STORY UPDATE @ 11:40 PDT – United Airlines warns 36,000 workers — including 15,000 flight attendants, 11,000 customer service and gate agents, 5,550 maintenance employees and 2,250 pilots they will receive layoff notices this fall. This doesn’t mean 36,000 will be furloughed, it is a furlough warning.
Just when airline booking are making a comeback so is Covid-19. We have seen that when infections rise, bookings drop. Is this happening again?
Airline Bookings Going In Reverse
United Airlines told employees on Monday that bookings are dropping as Covid-19 cases soar. The Wall Street Journal reported obtained a copy of the memo to United employees. The fact that New York, New Jersey, Massachusetts, Deleware and Hawaii have 14-day quarantine requirements isn’t helping airlines either. I was supposed to fly to Boston on Friday and I have cancelled my flight to Logan International Airport (BOS) due to the quarantine. Add to those woes, the sunbelt states of Florida, Texas, Arizona and California are going the wrong way in Covid-19 cases. You can see that these markets represent many prime airline destination cities. The airlines really needed to make the most of the summer travel season.
A few weeks ago, United’s Newark (EWR) traffic was only down about 33% from the same period in 2019. As of July 1, 2020, United’s Newark bookings were down to 16% of the 2019 departure level.
In a report to CNN, Delta Air Lines reported similar booking trends to that of United Airlines. Delta did not release actual booking statistics.
Airline analyst Philip Baggaley at Standard & Poor’s said:
“It certainly could be a jagged recovery,” he said. “The initial surge in bookings, there was probably some pent-up demand in there. There’s no doubt that the increase in [Covid-19] cases and quarantines throws a monkey wrench into it.”
“There’s so much uncertainty about the virus and that’s feeding people’s fears and perceptions about the safety of travel,” he said. “A second wave was always a downside risk for the overall economy and the airlines in particular.”
Just When Booking Was Picking Up
The Fourth of July holiday was looking promising when the TSA reported that 3.4 million people went through security screening. This was only 29% of the 2019 airport traffic but it showed a definite improvement over recent months. The TSA only screened 3.3 million passengers for the entire month of April.
Airlines For America is reporting that airlines were operating flight schedules of 46% of normal for the same period last year. Aircraft grounding was down to just 39%. This is a significant improvement from Spring, 2020.
Recovery Is Years Away
As the airlines hemorrhage cash, the cost-cutting continues. Airlines are seeking voluntary buyouts and early retirements from their employees. The delivery of new aircraft are delayed and some aircraft orders have been cancelled.
Airlines that took part in The CARES Act are required not use involuntary job cuts through September 30, 2020.
United CEO Scott Kirby said to United Airlines shareholders in June that in addition to voluntary buyouts and retirements, he wants new labor agreements with the unions to reduce labor costs enough to avoid layoffs. So far, there have been no new agreements between the airlines and its unions.
Final Thoughts
The Airlines and financial analysts were afraid of a second wave of Covid-19 striking this Fall. It appears that we haven’t made it out of the first wave of the pandemic and the majority of states are actually going backward in their infection numbers. The airlines are faced with business realities that are completely out of there control. The pandemic is resulting in a general reluctance by the public to fly and several states that have strong quarantine measures in place.
It will be years before the airline industry will get anywhere near 2019 levels. When the industry recovers, they will most likely look leaner and meaner.
