U.S. airlines are set to receive another round of support from Washington as the industry continues to wait for the first tangible signs of a real recovery from the coronavirus slowdown.
President Joe Biden’s new $ 1.9 trillion economic relief package includes $ 14 billion to keep thousands of flight attendants, pilots and other personnel on payroll until the end of the day. end of September.
The hope and expectation is that the funding – the third round of congressional payroll support since the coronavirus devastated the U.S. travel industry – will be the last needed before carriers can return to profitability.
Improving the pace of vaccinations in the United States has raised hopes that a recovery in travel may finally be on the horizon, with airlines planning to add flights this summer to meet expected pent-up demand .
But industry executives remain cautious after earlier hopes of a recovery faded as the coronavirus crisis progressed. The major airlines lost $ 35 billion in 2020 and they continue to spend $ 150 million a day.
“You can plan with this virus but you can’t very well predict,” Nicholas Calio, president of Airlines for America, said during a congressional hearing earlier this month.
– Raise and burn money –
The number of trafficking in the United States is still below 50% of its pre-coronavirus levels most of the time, an improvement from the slowest period of Covid-19 lockdowns, but still an unsustainable situation.
Airlines have pulled older planes, closed airport lounges, and delayed aircraft deliveries to cut costs during the crisis.
Tens of thousands of workers have also left the industry through early retirement and other voluntary initiatives, but Congress has intervened to prevent involuntary mass layoffs.
On Monday, American Airlines became the last major carrier to use its frequent flyer program as collateral for funding, raising $ 7.5 billion in additional debt.
American carriers had debt of $ 164 billion at the end of 2020, up more than 56% from 2019, according to Airlines for America. In 2021, the industry is expected to pay $ 5.2 billion in interest payments, up from $ 1.9 billion in 2019.
In a presentation accompanying its debt offer, American predicted a “non-linear recovery with an accelerating pace once we see widespread immunization and government restrictions ease.”
“The airlines have all set the bar very low” for the first quarter, said Peter McNally, analyst at Third Bridge, who said investors saw a recovery in demand as inevitable.
“People keep giving them money until the recovery happens,” he said.
Data from Google Trends shows searches for airlines like Southwest and JetBlue have increased by 50% or more since Christmas week last year, DataTrek Research said in a note.
“Americans are already increasingly interested in flying again before spring break,” DataTrek’s Jessica Rabe said in the note. “Leisure activity tends to come back faster and stronger after a recession than business travel, and better stimulus controls should help.”
– A return for MAX? –
A resumption of international travel depends on the global containment of the virus. Business travel – a crucial source of profitability – also returns later when “herd immunity” is breached and government restrictions are relaxed.
But while a full recovery is not expected until 2023 or later, industry experts see a rebound in domestic travel relatively soon, with more emphasis on single-aisle jets, including Boeing’s 737 MAX.
In anticipation of improving demand, United Airlines this month announced plans to purchase another 25 Boeing 737 MAXs for delivery in 2023.
The order “helps us meet the demand that we expect to see in 2022 and 2023,” United chief executive Andrew Nocella said, calling the plan “a down payment on our future success.”
The MAX was grounded for 20 months following two fatal crashes and was only cleared to return to service in late 2020 after extensive regulatory review and upgrades.
Changes in the market mean that the MAX is “starting to be used again,” McNally said. “In general terms, this is the kind of plane that is going to be used today.”
jmb / cs