U.S. Airlines Struggle as Airports Become Parking Lots

By Kurt Stolz on 1 June 2020
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In early May, Warren Buffett divested all of his investment firm’s holdings in the four major U.S. airlines, warning that the “world has changed” for the aviation industry due to the coronavirus crisis.  In mid May, Boeing CEO Dave Calhoun said he saw a bumpy road ahead for the airline industry and predicted that a major carrier would not survive 2020 as a result.

It appears Buffett and Calhoun were on to something as the numbers at the end of May are nothing less than shocking.

As of the end of May, a full 50% of the airliners in the fleets of U.S. airlines – some 3,054 aircraft – were parked and many are unlikely to be used again in the future.

Passenger loads have plummeted: almost three-quarters of all flights are less than 50% full, according to figures from Airlines for America, an industry trade group representing major U.S. carriers.  The group said that the average number of passengers on a domestic flight is 47, compared to 92 in the first two months of 2020.

Numerous airlines including American Airlines, Delta Air Lines, and United Airlines began to announce suspensions of flights to mainland China at the end of January of this year as the number of cases of the novel coronavirus began to dramatically increase there.

President Trump promulgated a ban on non-U.S. citizens entering the country from China on February 1 and from Europe in mid March.  At the very end of May, President Trump imposed a ban on non-citizens entering the country from Brazil, citing the increase in the number of cases there.

In addition, figures from the Transportation Security Administration, the agency that operates the nation’s airport security checkpoints indicate that the number of travelers traversing those checkpoints is down 87% compared to the same period last year, although there are some signs that travel is beginning to return in a small way.

Months into the crisis, in a memorandum to employees in late May, United’s new CEO, Scott Kirby, warned of “tough times ahead,” a statement that, by itself, creates a sense of foreboding although it very well may be a gross understatement.

A look at financial figures is revealing, if not frightening.

The coronavirus is costing airlines an estimated $6.5 to $7.5 billion a month, Airlines for America said.  Passenger volumes are down 89% and the number of net booked passengers is down 90% compared to 2019.  Net booked revenue is down 97%.

Meanwhile, health officials predict a possible spike in coronavirus infections as a result of the protests and riots in dozens of cities across the United States where participants didn’t wear masks or social distance and such a spike could make the Boeing CEO’s prediction come true.

(Photo: Accura Media Group)

Accura News

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