Tracking the Impacts of COVID-19 - Updated November 5, 2020 - Airlines For America
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Tracking the Impacts of COVID-19 Updated November 5, 2020
COVID-19 Has Forced Several Airlines Across the Globe to Restructure or Cease Operations
Selected Airline Bankruptcies and/or Shutdowns Since March 1, 2020
United States Outside the USA*
Compass Airlines Aeromexico (Mexico)
ExpressJet Air Mauritius (Mauritius)
Miami Air International AirAsia Japan (Japan)
RavnAir Group Alitalia (Italy)
Trans States Airlines Avianca (Colombia)
Comair (South Africa)
Flybe (UK)
German Airways (Germany)
Germanwings (Germany)
LATAM (Chile)
South African (S. Africa)
Thai Airways (Thailand)
TAME (Ecuador)
Virgin Australia (Australia)
Source: A4A research * UK-based Virgin Atlantic filed Chapter 15 in the United States – “a solvent restructuring of an English company”
2
Aviation Is in the Early Innings of a Multiyear, Multistage Recovery
Contain Stabilize the Increase
the Virus Economy Efficiency
Aviation-Government Collaboration on Health/Facilitation/Safety/Technology
Traffic Revenue Financial
Recovery Recovery Recovery
Cost-Reduction
Business Initiatives + Business
Model Adaptation Model Initiatives
Cost-Reduction Adaptation+ +Debt
DebtReduction
Reduction
Reduce Restore Profitability Repair Balance
Cash Burn & Rebuild Margins Sheets
3
Airlines Are Making an Unprecedented Level of Investment in the Safety and Wellbeing of Their
Customers and Workers, Instituting Multiple Layers of Protection Throughout the Experience
Partnering With Premier
Requiring face Offering touchless Sanitizing counters, Adjusting security
coverings check-in kiosks & gate areas screening
Medical Institutions
Using HEPA Sterilizing w/electrostatic Disinfecting surfaces Reducing touchpoints
filtration systems sprayers & foggers (e.g., tables, buckles) (e.g., beverage service)
Source: AirlinesTakeAction.com
4
“When the use of masks is implemented in combination
with other measures built into aircraft operations, such as
increased ventilation…and disinfection of surfaces, these
layered NPIs offer significant protection from acquiring
COVID-19 through air travel.”
“The use of face masks is critically important throughout
the air travel process, from entering the airport for
departure to leaving the destination airport…”
The Global Economy Is Projected to Grow 6% in 2021
“The most important driver of this variable speed recovery is also the most unpredictable one and that, of
course, is the virus itself. When it comes to key developments and medical advances, we leave the forecasting
of the precise timing to epidemiologists and experts best suited to the task. Our baseline expectations reflected
in our latest forecast are predicated upon the rough framework that we get a reasonably effective vaccine
within the next year and that enough people are willing to take it that the virus case counts decline over time.”
Wells Fargo Forecasts for 2021 Real GDP Growth (%)
9.9 9.9
6.2 5.5 5.8
4.4 5.2
3.2 3.4 3.9
2.1
Source: Wells Fargo Securities (Oct. 7, 2020)
6
New U.S. Cases of COVID-19 Surging Again, With Third Wave This Fall – Surpassing India
New Cases Also Surging in Europe, Trending Down in India and Brazil
New Cases of COVID-19 (7-Day Moving Average)
100,000
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
16-Nov
23-Nov
30-Nov
14-Dec
21-Dec
28-Dec
11-May
18-May
25-May
12-Oct
19-Oct
26-Oct
16-Mar
23-Mar
30-Mar
4-May
15-Jun
22-Jun
29-Jun
5-Oct
2-Nov
9-Nov
7-Dec
1-Jun
8-Jun
13-Jul
20-Jul
27-Jul
10-Feb
17-Feb
24-Feb
20-Jan
27-Jan
2-Mar
9-Mar
6-Jul
3-Feb
10-Aug
17-Aug
24-Aug
31-Aug
14-Sep
21-Sep
28-Sep
3-Aug
7-Sep
13-Apr
20-Apr
27-Apr
6-Apr
USA China Japan India Italy UK Brazil Mexico France Spain
Source: World Health Organization and U.S. Centers for Disease Control and Prevention
7
In Most Recent Week, U.S. Airline Passenger Volumes* Were 62% Below Year-Ago Levels
Domestic Air Travel Down 60%, International Air Travel Down 75%
7-Day Rolling Year-Over-Year Change (%) in Onboard Passengers*
20
0
(20)
(40)
(60)
(80)
(100)
10-Nov
17-Nov
24-Nov
15-Dec
22-Dec
29-Dec
12-May
19-May
26-May
13-Oct
20-Oct
27-Oct
10-Mar
17-Mar
24-Mar
31-Mar
5-May
16-Jun
23-Jun
30-Jun
6-Oct
3-Nov
1-Dec
8-Dec
2-Jun
9-Jun
14-Jul
21-Jul
28-Jul
11-Feb
18-Feb
25-Feb
7-Jul
14-Jan
21-Jan
28-Jan
3-Mar
7-Jan
4-Feb
4-Aug
11-Aug
18-Aug
25-Aug
1-Sep
8-Sep
15-Sep
22-Sep
29-Sep
14-Apr
21-Apr
28-Apr
7-Apr
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
8
In Most Recent Week, U.S. Passenger Airline Departures Were 48% Below 2019 Levels
Domestic Flights Operated Down 46%, International Flights Operated Down 63%
7-Day Rolling Year-Over-Year Change in Aircraft Departures (%)
20
0
(20)
(40)
(60)
(80)
(100)
10-Nov
17-Nov
24-Nov
15-Dec
22-Dec
29-Dec
12-May
19-May
26-May
13-Oct
20-Oct
27-Oct
10-Mar
17-Mar
24-Mar
31-Mar
5-May
16-Jun
23-Jun
30-Jun
6-Oct
3-Nov
1-Dec
8-Dec
2-Jun
9-Jun
14-Jul
21-Jul
28-Jul
11-Feb
18-Feb
25-Feb
7-Jul
14-Jan
21-Jan
28-Jan
3-Mar
7-Jan
4-Feb
4-Aug
11-Aug
18-Aug
25-Aug
1-Sep
8-Sep
15-Sep
22-Sep
29-Sep
14-Apr
21-Apr
28-Apr
7-Apr
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)
90
10
(80)
(70)
(60)
(50)
(40)
(30)
(20)
(10)
Montana 2
Wyoming (7)
Utah (9)
Idaho (12)
USVI (15)
South Dakota (20)
North Dakota (21)
Colorado (23)
Georgia (30)
Arizona (31)
Kansas (31)
USA Average
Washington (31)
Mississippi (32)
West Virginia (32)
Oregon (32)
Minnesota (34)
Michigan (35)
Iowa (35)
Tennessee (35)
Nebraska (36)
Florida (36)
Texas (36)
Nevada (38)
Maryland (38)
Puerto Rico (39)
10
South Carolina (39)
Source: Diio by Cirium published schedules (Oct. 23, 2020) for all airlines providing scheduled service to all destinations
Oklahoma (39)
North Carolina (40)
Wisconsin (41)
Alabama (42)
Maine (42)
Indiana (43)
Missouri (44)
Arkansas (45)
Alaska (45)
Louisiana (45)
Kentucky (48)
Virginia (48)
Pennsylvania (49)
New Mexico (49)
New Hampshire (49)
Illinois (49)
Rhode Island (52)
Ohio (52)
California (52)
Connecticut (55)
Vermont (55)
New Jersey (55)
In November, DC/NY/HA/MA/NJ Seeing Largest Air Service Reductions; MT Flights Up YOY
Massachusetts (57)
Hawaii (57)
% Change in Scheduled Passenger Flights: November 2020 vs. 2019 – All Airlines and Destinations
New York (65)
Wash. Reagan (72)Domestic U.S. Load Factor* Averaged 59% in Most Recent Week, Versus 81% a Year Earlier
Weekly Average Domestic U.S. Load Factor* (%)
100
90
80
70
60 58.8
50
40
30
20
10
0
15-Nov
22-Nov
29-Nov
13-Dec
20-Dec
27-Dec
10-May
17-May
24-May
31-May
11-Oct
18-Oct
25-Oct
15-Mar
22-Mar
29-Mar
3-May
14-Jun
21-Jun
28-Jun
4-Oct
1-Nov
8-Nov
6-Dec
7-Jun
12-Jul
19-Jul
26-Jul
16-Feb
23-Feb
5-Jul
12-Jan
19-Jan
26-Jan
1-Mar
8-Mar
5-Jan
2-Feb
9-Feb
16-Aug
23-Aug
30-Aug
13-Sep
20-Sep
27-Sep
2-Aug
9-Aug
6-Sep
12-Apr
19-Apr
26-Apr
5-Apr
2019 2020
Source: A4A member passenger airlines as reported to A4A on a consolidated company basis (including branded code share partners) * Revenue passenger miles divided by available seat miles
11In Most Recent Week, Domestic U.S. Flights Averaged 71 Passengers*
Domestic Flights Averaged ~99 Passengers per Departure Over the Course of 2019
7-Day Moving Average Onboard Passengers* per Flight
250
200
150
100
50
0
7-Jan-19
6-Jun-19
2-Jan-20
6-Jul-19
31-May-20
7-May-19
28-Oct-20
27-Nov-20
27-Dec-20
7-Apr-19
1-Apr-20
1-May-20
5-Aug-19
4-Sep-19
4-Oct-19
3-Nov-19
3-Dec-19
29-Aug-20
28-Sep-20
6-Feb-19
8-Mar-19
1-Feb-20
2-Mar-20
30-Jun-20
30-Jul-20
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
12U.S. Airline Capacity Cuts Have Not Caught Up With the Severe Drop in Demand
7-Day Rolling Year-Over-Year Change (%) in Systemwide Traffic and Capacity*
20
10
0
(10)
(20) Traffic (RPMs)
(30)
(40) Capacity (ASMs)
(50) (53)
(60)
(70) (68)
(80)
(90)
(100)
10-Nov
17-Nov
24-Nov
15-Dec
22-Dec
29-Dec
12-May
19-May
26-May
13-Oct
20-Oct
27-Oct
10-Mar
17-Mar
24-Mar
31-Mar
5-May
16-Jun
23-Jun
30-Jun
6-Oct
3-Nov
1-Dec
8-Dec
2-Jun
9-Jun
14-Jul
21-Jul
28-Jul
11-Feb
18-Feb
25-Feb
7-Jul
14-Jan
21-Jan
28-Jan
3-Mar
7-Jan
4-Feb
4-Aug
11-Aug
18-Aug
25-Aug
1-Sep
8-Sep
15-Sep
22-Sep
29-Sep
14-Apr
21-Apr
28-Apr
7-Apr
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
13Since June 1, Flight Completion Factor Has Averaged 99%, Consistently Outperforming 2019
U.S. Passenger Airline Flight Completion Factor* (7-Day Moving Average)
100%
99%
98%
97%
96%
16-Nov
30-Nov
14-Dec
28-Dec
15-Jun
29-Jun
19-Oct
1-Jun
13-Jul
27-Jul
5-Oct
2-Nov
10-Aug
24-Aug
21-Sep
7-Sep
2020 2019
Source: Global Eagle's masFlight Aviation Platform * Departures performed as a percent of those scheduled
14TSA Checkpoint Traveler Throughput* Is Running 64% Below Year-Ago Levels
Daily Average Bottomed Out at 95K in April 11-17
TSA Traveler Throughput: 7-Day Moving Average (in Thousands)
2,750
2,500
2,250
2,000 Jan 5.5%
Feb 2.1%
1,750 Mar (50%)
Apr (95%)
1,500 May (90%) 2019 2020
1,250 Jun (81%)
Jul (73%)
1,000 Aug (70%)
Sep (67%)
750 Oct (63%) 773
Nov (TBD)
500 Dec (TBD)
250
0
11-Nov
18-Nov
25-Nov
16-Dec
23-Dec
30-Dec
13-May
20-May
27-May
14-Oct
21-Oct
28-Oct
11-Mar
18-Mar
25-Mar
6-May
10-Jun
17-Jun
24-Jun
7-Oct
4-Nov
2-Dec
9-Dec
3-Jun
15-Jul
22-Jul
29-Jul
12-Feb
19-Feb
26-Feb
15-Jan
22-Jan
29-Jan
4-Mar
1-Jul
8-Jul
1-Jan
8-Jan
5-Feb
12-Aug
19-Aug
26-Aug
16-Sep
23-Sep
30-Sep
5-Aug
2-Sep
9-Sep
15-Apr
22-Apr
29-Apr
1-Apr
8-Apr
Source: Transportation Security Administration * U.S. and foreign carrier customers traversing TSA checkpoints; 2019 is year-ago same weekday
15October: TSA Checkpoint Volumes Declined Most in HA/NY/MA/VT/DC; Least in VI/WY/MT/SD/ID
% Change in Traveler Throughput by U.S. State – October 2020 vs. October 2019
Source: Transportation Security Administration
16Conditional Lifting of Hawaii Inbound Quarantine on Oct. 15 Is Boosting Volumes*
Recent Days Are 75-83% Below Year-Ago Levels Versus 94-95% Previously
Year-Over-Year Change (%) in Air Travel to Hawaii: 7-Day Moving Average*
20
0
(20)
On Mar. 26, the State of Hawai’i initiated a mandatory 14-day self-quarantine for all passengers arriving from out of
(40)
state. Beginning Oct. 15, subject to specific COVID-19 negative test results, passengers can avoid quarantining.
(60)
(80)
(100)
11-Nov
18-Nov
25-Nov
16-Dec
23-Dec
30-Dec
13-May
20-May
27-May
14-Oct
21-Oct
28-Oct
11-Mar
18-Mar
25-Mar
6-May
10-Jun
17-Jun
24-Jun
7-Oct
4-Nov
2-Dec
9-Dec
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
12-Aug
19-Aug
26-Aug
16-Sep
23-Sep
30-Sep
5-Aug
2-Sep
9-Sep
15-Apr
22-Apr
29-Apr
1-Apr
8-Apr
Source: Hawaii Department of Business, Economic Development & Tourism * Daily passenger counts include returning residents, intended residents and visitors but exclude interisland and Canada passengers
17In September, U.S.-International Air Travel* Fell 88% From Year-Ago Levels
Non-U.S. Citizen Arrivals Fell 90%; U.S. Citizen Departures Fell 85%
% Change YOY in Total* U.S.-International Air Passengers: 2020 vs. 2019
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
20
1.5
0
(2.0)
(20)
(40)
(60)
(64.0)
(80)
(100) (90.0) (87.8)
(97.0) (92.6)
(99.2) (98.8)
Non-U.S. Citizen International Arrivals U.S. Citizen International Departures
Source: U.S. Department of Commerce National Travel and Tourism Office using DHS I-92 / APIS data * Gateway-to-gateway passengers on U.S. and foreign scheduled and charter airlines and general aviation
18In September 2020, Mexico Was the Clear Leader for U.S.-International Air Travel
U.S.-Mexico Down 49% YOY vs. U.S.-United Kingdom Down 96% YOY
Top-20 U.S. Country Pairs by Total Nonstop Air Passengers* (000)
September 2019 September 2020
2,689
Ex. NYC-LON = 415K Ex. NYC-LON = 21K
1,956
1,858
1,097
1,032
946
867
692
615
598
542
536
455
411
369
325
304
285
282
278
241
237
97
82
77
69
66
58
54
51
49
47
44
39
33
32
32
30
26
25
D.R.
D.R.
Germany
Panama
Korea
Ireland
Brazil
Australia
Turkey
Germany
Korea
Brazil
Aruba
France
Italy
Spain
Haiti
France
Canada
Canada
Qatar
UK
Mexico
Japan
China
Colombia
UAE
UK
India
UAE
Hong Kong
Mexico
Ecuador
Colombia
Jamaica
Jamaica
Japan
Netherlands
Netherlands
Israel
U.S. Citizens Others
Source: U.S. Department of Commerce National Travel and Tourism Office using DHS I-92 / APIS data * Gateway-to-gateway passengers on U.S. and foreign scheduled and charter airlines and general aviation
19Corporate Air Travel* Has Yet to Recover From the Steep Declines That Began in March
Year-Over-Year Change (%) in Weekly Tickets Sold* by U.S. Travel Agencies
20
0
(20)
(40)
(60)
(68.6)
(80)
(85.3)
(100)
15-Nov
29-Nov
13-Dec
27-Dec
17-May
31-May
18-Oct
22-Mar
3-May
14-Jun
28-Jun
4-Oct
1-Nov
12-Jul
26-Jul
23-Feb
12-Jan
26-Jan
8-Mar
9-Feb
9-Aug
23-Aug
6-Sep
20-Sep
19-Apr
5-Apr
All Corporate
Source: Airlines Reporting Corporation (ARC) * Results do not include sales of tickets purchased directly from airlines and are not net of refunds or exchanges.
20The Rapid Decline of Demand – Especially Business Travel – Has Pummeled Airline Revenues
YOY Change (%) in Operating Revenues Total Operating Revenues (Cents) per ASM
16 15.58
15.06 15.30
15 14.71
(17)
14
13 12.82
12
(74) 11
9.96
(86) 10
9.25
9
1Q 2Q 3Q 4Q
1Q20 2Q20 3Q20 4Q20
2019 2020
Source: A4A analysis of reports by Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit and United on a consolidated company basis for systemwide operations
21First Nine Months of 2020: U.S. Passenger Airline Operating Revenues Down 61.5% YOY
Pre-Tax Losses Exceeding $36 Billion Through September
Change (%) in Operating Revenues and Expenses Quarterly Pretax Income/Losses ($Billions)
YTD 3Q20 vs. YTD 3Q19
3.3
(1.0)
(6.4)
(17.7)
(21.1)
(32.2)
(39.3)
(47.2)
($6.8)
Fuel (61.1)
Total OpRev (61.5)
Psgr. (1) (65.3)
Labor
Airports
Cargo
Aircraft
Total OpExp
Other (2)
Other (3)
Maintenance
($14.2)
($15.3)
1Q20 2Q20 3Q20 4Q20
1. Traffic = revenue passenger miles (down 63.5%); yield = revenue per passenger-mile flown (down 5.0%)
2. Sale of frequent flyer award miles to airline business partners, transportation of pets, in-sourced aircraft and engine repair, flight simulator rentals, inflight sales, etc.
3. Aircraft rents, professional fees, food/beverage, insurance, commissions, GDS fees, communications, advertising, utilities, office supplies, crew hotels, payments to regionals
Source: A4A analysis of reports by Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit and United on a consolidated company basis for systemwide operations
22Domestic U.S. Air Cargo Demand Continues to Outperform U.S.-International
Trade With Asia Continues to Lead the Recovery for U.S.-International Air Cargo
% Change YOY in Air Cargo* Between the United States and World Areas – U.S. and Foreign Airlines
15.3
10.5
12.7
8.0
1.2
4.2
3.1
3.1
2.8
2.2
(12.7)
(3.8)
(5.4)
(5.9) (26.3)
(7.0)
(10.1)
(13.7)
Apr (16.5)
Mar (17.0)
Feb
Jul
Jun
Jan
Aug
Sep
May
Oct
Nov
Dec
Feb
Jul
Jun
Jan
Apr
Aug
Sep
Mar
May
Oct
Nov
Dec
Domestic International Europe Latin America Asia Canada
Source: Bureau of Transportation Statistics, T1 (U.S. carriers) and T-100 International Market (U.S. and foreign flag carriers) * Pounds of freight and mail enplaned in scheduled and nonscheduled services
23Airlines 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
24The Pandemic Has Taken a Material Toll on U.S. Airline Employment
Voluntary Reductions, Retirements, Job Changes, Employer Shutdowns and Other Factors at Play
Scheduled U.S. All U.S. Passenger
Carrier Universe
Passenger Airlines and Cargo Airlines
Measure FTEs* (000) Headcount (000)
All-Time High Jun-2001: 545.9 May-2001: 760.8
Post-2000 Low Point Apr-2010: 376.7 Apr-2010: 562.3
Pre-COVID Peak Mar-2020: 460.0 Feb-2020: 757.0
Latest Available Data Point Aug-2020: 411.2 Sep-2020: 702.1
Change vs. Pre-COVID (48.9) (54.9)
Source: Bureau of Transportation Statistics based on payroll near the 15th of the month * Full-time equivalents (FTE) = full-time workers plus 0.5 * part-time workers
25Over the Past Two Decades, Job Gains/Losses Have Mirrored the Industry’s Financial Health
From March to December, U.S. Passenger Airline Employment Will Have Fallen by ~90,000 FTEs
U.S. Scheduled Passenger Airline Full-Time Equivalent Employees (000s)
550 Jun-2001, 545.9
525 All-Time High
Pre-COVID Peak
500 Mar-2020
475 460.0
450 Lowest Since 1Q87
425 Apr-2010
376.7
400
375 Dec-2020
Sep-Dec Est.
370.0
350
Jan-2000
Jan-2001
Jan-2002
Jan-2003
Jan-2004
Jan-2005
Jan-2006
Jan-2007
Jan-2008
Jan-2009
Jan-2010
Jan-2011
Jan-2012
Jan-2013
Jan-2014
Jan-2015
Jan-2016
Jan-2017
Jan-2018
Jan-2019
Jan-2020
Jan-2021
Jan-2022
Jan-2023
Source: Bureau of Transportation Statistics for scheduled U.S. passenger airlines (i.e., all that report scheduled passenger revenue)
26One-Fourth of the U.S. Passenger Airline Fleet Has Been Inactive for at Least 30 Days
% of Fleet Inactive by Duration Number of Active Aircraft*
28
25
22 5,856
20 19
4,449
7+ 30+ 60+ 90+ 180+ 12/31/2019 11/1/2020
Consecutive Days Inactive as of 11/1/2020
Source: Global Eagle's masFlight Aviation Platform, based on tail numbers that were active at any point in 1Q 2020. * Active defined as operated in any of the previous seven days
27Lower Jet-Fuel Prices Have Provided Some Cost Relief, But Rising Again With More Flying
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
23-Jul
10-Jun
24-Jun
16-Jan
31-Jan
2-Mar
6-Aug
3-Sep
14-Apr
28-Apr
2-Oct
16-Mar
30-Mar
12-May
27-May
20-Aug
18-Sep
2-Dec
16-Oct
30-Oct
9-Jul
16-Nov
16-Dec
31-Dec
2-Jan
14-Feb
2020 2019
Source: Energy Information Administration (EIA) Weekly Petroleum Status Report
28Decline in Air-Transport Demand Has Translated to Sharply Reduced Jet-Fuel Consumption
Fewer Operations (Especially Long-Haul) and Smaller Payloads + Retirement of Older Aircraft
% Change YOY in U.S. Airline Industry Fuel Consumption*
2.4 2.5
(22.4)
(45.6)
(47.6)
(50.8)
(60.7)
(65.4) (66.3)
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Domestic International
Source: Bureau of Transportation Statistics F41 Schedule P12A * Scheduled and nonscheduled passenger and cargo services
29U.S. Airlines Have Faced a Highly Elevated Breakeven Load Factor in 2020
Expected to Remain Elevated Through First Quarter of 2021 on Low Yield and High Unit Cost
Breakeven Load Factor* (%)
140
124
120
100
100 89 93
77 79 75 75 75 76
80
60
Estimate
Estimate
Estimate
40
20
0
1Q 2Q 3Q 4Q
2019 2020 2021
Source: Analyst estimates for publicly traded U.S. passenger airlines
30Collectively, U.S. Airlines Expect Cash Burn to Persist Through Winter 2020/2021
Given the Dearth of Demand (Especially Business Travel), Cost Reduction Is Paramount
Estimated Average Daily Cash Burn* (in Millions), U.S. Passenger Airlines
($140) ($136)
($149)
($182) ($177)
Nov Dec Jan Feb Mar
Source: A4A and various airline equity analysts * Ticket and cargo sales - cash operating expenses - cash refunds - capital expenditures - interest expense – repayment of debt
31Airlines Are Coping by Taking on Billions in Debt – Up ~65% From YE2019 to YE2020
Annual Net Interest Expense Projected to Exceed $14.5B in 2021-2023
“For 2021 and beyond, we anticipate a major deleveraging cycle as the industry will have no choice but to
address its significant debt load.” (Deutsche Bank, “Airline Industry Update,” July 1, 2020)
Year-End Total Debt ($ Billions) Interest Expense, Net ($ Billions)
5.2
4.9
4.5
173.5
+$68B
167.5
161.4
155.5
3.7
108.1
105.4
2.0 1.9
2018 2019 2020F 2021F 2022F 2023F 2018 2019 2020E 2021F 2022F 2023F
Source: A4A, equity analysts and filings of Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit and United
32In 2020, S&P Has Lowered Its Credit Ratings on Eleven U.S. and Canadian Airlines*
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 Air Canada WestJet
15-Mar 24-Aug
Source: Standard & Poor’s * Publicly traded U.S. carriers in S&P Global coverage universe
33After 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 (Millions) and Operating Revenues (Billions)
1,000 $250
900
800 $200
700
600 $150
500 9/11
400
300
200
100
0
Global Financial Crisis + $100 Oil
? $100
$50
$0
4Q00
2Q01
4Q01
2Q02
4Q02
2Q03
4Q03
2Q04
4Q04
2Q05
4Q05
2Q06
4Q06
2Q07
4Q07
2Q08
4Q08
2Q09
4Q09
2Q10
4Q10
2Q11
4Q11
2Q12
4Q12
2Q13
4Q13
2Q14
4Q14
2Q15
4Q15
2Q16
4Q16
2Q17
4Q17
2Q18
4Q18
2Q19
4Q19
2Q20
4Q20
2Q21
4Q21
2Q22
4Q22
2Q23
4Q23
2Q24
4Q24
Passengers Enplaned (Mils) Operating Revenues ($ 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
34We Are Unlikely to See a Return to 2019 Passenger Volumes Before 2023-2024
2021-2022 Clouded by Uncertainty re: State of Pandemic, Vaccination/Therapeutics, Economy
Estimated U.S. Airline Industry Passenger Traffic Change (%) vs. 2019 Levels
10
0
(10)
(20)
(30)
(40)
(50)
(60)
(70)
2020E 2021F 2022F 2023F 2024F
Pessimistic Optimistic
Source: A4A and various airline equity analysts
35After 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 (Billions)
50
45
40
35
?
30
25
20
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
2Q21
4Q21
2Q22
4Q22
2Q23
4Q23
2Q24
4Q24
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
36Developments in the Marketplace Are Driving Important Changes in Airline Strategy
Evaporation of corporate travel Enhanced cleaning measures and PPE
Gradual, growing interest in getaways and VFR Widespread elimination of change fees
“WFH” affording leisure travelers more flexibility Expansion of mobile app self-service functionality
Most bookings within 30 days of departure Map-based flight searches (simultaneous
Aversion to connecting / layovers comparisons across multiple destinations)
Stockpiling of travel credits (e.g., e-wallets) Efforts to deploy preflight COVID testing in key
transoceanic corridors (incl. Lower 48-Hawaii)
International restrictions/quarantines/recession
Rethinking of fleets (gauge, range, types) and
Domestic leisure fares down > 10% YOY routes (points, timings, frequencies, connections)
Materially higher breakeven load factor Initiatives to capitalize on air-cargo opportunities
Higher-than-historical Thurs/Mon share of travel amid reduced capacity but newer technology
Non-U.S. point of sale down ~90% YOY Acceleration of selected airport projects
U.S.-Mexico/Caribbean/C. America faring better Focus on retaining talent, boosting morale
37Key Points
» In the first two months of 2020, operating revenues grew more than 5% – we were on our way to another record.
» U.S. passenger airlines will experience a high rate of cash burn (~$150-190M per day) through at least 1Q 2021.
» Air travel took 3 years to recover from 9/11 and 7+ years from the global financial crisis. Air cargo took 10 years post-GFC.
» 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 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 rehire and reinvest.
3839
You can also read
