid shape as they work through the challenges created by the pandemic; the company is also being opportunistic during the crisis, reflecting its bullishness in the aviation sector for the foreseeable future.”

Click here for the Barrons article & Centre for Aviation article.

KEY POINTS:

• “On Friday afternoon, Gov. Steve Sisolak gave Nevada casinos a tentative date they could plan to reopen: June 4. Seventy-eight days after casinos first closed down to help stem the spread of COVID-19.”

• “Our members have spent more than two months preparing for this day,” she said in an emailed statement. “They’ve put in place enhanced health and safety plans and protocols … Our members are excited to show off the enhancements they’ve made that preserve the experience while ensuring the well-being of our employees and visitors.”

• “Virginia Allegra from Fresno, California, said she plans to visit Las Vegas soon after it reopens; she’s already had to rebook six reservations with MGM Resorts as tentative booking dates were pushed back.”

• “Others, like Ryan Cisneros from Texas, want to wait until Las Vegas properties end social distancing protocols at table games and pools before returning. “Vegas is all about social interactions, especially at the blackjack table,” he said. “I typically go to Vegas two to three times a year, but until everything is normal regarding the social distancing aspect, (I) would rather just wait or go somewhere else.”

Click here for the Las Vegas Review Journal article.

KEY POINTS:

• “Late last night, Hertz filed for bankruptcy. The restructuring has sent shockwaves through the US auto industry, according to CNN. What’s driving the decision? Reduced air travel.”

• “Last year, all US rental car companies bought nearly 2 million automobiles – or about 10% of the US auto industry production. Now, major auto manufacturers like Ford, GM and Fiat Chrysler are seeing a vast aspect of their annual sales threatened.”

• “In the US, Hertz employs 38,000 people. So far, 12,000 have lost their jobs and 4,000 have been furloughed. To gain some breathing room, the company renegotiated with lenders on debt due in April – extending the payment deadline to May 22. That was the day the company filed for bankruptcy.”

• “To be clear, bankruptcy is a restructuring – not a declaration that the company is going out of business. Hertz already abandoned part of its fleet, selling 54,000 cars in March – but the cancellation of auto auctions (and the closure of many new car dealerships) has blocked the company from continued relief.”

• “Today’s action will protect the value of our business, allow us to continue our operations and serve our customers, and provide the time to put in place a new, stronger financial foundation to move successfully through this pandemic and to better position us for the future.”

Click here for the Forbes article.

KEY POINTS:

• “Each U.S. airline will be allowed to shed 5% of its airports served or five airports, whichever is greater.”

• Due to the weak passenger demand, airlines have been authorized to proceed with additional service exemptions.

• Many airports will have service reduced to only one carrier.

• “Any objections to these route reductions must be filed by May 28, 2020.”

Click here for the Live and Lets Fly article.

• “The bid plan incorporates the flexibility to adjust initially to the evolving landscape (e.g., potential early out programs, increased early retirements, or a change in the economic environment following the bid award).”

• “When this bid is awarded there will be approximately 10,730 active pilot positions, a reduction of approximately 2,500 active positions (inclusive of the approximately 300 new hire pilots who had their Advanced Entitlements removed with the cancellation of the January 2020 AE).”

KEY POINTS:

• “Delta Air Lines Inc. said it would remove Boeing Co. 777 aircraft from its fleet by the end of the year, a sign the airline believes international travel will recover slowly from the coronavirus pandemic.”

• “Airline executives have said they believe domestic travel will be first to resume, as people may feel ready to visit friends and relatives or take relatively short flights before they will venture abroad.”

• “That means Delta has more pilots than it needs. John Laughter, senior vice president of flight operations, told employees in a separate memo that the airline will likely be overstaffed by 7,000 pilots this fall.”

• “First Officer Chris Riggins, a spokesman for the union that represents Delta’s pilots, said retiring the 777 and shrinking the airline’s fleet will hinder its ability to benefit when demand for travel eventually recovers.”

• “Delta has 18 of the aircraft in its fleet and had recently spent $100 million to refurbish their cabins—a sign it had planned to continue flying the planes for years.”

• “Many airlines and industry observers believe it could be years before travel fully recovers, particularly for long flights. Delta said its more fuel-efficient Airbus A330 and A350-900 can handle the job when demand returns. Delta said the A350-900 burns 21% less fuel per seat than the 777s it will replace.”

Click here for the Wall Street Journal article & Delta’s announcement.

• “Revenue hours so far in May have been up 50% over what they were in April. In fact, for this weekend for May 15, we’re going to be north of 200 revenue hours and that’s three times what we were flying at our April low.”

• Twenty-five aircraft will be returning to the fleet from storage.

• “We’re just starting to see and we’re participating in a tremendous amount of large-cabin international opportunities…There is certainly a tremendous amount of demand in large-cabin and international and so part of bringing back our aircraft will be to significantly, in very short order, activate our full fleet of our large-cabin aircraft.”

• “We’re in a position to end all of our salary deferrals and return everybody back to their full salaries as they were before the crisis.”

• “You’ll also receive any deferred monies that you received that were deferred during the month of April.”

• “And finally, we will be paying the Q4 2019 pilot bonuses at the end of June on-schedule as planned.”

The Private Jet Rebound is Continuing Day-by-Day:

• “Global business aviation is down 58% so far in May compared to a 70% drop in April.”

• “Palm Beach International is the world’s busiest airport so far in May.”

• “Over the past weeks, numerous industry executives have reported signs that private jets will help lead global travel recovery. Companies that already use private aviation are planning to expand their use.”

• “UHNWs who previously eschewed private jets are now turning to the segment, not for time savings or privacy, but health. One analysis shows potential COVID-19 exposure is 30 times lower when flying privately.”

• “Business aviation activity globally is still at least 50% below normal, but the trend this month is stronger than last month, and steadily recovering in all regions, in contrast to still-idle scheduled airline capacity.”

Click here to read the full report by Doug Gollan

Will Private Jets Soar Because of Covid-19?

• “In the coming weeks and months, Dan Early predicts there will be “a fairly significant uptick in demand” for charter flights like those operated by his firm, St. Paul-based Best Jets International.”

• “At a time when people are worried about being infected with the coronavirus, flying private avoids a TSA security line, as well as a large airport terminal. Also, if a family or corporation purchases a charter, they obviously have control over who is on the flight.”

• “One was a group of businesspeople that were in a [undisclosed] location and they opted not to fly back commercially,” Early says. “So we sent an airplane out to get them.”

Click here to read the full article by Liz Fedor

The stringent rules accompanying the CARES act grants are potentially strangling airlines’ futures.  Their ability to cut back on routes now could prove useful in the Fall but the denials from the DOT are painting a grim picture for both the current situation and future planning.  Forcing airlines to maintain routes that are not currently supporting a traveling public puts into question the sustainability of the airline when the funding is exhausted.  But not everyone is receiving the same treatment…

KEY POINTS:

• “It would be nice if the Department of Transportation made it easier for airlines to cut routes. But when crafting the CARES Act, Congress sought to ensure smaller communities would retain air service, so the DOT is in a tough position. It doesn’t want to flout the desires of Congress.”

• Delta, United, Spirit, Frontier, JetBlue, and more all requested waivers for specific routes ranging from just a few to well over a dozen major routes/cities.

• “On Monday, the department said it rejected most requests by United Airlines and Frontier Airlines to suspend some flights.”

• Not everyone is receiving similar treatment; “The latest guidance from the US Department of Transportation released this morning shows that the Agency is using different standards for the different sized airlines in forming its policy.”

• “Sun Country will be permitted to collect its government funding while largely suspending service”

• “The DOT also appears to be admitting a mistake in prior rulings. Or at least identifying inconsistencies. JetBlue, for example, requested exemptions at Portland, Houston, Dallas/Ft Worth, and Minneapolis/St Paul. All four of those are included in the DOT’s listing of large airports. All four were denied in the DOT’s ruling for the carrier. Similarly, Spirit Airlines requested exemptions at Charlotte, Minneapolis, New York City, Portland and San Francisco. Those requests were also all denied.”

>> Click here to read the entire article by SKIFT & PAXEX.AERO

KEY POINTS:

• “Berk believes airlines should be allowed to go bankrupt. He argues that bailouts help equity investors like Vanguard and Blackrock (which both own large stakes in several airlines), but that Chapter 11 bankruptcy could keep airline workers employed while forcing the company to restructure debt. “People confuse bankruptcy with liquidation,” says Berk.”

• “A number of airlines have undergone bankruptcy proceedings and re-emerged, including Continental Airlines UAL which filed in 1983 and came out in 1986, then filed again in 1990 when oil prices skyrocketed following the Gulf War—the airline kept all 37,000 of its employees on the payroll. Both times, the airline continued to operate.”

• “When American Airlines filed for bankruptcy in 2011, it continued normal operations as well through its merger with U.S. Airways in 2013.”

• “Airlines would still operate in bankruptcy, but the question is: What will they look like after bankruptcy?” says Arnold Barnett, a finance professor at MIT Sloan.

• “I don’t think the kind of [bailout] we have here precludes bankruptcies at all,” he says. “It lasts through September. When autumn comes, then what?”

We can turn our attention to airlines that aren’t looking at traditional sources of cash preservation for potentially opened minded notions come the Fall.

• “Southwest swung to a $94-million net loss in the first quarter from a $387 million profit a year earlier, and warned that operating revenues would fall by 90-95% in both April and May, when it does not expect load factors to surpass 10%.”

• “However, it has no current plans to cancel orders, Chief Financial Officer Tammy Romo said on a conference call, noting that a more fuel-efficient fleet “is still relevant and meaningful” even given current low oil prices and demand.”

• “On Tuesday it announced an additional capital raise including a public stock offering of 55 million shares, worth around $1.6 billion at Monday’s closing price of $29.11, and $1 billion worth of convertible debt. Shares rose 1.6% to $29.57.”

>> Click here to read the entire article by FORBES & REUTERS

KEY POINTS:

• “Consumer-facing companies urgently need to anticipate what kind of consumer is emerging, so they can make it through the current crisis and build the capabilities that future relevance will require.”

• “Across the markets we’ve surveyed, some consumers are making deep cuts. Others are continuing to spend as normal but are changing how they live in other ways. For now, many are remarkably optimistic. Looking across all the Index data, we’ve identified four segments of behavior.”
  • Save & Stockpile; Not so concerned about the pandemic, but worried about their families. Pessimistic about the long-term effects.
  • Cut Deep; Hardest hit by the pandemic. Most pessimistic about the future. Spending less across all categories.
  • Stay Calm, Carry On; Not changing their spending habits. Not directly impacted by the pandemic. Worried that others are stockpiling.
  • Hibernate & Spend; Most concerned about the pandemic. But best positioned to deal with it. Optimistic for the future. Spending more across the board.

• ““Cut deep” segment. These consumers – who are mainly over 45 – have seen the most impact on their employment. Almost a quarter have had their jobs suspended, either temporarily or permanently. Seventy-eight percent of them are shopping less frequently, and 64% are only buying the essentials. In contrast to the Hibernate and spend segment, 33% of consumers here feel brands are now far less important to them.”

• “Looking beyond the immediate effects of the pandemic, few consumers expect to go back to their old behaviors any time soon. As with many of the shocks we encounter in life, people are in a mood to pause and reflect.”

“The big question is this: as the economy recovers from the aftermath of the pandemic, which behaviors – if any – will return to what they were like before, which will stabilize for a while, and which will have changed for good?”

• “Today, a third of consumers strongly agree with the suggestion that they will reappraise the things they value most and not take certain things for granted. And more than a quarter say they pay more attention to what they consume and what impact it has. Perhaps in our post-crisis world we will see consumers becoming more mindful about the consequences of their choices?”

>> Click here to gain access to the entire consumer report

KEY POINTS:

• “Skywest Inc. said Friday it has reached agreement with the U.S. Treasury Department to receive $438 million under the Payroll Support Program as part of the CARES Act.”

• “$337 million will be in the form of a direct grant and $101 million will be in the form of a 10-year loan.”

• “These funds will cover important payroll expenses as we work together with our people to provide critical air service during this difficult time, and prepare for when demand returns,” said Chief Executive Chip Childs.

>> Click here to read the entire article by Tomi Kilgore of MarketWatch

KEY POINTS:

• “Air travel will not rebound to pre-pandemic levels for another three years, Delta Air Lines CEO Ed Bastian warned analysts during the company’s first quarter earnings call on Wednesday. “Demand for near-term air travel dropped to almost zero in a matter of weeks,” he said.”

• “Safety will not be limited to flight safety, but [will expand] to personal safety,” Bastian said. “People will pay a premium on service excellence like never before.”

• On aircraft disinfectant procedures and social distancing practices such as blocking middle seats Ed Bastian states: “It is too soon to determine if these measures will be permanent, he cautioned. “This recovery will take years. We will spend some time in the future to figure that out.”

• “The pandemic has forced Delta to ground more than 650 aircraft of its roughly 850-aircraft fleet, and is accelerating the carrier’s fleet retirements. Some of those grounded aircraft, including the MD-80 fleet, will not return to service. The airline may permanently retire its MD-90 fleet and is considering removing some Boeing 757s and Boeing 767s and some regional jets from its roster. In addition, Delta is not taking delivery of new aircraft, except for those that have been fully financed and paid for already. With such a large chunk of its fleet currently grounded, the carrier doesn’t need any new aircraft.”

• “Although not speaking specifically about Delta’s partners, Bastian said he expects to see some airlines cease operations altogether or declare bankruptcy. International travel will recover slowly, which will affect when or if Delta returns to its previous international strategy.”

• “As part of the deal for taking the grants, Delta, like all airlines, cannot lay off or furlough staff through Sept. 30. Bastian made no prediction about future staffing, although he did say the airline will be “smaller.””

• “Delta reported a $534 million net loss in the first quarter, down from a $730 million net profit in the first quarter of 2019. Operating revenue plunged 18 percent from 2019 to $8.6 billion.”

>> Click here to read the entire article by Madhu Unnikrishnan of Skift

KEY POINTS:

• “In some economies, the spread of COVID-19 has slowed to the point where governments are planning to lift the most severe elements of social distancing restrictions. But an immediate rebound from the catastrophic fall in passenger demand appears unlikely. People still want to travel. But they are telling us that they want clarity on the economic situation and will likely wait for at least a few months after any ‘all clear’ before returning to the skies.”

• ““Passenger confidence will suffer a double whammy even after the pandemic is contained—hit by personal economic concerns in the face of a looming recession on top of lingering concerns about the safety of travel. Governments and industry must be quick and coordinated with confidence-boosting measures,” said Alexandre de Juniac, IATA’s Director General and CEO.”

• “IATA estimates that some 25 million jobs in aviation and its related value-chains, including the tourism sector, are at risk in the current crisis.”

• IATA’s survey suggests that passengers are cautiously optimistic about travel stating “60% anticipate a return to travel within one to two months of containment of the COVID-19 pandemic but 40% indicate that they could wait six months or more…69% indicated that they could delay a return to travel until their personal financial situation stabilizes.”

• “This is an emergency. Airlines around the world are struggling to survive. Virgin Australia which entered voluntary administration demonstrates that this risk is not theoretical. Governments will need financially viable airlines to lead the economic recovery. Many of them won’t be around to do that if they have run out of cash. The number of governments recognizing that relief measures are needed is growing. But the crisis is also deepening.”

• “Passenger revenues are expected to be $314 billion below 2019 (-55%) and airlines will burn through about $61 billion in liquidity in the second quarter alone as demand plummets by 80% or more.”

>> Click here to read the entire press release from IATA

KEY POINTS:

• “Southwest Airlines chief executive Gary Kelly told employees he would prefer an across-the-board pay cut to more dire scenarios – such as the first involuntary furloughs in the company’s history.”

• “While Southwest has cash reserves of about $3.2 billion (Dh11.74bn) in government payroll aid to survive the coming months, he encouraged workers to “fight like we have never fought before” to lower costs.”

• In his message Gary Kelly stated, “If things don’t improve dramatically over the May-June-July time period, we’ll have to prepare ourselves for a dramatically smaller airline.” Adding, “I am not predicting that. But life can be very humbling and clearly this is a lesson that we are not in control of this coronavirus and how many people choose to fly.””

• “If Southwest has to shrink, it will first seek volunteers to retire early, take extended time off or accept voluntary furloughs, Mr Kelly said. If the airline is still burning through cash at that point, it would try to push through reductions in benefits and then in pay before resorting to involuntary furloughs, he said.”

>> Click here to read the entire article at TheNational

Our expert curators suggest some additional aviation sources for continued news coverage

• Wizz Air CEO Confident About Post-Crisis Outlook

• An unemployment rate of 23%? The real jobless picture is coming together

• US Airlines Seek Exemptions To Minimum Service Requirements

• Mesa Air lands $92.5M in payroll support from federal government

KEY POINTS:

• “U.S. Department of the Treasury concluded Payroll Support Program agreements with Allegiant Air, American Airlines, Delta Air Lines, Southwest Airlines, Spirit Airlines, and United Airlines.”

• “Alaska Airlines, Frontier Airlines, Hawaiian Airlines, JetBlue Airways, and SkyWest Airlines have also indicated that they plan to participate in the Payroll Support Program.”

• “Treasury also made the first Payroll Support Program payments to passenger air carriers today, disbursing a total of $2.9 billion in initial payments to approved applicants.”

• “All funds provided under the program can be used only for the continuation of payment of employee wages, salaries, and benefits.”

>> Click here to read the entire press release written by US Department of Treasury

KEY POINTS:

• With the need for passengers and air travel to return, the CEO of Southwest Airlines, Gary Kelly, takes a few moments to tackle a question that has been on many minds; “how quickly will we ramp up service when we are ready to come back, assuming demand returns in a strong way?”

• Gary starts off by freely admitting that this is a difficult question to answer “I just don’t know the answer to that” Mr. Kelly stated, while emphasizing the need to plan for multiple scenarios and holding on to cash in preparation for a “very prolonged, sluggish travel environment.” Mr. Kelly stresses the need to “learn patience” in what is likely an effort to comfort employees. He goes on to say “we’re not downsizing the airline” while noting the current plan to retire older aircraft will continue.

• Recalling previous economic downturns, Mr. Kelly states that the company doesn’t “want to furlough employees” nor do they “want to ground airplanes” or close access to the cities they serve. To maintain this goal the traveling public needs to return to the air, mentioning: “I don’t think air travel will snap right back to where it was here, this year. Maybe it will come back next year; if this is a real recession and bad recession it could take four or five years.”

• Mr. Kelly outlines the fact that the airline is exploring business decisions that will help them navigate a quick recovery, a prolonged recovery, or an extended recession, closing with “we’re just going to do the best we can to perform the best we can in any of those scenarios.”

KEY POINTS:

• “In the near term after the virus has been contained, international travel probably won’t be a top priority for the majority of the global population, partly due to fear, but also partly due to the collapse of the economy.”

• Airports and airlines need to be prepared for governments and agencies turning social distancing on and off with future threats. Immigration and security lines will have to be rethought to be social distance friendly.

• Automation of passenger interactions will need to be automated as much as possible. “Thermal imaging cameras and temperature sensors to capture body temperature are another feature that could become a part of future solutions.”

• There is already talk of “immunity passports,” to identify passengers who are safe to travel.

• E-commerce will shift to provide better access for passengers in purchasing ancillary experiences and products from airlines and airports to reduce the need for face-face interactions.

• Expect to see more protective screens around the airport, policy adjustments for those who are showing symptoms of illness, etc.

• Airports Council International “predicts that it may take a year to 18 months to reach anywhere near pre-crisis traffic levels, and the industry may not record pre-COVID-19 traffic volumes again before the end of 2021.”

>> Click here to read the entire document curated by Future Travel Experience

KEY POINTS:

• The Cares Act protections are less of a grant and more of a loan with additional strings attached.

• CARES Act funding for payroll only backs approximately 76% of payroll based on expenses from late 2019. This despite most airlines having experienced growth through COVID-19 halting air-travel.

• Due to higher demand than expected, the award amounts are smaller than required for individual airlines. In the end, the awards were significantly scaled down.

• While the purpose of this capital injection is to protect jobs, certain CEO’s have pivoted to discussing how these bailout funds will help their passengers vs focusing on how they will protect their employees.

*at time of publishing not all Airlines had released their stimulus package amounts; Raven will update as information becomes available

>> Click here to read the entire article written by Michael B. Baker of Business Travel News

KEY POINTS:

• Becker believes that US airlines will retire between 800 and 1,000 aircraft this year, leading to a much smaller aviation industry than was previously seen.

• She predicts huge job losses in the sector too, signaling that many of the furloughs that we’re seeing now may well evolve into permanent layoffs. “We believe airlines will be 30% smaller at the end of his year than they were at the start of the year. Also, we expect there will be between 100K and 200K fewer employees at the end of the year than there were at the beginning of the year.” [Click here to read quotes from Delta and United that reinforce this analysis]

• If Becker’s prediction is right, we could see many more aircraft from the fleets in the US disappearing by the end of 2020. “While many of these will be temporary storage, many of these aircraft will never resume service. We believe the airline industry will look very different when we get to the other side of this.”

• As well as her take on the shape of the US fleet in the future, Becker has made one of the most damning predictions to date for the return of air travel demand. She told Seeking Alpha, “Demand is 5% of what it was in February, and we continue to believe it will take 3 to 5 years for domestic demand to return to 2019 levels and 4 to 6 years for international demand to get back to those levels.”

Cowen #airlines analyst Helane Becker released a new #AheadOfTheCurve report. Believes major airlines can operate for ~12 months at bare-bones operations w/ gov't grants. Will take 2-5 years to return to 2019 levels. Expects reduced fleet count, and potential for ~100K job losses

— cowenresearch (@CowenResearch) April 13, 2020

• The author of the article summarizes: “While we may see an uptick in aviation activities before the end of the year, it’s going to be a long, long time before we see the type of demand that was typical of pre-coronavirus, if it ever comes back at all.

>> Click here to read the entire article written by Joanna Bailey of Simple Flying