Aviation Industry Updates: May 3, 2020

United Publishes 5,000+ Pilot Displacement Bid | What Does This Mean For Other Majors?

KEY POINTS:

• United has announced the largest displacement in its history which will impact all pilots in one way or another.

• The displacement notice stated this is likely the first in a series of changes to pilot staffing that will ultimately be driven by demand.

• More than 5,007 total pilots were named in displacement letters.

• United pilots are flying 10% of their block hours with no indication of increasing through October 1, 2020. As of today, United would be right sized at 2,000 pilots vs. their current 13,500.

• “Due to the unprecedented environment the company finds itself in, they are reluctant to talk about potential furloughs at this time. The most they will say is that they hope they can grow United back to be 70% of the size it was in 2019 in the next 18 months. As such, this displacement reflects an airline that is 30% smaller than it was before the downturn.”

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Flight Safety Furloughs Significant Number of Sim Instructors | Will Corporate Flying Be a Safe Plan B?

CEO Quotes:

• “This week we made the painful decision to reduce or furlough a significant portion of our workforce. We have also cut planned capital expenditures on new facilities and simulators.”

• “FlightSafety International has been severely impacted by the economic downturn caused by the COVID-19 virus. This pandemic has affected the global economy more powerfully than anything our company has experienced in its 69-year history.”

Our contacts at FSI have made it clear to us that these numbers are expected to be quite high. Further communication from Flight Safety International to their employees is expected Monday (May 4, 2020). We continue to monitor all reliable sources to ensure we’re bringing you current correct information. Updates will be provided as information is published.

MESSAGE FROM THE CEO:

Like most people and businesses around the world, FlightSafety International has been severely impacted by the economic downturn caused by the COVID-19 virus. This pandemic has affected the global economy more powerfully than anything our company has experienced in its 69-year history.

The world has become increasingly focused on safety.

Our customers know that safety is the reason FlightSafety was founded, and remains our highest priority. We have worked diligently to develop and execute a disciplined protocol to prevent the spread of COVID-19. This includes extensive cleaning, on-site personal protective equipment and maximizing distancing at our facilities, as well as work from home programs and the rapid expansion of online training tools.

While most of our learning centers remain open and ready to serve your training needs, demand has declined significantly since mid-March. Because of this, and the long-term economic damage caused by the pandemic, we have taken steps to adapt to this new reality in order to remain a healthy and reliable partner to you.

This week we made the painful decision to reduce or furlough a significant portion of our workforce. We have also cut planned capital expenditures on new facilities and simulators.

Rest assured that we are well-positioned to rebuild from a solid foundation, and most importantly, focused on providing you with a safe training environment and the highest quality products and services available.

As you all know, blue skies are ahead.

Thank you for your partnership.

Sincerely,
Brad Thress
President & CEO”

Two More Regionals Announce Pilot Furloughs | Will There Be More?

This week the regional airline sector took a hit with multiple airlines announcing layoffs of pilots and non-flying staff:

• Republic Airways furloughed pilot classes including everyone hired in the February and March classes totalling 68 pilots.

• Republic also announced the layoffs of around 300 non-crew positions including 30 dispatchers.

• ExpressJet, who reportedly had plans to hire north of 800 pilots this year, has also announced furloughs totalling 112 pilots.

• April saw RavnAir Alaska park their entire fleet of 72 airplanes while it pursued Chapter 11 Bankruptcy protection laying off their entire staff.

• Trans States Airlines and Compass Airlines cease operations and multiple regional airlines announce reduced line guarantees, furloughs, and LOA’s.

>> Click here to read more

PSA Announces Overstaffing & CRJ-200 Early Retirements

KEY POINTS:

• PSA is currently staffed for approximately 145 aircraft despite now only flying 130.

• American is retiring 19 Bombardier CRJ-200 aircraft operated by PSA Airlines.

• PSA is not currently discussing base closures. Stay tuned for future updates and changes.

>> Click here to read the full memo

Significant Risk American Will Declare Bankruptcy | What Does This Mean For Pilot Contracts?

KEY POINTS:

• “American Airlines also has substantial pension liabilities and other retirement obligations. These totaled more than $6 billion as of the end of 2019. Furthermore, the sharp decline in interest rates and stock prices this year represents a double-whammy that will drive American's pension deficit higher when it is remeasured in early 2021, all else equal.”

• American has been touting their young fleet, however it may be becoming a burden “Having cut near-term capacity by 80% or more, American Airlines has been forced to idle lots of relatively new jets while incurring high fleet-related lease and interest payments.”

• “American Airlines entered 2020 with the highest debt load and lowest profit margin of any major U.S. airline. The combination of massive liabilities and weak prospects for profitability over the next few years means there is a significant risk that American will eventually be forced into bankruptcy.”

• “The business is probably worth less than American's debt load, making bankruptcy or a distressed debt restructuring likely at some point in the future. For the stock to retain any value for long-term investors, business conditions will have to improve faster than many industry experts expect.”

>> Click here to read the full article

Additional Resources

How Does the Coronavirus Compare to 9/11?
How to Survive Disruptive Change
Are Furloughs Coming?
What Should Pilots Do In These Uncertain Times?