WSJ US BusinessAirlines Plan for Prolonged Coronavirus Travel Drought

October 16, 20200
https://www.gmi-co.com/wp-content/uploads/2020/10/airlines-plan-for-prolonged-coronavirus-travel-drought.jpg

One of airlines’ primary challenges: easing a fear of flying that has taken hold during the pandemic.

Photo: David Zalubowski/Associated Press

Airlines say they believe they have made it through the worst of the coronavirus pandemic.

So now what?

After pulling together over $100 billion by tapping government aid, mortgaging assets including planes and frequent flier programs, airlines likely have enough cash to withstand a prolonged downturn, Cowen & Co. analysts say. But it will be years before passenger demand recovers, chief executives of United Airlines Holdings Inc. UAL -0.89% and Delta Air Lines Inc. DAL 0.32% said this week.

“Make no mistake—we’re still in the early miles of this marathon,” Delta Chief Executive Ed Bastian wrote in a memo to employees on Thursday.

Airlines have two primary challenges: easing a fear of flying that has taken hold during the pandemic and reinventing themselves to compete for a share of an air-travel business that has abruptly become much smaller.

“We’ve got 12 to 15 months of pain, sacrifice and difficulty ahead,” United Chief Executive Scott Kirby said during a conference call Thursday to discuss the airline’s third quarter results. But “increasingly, the light at the end of the tunnel is visible.”

United and Delta together lost $16.8 billion in the first nine months of the year. Both have shrunk their workforces by at least 20%, including more than 13,000 furloughs at United. Airlines had pushed for a second round of government aid to prevent job cuts, hoping to be better prepared to bounce back when demand returns. However, negotiations over a broader relief package have dragged on for months with no resolution. 

American Airlines Group Inc. and Southwest Airlines Co. are scheduled to report third-quarter results next week.

Passengers have started to come back, but they are a trickle, not a surge. On Sunday, when almost 1 million people passed through U.S. airports, volumes were more than 60% lower than at the same time a year ago, and most days volumes are worse than that.

And with most corporate travel still on hold and international borders closed or subject to an array of entry requirements, some analysts see little room for improvement for a while. Delta expects fourth quarter sales to be 66% below last year’s levels. United’s Mr. Kirby said travel demand will likely be capped at half of typical levels until a vaccine has been developed and made widely available. Business travel probably won’t be back to normal before 2024, he predicted.

Delta and United together lost $16.8 billion in the first nine months of the year.

Photo: shannon stapleton/Reuters

As people resume some elements of their normal lives—going back to offices or school in some cases—airlines are stepping up efforts to convince them that it is safe to fly again, too.

That claim was bolstered this week by the results of a study of how virus particles move around during flights, conducted by the Department of Defense, United, Boeing Co. and others.

Using coughing mannequins that spewed fluorescent tracer particles on Boeing wide-body planes lent by United, the study found that aerosols are quickly diluted by plane ventilation systems and air filters. Exposure risk is minimal even for passengers on long flights seated next to an infected person, the study found.

After an unprecedented drop in air travel due to the coronavirus, passenger airlines are being forced to make long-term, make-or-break decisions at a time of great uncertainty and minimal cash flow. So how are they planning to survive? WSJ finds out. Composite: George Downs/The Wall Street Journal

There were caveats: The study looked at what happens if one passenger is infected, not several, and didn’t account for added risks from passengers moving around the cabin or turning their heads to talk to one another.

Other academic researchers have documented close to four dozen instances when Covid-19 appears to have been transmitted during flights, many of them early in the pandemic before masks were widely required.

STAY INFORMED

Get a coronavirus briefing six days a week, and a weekly Health newsletter once the crisis abates: Sign up here.

Military officials and airline executives said they were encouraged by the results of the new study. On social media, United touted the study, which Mr. Kirby said demonstrates that airplanes are “truly uniquely safe.”

Even if people can be persuaded to board planes, there are fewer places to go.

Efforts at creating travel bubbles in Asia have floundered, and rising cases within Europe have resulted in tighter travel restrictions there.

Something similar could play out in the U.S., if infection rates continue climbing. Over the summer, an uptick in cases in parts of the country triggered travel restrictions that cut short what had looked like the beginnings of a rebound, leaving airlines to determine how to best serve fliers. Today’s customers are booking last-minute, paying bargain-basement fares and flying short distances.

Understanding Coronavirus

“We’re literally looking at where people want to go next week,” Joe Esposito, Delta’s senior vice president of network planning, said at an industry event this week.

United is monitoring indicators such as occupancy rates in New York skyscrapers to get a sense of when people might start traveling for work again, Chief Commercial Officer Andrew Nocella said Thursday.

Carriers also are seizing the opportunity to grab space at once-congested airports. Southwest this week said it would start flights at major airports in Chicago and Houston, adding to its presence at secondary airports in both cities and going head-to-head against United in its hubs.

Mr. Kirby said United has its own plans. The airline has been angling to return to John F. Kennedy International Airport in New York, he said. Mr. Kirby has long said he believes United made a mistake by leaving JFK in 2015 before he joined the company.

Write to Alison Sider at alison.sider@wsj.com

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Leave a Reply

Your email address will not be published. Required fields are marked *

700 Louisiana Street , Houston TX. 77002
(+1) 832-390-2738
info@gmi-co.com

Follow us:

FREE CONSULTATION

Calls may be recorded for quality and training purposes.

Copyright © GMI 2020