Business

U.S. airline 2020 losses expected to top $35 billion in dismal Covid pandemic

Decommissioned and suspended commercial aircrafts are seen stored in Pinal Airpark on May 16, 2020 in Marana, Arizona.

Christian Petersen | Getty Images News | Getty Images

The Covid-19 pandemic has been brutal for U.S. airlines and significant relief isn’t expected until the second half of 2021.

U.S. carriers’ 2020 net losses likely topped $35 billion, according to analyst estimates provided by FactSet. That includes what’s expected to be Southwest Airlines‘ first annual loss in more than four decades.

The pandemic ended a decade of profits that the historically boom-and-bust industry enjoyed until 2020, a stretch during which they hired tens of thousands of workers, bought new planes and expanded their networks.

Airline stocks in 2020 dropped the most in years. American Airlines‘ share price lost 45%, its biggest percentage decline since before the carrier’s 2013 merger with US Airways. Delta Air Lines‘ stock lost 31%, while United Airlines fell 51% over the last 12 months, its biggest drop since 2008. Southwest shed 14%. The S&P 500, meanwhile, rose by more than 16% in 2020.

The pandemic forced carriers to quickly shrink, cut routes and park hundreds of jets. U.S. carriers’ increased their total debt by $67 billion in 2020 to more than $172 billion to weather the crisis, according to trade group Airlines for America. Paying that down will be a headwind over the next several years.

The good news is air travel demand has recovered a lot of ground compared with the volumes hit early in the pandemic. On April 16, the Transportation Security Administration screened 95,085 people at U.S. airports, less than 4% of the 2.6 million people that had passed through those checkpoints a year earlier. TSA airport screenings, fueled in part by the yearend holidays, surpassed 1 million people a day in the last five days through Wednesday, though that’s still down about 45% from a year earlier.

With lucrative business and international travel largely sidelined, leisure travel became the most important market.

Airlines are expected to trim their losses and in some cases — including Southwest, Delta, Alaska — turn profitable next year, according to analysts’ estimates. Authorization of coronavirus vaccines has helped boost optimism about future travel demand though it isn’t yet clear when more of the public will resume flying.

Airline executives have recently warned that they expect difficult months ahead as they pushed out targets for when they will break even and say they will continue to operate limited capacity to match weak demand. American Airlines President Robert Isom earlier this week said the carrier’s January and February capacity will likely be 45% of 2019 levels.

Many potential customers are still not flying as coronavirus infections rise to ever higher records, new travel restrictions are implemented and government officials recommend avoiding travel to slow the spread of the disease.

U.S. officials last week said all passengers must test negative for Covid-19 before flying to the United States after a highly contagious strain of the disease was detected in the U.K., though it has also been identified in California and Colorado.

Carriers recently won $15 billion in additional payroll support in the latest coronavirus relief package that President Donald Trump signed Sunday. That requires airlines to keep employees on staff through March 31 and to call back more than 30,000 workers they furloughed when the terms of last package, which was $25 billion, expired on Oct. 1.

United Airlines executives said they expect it will be temporary.

“The truth is, we just don’t see anything in the data that shows a huge difference in bookings over the next few months,” CEO Scott Kirby and President Brett Hart said in a Dec. 21 employee note. “That is why we expect the recall will be temporary.”

View Article Origin Here

Related Articles

Back to top button