Tracking the Impacts of COVID-19 - Updated May 19, 2020
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Tracking the Impacts of COVID-19 Updated May 19, 2020
COVID-19 Has Forced Several Airlines Across the Globe to Restructure or Cease Operations
Airline Bankruptcies and/or Shutdowns From March 1 to Present
United States Outside the USA
Trans States Airlines Flybe (UK)
Compass Airlines Germanwings (Germany)
RavnAir Group Virgin Australia (Australia)
Miami Air International Air Mauritius (Mauritius)
German Airways (Germany)
Alitalia (Italy)
Comair (South Africa)
Avianca (Colombia)
Thai Airways (Thailand)
Source: A4A research
2
Worldwide Commercial Flights* Are Beginning to Resurface
Number of commercial flights tracked by Flightradar24, per
day (UTC time), last 120 days
125,000
100,000
Number of flights
75,000
50,000
25,000
0
7 -d a y moving a ve ra ge Numb e r of flights
Source: Flightradar24 * Commercial passenger flights + cargo flights + charter flights + some business jet flights
3
In Every Region, U.S. Airlines Have Seen Passenger Volumes* Decimated
After Growing ~5 Percent in January-February, Air Travel Fell 93 Percent in the Most Recent Week
7-Day Rolling Year-Over-Year Change (%) in Onboard Passengers
20
0
(20)
(40)
(60)
(80)
(100)
14-Jan
21-Jan
28-Jan
3-Mar
7-Apr
14-Jul
21-Jul
28-Jul
16-Jun
23-Jun
30-Jun
10-Mar
17-Mar
24-Mar
31-Mar
14-Apr
21-Apr
28-Apr
5-May
4-Aug
1-Sep
8-Sep
4-Feb
12-May
19-May
26-May
11-Aug
18-Aug
25-Aug
15-Sep
22-Sep
29-Sep
7-Jan
11-Feb
18-Feb
25-Feb
7-Jul
2-Jun
9-Jun
Domestic USA Canada Mexico Atlantic Latin (excl. Mexico) Pacific
Source: A4A member passenger airlines as reported to A4A on a consolidated company basis (including branded code share partners) * Onboard (“segment”) passengers
4
U.S. Airlines Have Reduced International Operations More Sharply Than Domestic Operations
7-Day Rolling Year-Over-Year Change in Aircraft Departures (%)
20
0
(20)
(40)
(60)
(73.9)
(80)
(93.3)
(100)
14-Jan
21-Jan
28-Jan
3-Mar
7-Apr
14-Jul
21-Jul
28-Jul
5-May
16-Jun
23-Jun
30-Jun
10-Mar
17-Mar
24-Mar
31-Mar
14-Apr
21-Apr
28-Apr
4-Aug
1-Sep
8-Sep
4-Feb
12-May
19-May
26-May
11-Aug
18-Aug
25-Aug
15-Sep
22-Sep
29-Sep
7-Jan
11-Feb
18-Feb
25-Feb
7-Jul
2-Jun
9-Jun
Domestic International
Source: A4A member passenger airlines as reported to A4A on a consolidated company basis (including branded code share partners)
5
Domestic U.S. Flights Are Carrying 31 Passengers, on Average
In the First Two Months of 2020, the Domestic Flights Averaged About 85 to 100 Passengers
7-Day Moving Average Onboard Passengers per Flight
160
140
120
100
80
60
39
40
20 31
0
14-Jan
21-Jan
28-Jan
3-Mar
7-Apr
14-Jul
21-Jul
28-Jul
16-Jun
23-Jun
30-Jun
10-Mar
17-Mar
24-Mar
31-Mar
14-Apr
21-Apr
28-Apr
5-May
4-Aug
1-Sep
8-Sep
4-Feb
12-May
19-May
26-May
11-Aug
18-Aug
25-Aug
15-Sep
22-Sep
29-Sep
7-Jan
11-Feb
18-Feb
25-Feb
7-Jul
2-Jun
9-Jun
Domestic International
Source: A4A member passenger airlines as reported to A4A on a consolidated company basis (including branded code share partners) * Onboard (“segment”) passengers
6
For U.S. Airlines, Passenger Traffic Is Falling Much Faster Than They Can Cut Capacity*
Airlines Are Struggling to Keep Pace With the Severe Drop in Demand for Air Travel
7-Day Rolling Year-Over-Year Change (%) in Traffic and Capacity
20
0
(20) Traffic (RPMs)
(40) Capacity (ASMs)
(60)
(80) (83.0)
(94.3)
(100)
14-Jan
21-Jan
28-Jan
3-Mar
7-Apr
14-Jul
21-Jul
28-Jul
16-Jun
23-Jun
30-Jun
10-Mar
17-Mar
24-Mar
31-Mar
14-Apr
21-Apr
28-Apr
5-May
4-Aug
1-Sep
8-Sep
4-Feb
12-May
19-May
26-May
11-Aug
18-Aug
25-Aug
15-Sep
22-Sep
29-Sep
7-Jan
11-Feb
18-Feb
25-Feb
7-Jul
2-Jun
9-Jun
Source: A4A member passenger airlines as reported to A4A on a consolidated company basis (including branded code share partners) * RPM = revenue passenger mile; ASM = available seat mile
7
TSA Checkpoint Traveler Throughput* Down 91 Percent Year Over Year
March Came In Like a Lion, Out Like a Lamb; April Showers Ensued; May Still Short of Flowers
TSA Traveler Throughput: 7-Day Moving Average (in Thousands)
2,750
2,500
2,250
2,000
1,750
1,500
1,250 January 5.5%
February 2.1%
1,000
March (50%)
750 April (95%)
500 206
250 217
0
13-May
20-May
27-May
11-Mar
18-Mar
25-Mar
6-May
10-Jun
17-Jun
24-Jun
3-Jun
15-Jul
22-Jul
29-Jul
12-Feb
19-Feb
26-Feb
1-Jul
8-Jul
15-Jan
22-Jan
29-Jan
4-Mar
1-Jan
8-Jan
5-Feb
5-Aug
12-Aug
19-Aug
26-Aug
2-Sep
9-Sep
16-Sep
23-Sep
30-Sep
15-Apr
22-Apr
29-Apr
1-Apr
8-Apr
2019 2020
Source: Transportation Security Administration * U.S. and foreign carrier customers traversing TSA checkpoints; 2019 is year-ago same weekday
8
The Evaporation of Air-Travel Demand Has Left Airports Nearly Empty
9
Travel to the State of Hawaii* Is Almost Nonexistent – Down 98 Percent Year Over Year
Air Travel to Hawaii: 7-Day Moving Average*
40,000
34,547
35,000
30,000
25,000
On March 26, the State of Hawai‘i initiated a
20,000 mandatory 14-day self-quarantine for all
15,000 passengers arriving from out of state. (On April
1, it was expanded to include interisland travel.)
10,000
5,000
726
0
13-May
20-May
27-May
11-Mar
18-Mar
25-Mar
6-May
10-Jun
17-Jun
24-Jun
3-Jun
15-Jul
22-Jul
29-Jul
12-Feb
19-Feb
26-Feb
1-Jul
8-Jul
15-Jan
22-Jan
29-Jan
4-Mar
1-Jan
8-Jan
5-Feb
5-Aug
12-Aug
19-Aug
26-Aug
2-Sep
9-Sep
16-Sep
23-Sep
30-Sep
15-Apr
22-Apr
29-Apr
1-Apr
8-Apr
2019 2020
Source: Hawaii Department of Business, Economic Development & Tourism * Daily passenger counts include returning residents, intended residents and visitors but exclude interisland and Canada passengers
10Demand* for Future U.S.-Related Air Travel Down 92 Percent in Week Ending May 10
Net Booked Revenue* Down 98 Percent
Year-Over-Year Change (%) in 7-Day Rolling Net Bookings*
20
0
(20)
(40)
(60)
(80) (91.7)
(100)
(98.3)
(120)
14-Jan
21-Jan
28-Jan
3-Mar
7-Apr
14-Jul
21-Jul
28-Jul
16-Jun
23-Jun
30-Jun
10-Mar
17-Mar
24-Mar
31-Mar
14-Apr
21-Apr
28-Apr
5-May
4-Aug
1-Sep
8-Sep
4-Feb
12-May
19-May
26-May
11-Aug
18-Aug
25-Aug
15-Sep
22-Sep
29-Sep
7-Jan
11-Feb
18-Feb
25-Feb
7-Jul
2-Jun
9-Jun
Passengers Revenue
Source: Airlines Reporting Corporation (ARC) for most U.S. and foreign carriers for any flight to/from/within the United States * Sales transactions minus refunds, for all future travel up to 330 days out
11Airlines Are Taking a Wide Variety of Self-Help Actions to Reduce Cash Burn
Selected Examples of Actions to Improve Cash Flow From Operations, Investing and Financing
» Making historic capacity cuts, parking and/or retiring older aircraft (and, in some cases, entire fleet types)
» Utilizing passenger planes on cargo-only missions, either belly-only or belly and main cabin
» Cutting executive compensation and implementing voluntary leave and early retirement programs
» Freezing hiring and non-essential spending (e.g., employee travel, consultants, events, marketing, training)
» Consolidating footprint at airport facilities (e.g., concourses); shuttering lounges; halting real estate projects
» Simplifying onboard product (e.g., food and beverage)
» Negotiating with vendors: cobranded credit cards, airports (i.e., zero-interest rent deferrals), regional airline
partners (i.e., reduced block hours), fuelers, caterers, etc. to achieve relief on payment terms/timing
» Deferring aircraft deliveries and reducing non-aircraft (e.g., ground equipment, IT) capital expenditures
» Raising funds via capital markets: borrowing funds via unsecured or secured loans and/or selling stock
» Selling/mortgaging aircraft/engines/other assets
» Suspending capital return programs, including share repurchases and the payment of future dividends
Source: A4A and member companies
12COVID-19 Has Forced U.S. Passenger Airlines to Idle More Than Half the Fleet
U.S. Passenger Airlines: Idled Aircraft*
4,000 100
3,193
3,002
3,000 75
2,000 49 52 50
1,171
1,000 25
353 19
300 316
5 6 5
0 0
31-Dec 31-Jan 29-Feb 31-Mar 30-Apr 17-May
# of Aircraft % of Active Fleet
Source: masFlight * Idle defined as inactive for the previous seven days
13Thousands of Planes Have Been Parked Worldwide
14Lower Jet-Fuel Prices Have Provided One Modest Source of Airline Cost Relief
Down More Than a Dollar per Gallon Versus 2019 Since Mid-March
Price of Jet Fuel (U.S. Gulf Coast, $ per Gallon)
2.25
2.00
1.75
1.50
1.25
1.00
0.75
0.50
0.25
0.00
16-Jan
24-Jan
31-Jan
2-Mar
9-Mar
6-Apr
10-Jun
17-Jun
24-Jun
16-Mar
23-Mar
30-Mar
14-Apr
21-Apr
28-Apr
5-May
7-Feb
12-May
19-May
27-May
2-Jan
9-Jan
14-Feb
24-Feb
3-Jun
2020 2019
Sources: Energy Information Administration (EIA) Weekly Petroleum Status Report
15U.S.-Based Jet Fuel Demand1 Has Fallen Sharply, Running ~80% Below Year-Ago Levels
Kerosene-Type Jet Fuel2 (Weekly, Thousand Barrels per Day)
2,250
2,000
1,750
1,500
1,250
1,000
750
500
250
352
0
10-Jan
17-Jan
24-Jan
31-Jan
6-Mar
3-Apr
10-Jul
17-Jul
24-Jul
31-Jul
2-Oct
8-May
12-Jun
19-Jun
26-Jun
13-Mar
20-Mar
27-Mar
10-Apr
17-Apr
24-Apr
1-May
7-Aug
4-Sep
7-Feb
15-May
22-May
29-May
14-Aug
21-Aug
28-Aug
11-Sep
18-Sep
25-Sep
3-Jan
14-Feb
21-Feb
28-Feb
3-Jul
5-Jun
1Jet fuel supplied within the United States to all users (i.e., U.S. and foreign airlines, recreational and business aviation, civilian government, military)
2Approximates consumption by measuring the disappearance of these products from primary sources (i.e., refineries, natural gas processing plants, blending plants, pipelines, bulk terminals). Generally computed as: field
production + renewable fuels and oxygenate plant net production + refinery and blender net production + imports + net receipts + adjustments - stock change - refinery and blender net inputs - exports.
Source: U.S. Energy Information Administration (EIA)
16Airlines Have Played an Integral Role in Transporting Essential Supplies
17Beset by COVID-19, U.S. Airlines Have Actively Tapped Outside Sources of Cash
Carriers Are Utilizing All Available Resources to Bolster Liquidity
Funds Raised* (in Millions) in Capital Markets Since Feb. 26, 2020
$12,592
$8,600
$4,500
$3,790 $3,500
$3,233
$1,000 $813 $503 $235
Southwest Delta United American JetBlue Alaska Spirit Hawaiian FedEx UPS
Source: Company SEC filings and announcements, as tallied by A4A * Completed or underway; includes debt and stock issuances plus sale-leaseback transactions
18COVID-19 Will Leave U.S. Carriers Highly Leveraged, Reversing Years of Progress for Most
Total Debt Projected to Increase 45 Percent From End of 2019 to End of 2020
YE Total Debt (Bils) Net Interest Expense (Bils) Leverage Ratio*
$140 $3.5 9.0
$120 8.0 8.3
126.8
$3.0
121.4
3.0 3.1 7.0
$100 $2.5
6.0
88.1
87.6
$80 $2.0 5.0 5.5
2.0 1.9
$60 $1.5 4.0
3.0
$40 $1.0
2.0 2.6
2.2
$20 $0.5 1.0
$0 $0.0 0.0
2020E
2021F
2018
2019
2020E
2021F
2021F
2022F
2018
2019
2018
2019
Source: Wolfe research and filings of Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit and United * Net debt divided by EBITDA (earnings before interest, taxes, depreciation and amortization)
19In Less Than Two Weeks, S&P Lowered Its Credit Ratings on Every U.S. Passenger Airline*
Ratings Actions Taken to Reflect Weakened Financial Condition and Heightened Risk
A-
BBB+
BBB
BBB-
BB+
BB
BB-
B+
B
B-
CCC+
CCC
CCC-
CC
C
D
Alaska Allegiant American Delta Hawaiian JetBlue Southwest Spirit United
15-Mar 27-Mar
Source: Standard & Poor’s * Publicly traded U.S. carriers in S&P Global coverage universe
20By April 10, Fitch Had Lowered Its Credit Ratings on Every U.S. Passenger Airline*
Ratings Actions Taken to Reflect Weakened Financial Condition and Heightened Risk
A-
BBB+
BBB
BBB-
BB+
BB
BB-
B+
B
B-
CCC+
CCC
CCC-
CC
C
D
Alaska American Delta Hawaiian JetBlue Southwest Spirit United
1-Mar 10-Apr
Source: Fitch Ratings * Publicly traded U.S. carriers in Fitch Ratings coverage universe
21We’re Likely to Face a Long Road to Recovery
“The longest U.S. economic expansion on record burned out at an astonishing pace, with the
sharpest contraction in economic activity since World War II… The sudden-stop recession has
likely lopped off a massive 11.8% from economic activity – roughly three times the decline of
the 2008-2009 crisis and in one-third the time.
And while we expect the economy will reopen, albeit only gradually, starting as we near the third
quarter, the recovery will continue to face headwinds as lingering fears of another wave of
COVID-19 will likely keep Americans maintaining some form of social distancing, opting for at-home
dinners and movie nights on the couch rather than restaurant visits and going to the theater.
Businesses that survive the two to three months of lost revenue may also be reluctant to
quickly rehire all their workers as they clean up their books.”
Beth Ann Bovino, Standard & Poor’s Chief U.S. Economist (April 16, 2020)
Source: Standard & Poor’s, “An Already Historic U.S. Downturn Now Looks Even Worse” (April 16, 2020)
22With the U.S. Economy Contracting, Unemployment Is Rising
“Strict ‘social distancing’ mandates, supply chain 14.9 13.5
disruptions, and sharp declines in the energy
sector due to plunging oil prices are resulting in a
deep global contraction of uncertain depth 3.7 5.1
2.3
and duration… Massive and broad-based
layoffs totaling over 30 million and sharp declines
in many asset prices imply an unprecedented
deterioration in household-sector economic
wellbeing that further restrains consumer (7.3)
spending in the near- and medium-term. We
expect US real consumer spending and GDP to 2019 2020F 2021F
decline 8.3% and 7.3% in 2020, respectively.”
Real GDP Unemployment Rate
Source: IHS Markit, “Executive Summary: US Economic Outlook” (May 2020)
23After 9/11 and the Global Financial Crisis, It Took Years for Air-Travel Demand to Recover
Passenger Volumes Took More Than Seven Years to Recover From the Financial Crisis/Oil Spike
Four-Quarter Rolling Passenger Volume and Operating Revenues
1,000 $250
900
800 $200
700
600 $150
500 Post-9/11
400 $100
Global Financial Crisis + Oil Spike
300
200 $50
100
0 $0
4Q00
2Q01
4Q01
2Q02
4Q02
2Q03
4Q03
2Q04
4Q04
2Q05
4Q05
2Q06
4Q06
2Q07
4Q07
2Q08
4Q08
2Q09
4Q09
2Q10
4Q10
2Q11
4Q11
2Q12
4Q12
2Q13
4Q13
2Q14
4Q14
2Q15
4Q15
2Q16
4Q16
2Q17
4Q17
2Q18
4Q18
2Q19
4Q19
2Q20
4Q20
Passengers Enplaned (Mils) Operating Revenues ($ Bils)
Source: A4A Passenger Airline Cost Index and Bureau of Transportation Statistics (Form 41 Schedule T1) * Passengers enplaned systemwide on U.S. airlines in scheduled and nonscheduled services
24After 9/11 and the Global Financial Crisis, It Took Years for Air-Cargo Demand* to Recover
Cargo Volumes Took 10 Years to Recover From the Financial Crisis/Oil Spike
Four-Quarter Rolling Air Cargo Revenue Ton Miles Flown (Billions)
50
45
40
35
30
25
20
Post-9/11 Global Financial Crisis + Oil Spike
15
10
5
0
4Q00
2Q01
4Q01
2Q02
4Q02
2Q03
4Q03
2Q04
4Q04
2Q05
4Q05
2Q06
4Q06
2Q07
4Q07
2Q08
4Q08
2Q09
4Q09
2Q10
4Q10
2Q11
4Q11
2Q12
4Q12
2Q13
4Q13
2Q14
4Q14
2Q15
4Q15
2Q16
4Q16
2Q17
4Q17
2Q18
4Q18
2Q19
4Q19
2Q20
4Q20
Source: Bureau of Transportation Statistics (Form 41 Schedule T1) * Cargo revenue ton miles (RTMs) flown on U.S. passenger and cargo-only airlines in scheduled and nonscheduled services
25Key Points
» In the first two months of 2020, operating revenues grew more than 5 percent – we were on our way to another record.
» After burning cash at ~$10B/month in late March, U.S. airlines implemented measures to reduce burn to ~$6.5-7.5B/month.
» Passenger volumes took 3 years to recover from 9/11 and 7+ years from the global financial crisis. Air cargo took 10 years.
» When traffic returns, low-yield (VFR, then vacationers) is likely to return faster than high-yield (corporate) and international,
with implications for the pace of revenue recovery, the need for cost reduction/containment, and the return to profitability.
Businesses first cut back hiring and travel and entertainment; in a recovery, those are the last things they restore. These travelers are
essential due to how often they fly and the cabins/fares they purchase, among other reasons.
» People will be reluctant to travel – or even to book travel – until there is a strong degree of confidence that the health crisis
and associated risks are behind us. The COVID-19 global pandemic constitutes a black swan-like public health crisis that will
only be solved once an effective vaccine is developed, but vaccines usually take a year or longer to develop.
» In addition to concerns about the spread of the virus and the associated restrictions on the movements of citizens, businesses
and consumers are facing a sharp global economic downturn of unknown duration.
The economic and consumer psychology effects of COVID-19 are deep and global.
High unemployment and reduced HHNW worth + strained government coffers = curtailed travel budgets for households and organizations.
» Once demand has recovered, it will take years for airlines to retire the newly accumulated billions of dollars of debt and to
address the sizable associated interest expense, limiting their wherewithal to rehired and reinvest.
2627
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