PCN, imagine this
financial hit:
Delta Projects 90% Revenue Drop in 2Q, 'We Know We Still Haven't Seen the Bottom'
Provided by Dow Jones
Apr 3, 2020 5:33 PM EDT
By Maria Armental
Delta Air Lines Inc. is preparing for a 90% projected revenue drop in the second quarter, following a quarter "unlike any in Delta's history," Chief Executive Ed Bastian said Friday in a memo to company workers.
Delta, which Friday applied for government aid to help stem the
losses from the coronavirus pandemic, is burning through more than $60 million
a day and "we know we still haven't seen the bottom," Mr. Bastian
said.
Some 115,000 flights have been cancelled, cutting the company's
schedule by more than 80%, he said. "But the reality is we simply don't
know how long it will take before the virus is contained and customers are
ready to fly again."
The chief executive said some 30,000 Delta workers had taken
unpaid leaves to help stanch the cash bleed but more would have to take unpaid
leaves of up to a year.
The company has offered free flights for medical workers and
cargo shipments of medical supplies as part the response to the pandemic.
(END) Dow Jones Newswires
April 03, 2020 17:33 ET
(21:33 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Daily Memo: Envisioning The U.S. Domestic Market’s Recovery
Sean Broderick April 10, 2020
North American carriers, led by U.S. operators, generated nearly 60% of 2019’s combined estimated global airline profits of $29.3 billion, IATA figures show. Credit: Joe Pries
With 95% of the U.S. population under stay-at-home orders,
predicting when regular trips to the pub might resume is senseless
enough.
Accurately forecasting how the world’s biggest airline passenger
market will recover is a non-starter. But a look at where the airlines stood
just a few weeks ago, how they got there, and the lingering issues of the
coronavirus offers insight into what parts of the recovery could look like.
Most post-pandemic analysis starts with looking at the aftermath
of recent economic shocks, charting key metrics and their time from trough to
pre-downturn recovery—a reasonable approach. But the post-Great Recession
recovery is likely the most instructive, for one simple reason: U.S. airlines
changed the way they did business. The biggest carriers stuck to a
plan—product, people, and balance sheets out-weighed metrics like market share,
and they made money. Lots of money.
North American carriers, led by U.S. operators, generated nearly
60% of 2019’s combined estimated global airline profits of $29.3 billion, IATA
figures show. The performance capped 10 consecutive years of profitability,
with the last six topping $10 billion annually.
More importantly, for post-pandemic purposes, they did it while
exercising capacity discipline. Year-over-year annual domestic seat growth
exceeded 3% only once from 2010-2019, a Delta Airport Consultants analysis
shows—a notable contrast from the strategies employed following the 1991 and
2001 downturns.
This time around, they have a steep hill to climb. U.S. airline
domestic departures were down 52% year-over-year for the week ended April 5,
Airlines for America (A4A) data show, and most flights weren’t necessary.
Domestic load factors for the week were a mind-numbing 10%. The carriers had
36% of their active fleet—2,240 aircraft—on the ground as of April 9, A4A
said.
Despite the rapid ramp-down, the success of the previous decade
argues against a rapid rebuild. Rather, methodical expansion via profitable
flights, not simply additional network feed, is a solid bet.
Geography will play a major factor how airlines grow. Hubs and
focus cities place a natural reliance on specific stations, and local health
conditions will pace ramp-ups. If Atlanta becomes a major COVID-19 outbreak
hotspot, for example, Delta Air Lines would be hard-pressed to fill flights.
Conversely, if the West Coast sees its virus threat fade before other parts of
the country, Seattle-based Alaska Airlines, with a heavy California presence
and little reliance on international traffic, could get a head-start on piecing
together its next viable network.
The traditional hub-and-spoke system’s interconnectivity makes a
point-to-point-like ramp-up all but inevitable. Carriers will add where there
is demand (which, short-term, will be influenced by COVID-19 outbreak
statistics), leaving gaps in previously well-constructed hub-and-spoke
networks. Airlines with a heavy reliance on international feed will have even
larger gaps. Entire hubs (or, in the case of carriers like JetBlue Airways and
Frontier Airlines, focus cities) may find themselves left out of the rebuild,
at least initially.
Building networks with point-to-point service favors ULCCs. But
business travel returning before leisure would create a headwind for carriers
that thrive on infrequent service to largely discretionary destinations.
A methodical ramp-up by majors combined with surplus aircraft,
layoffs, low fuel prices, and evidence that the domestic network has pent-up
demand could open the door for upstarts. Finding markets for David Neeleman’s
Breeze Airways or Andrew Levy’s proposed Houston-based startup to serve is much
easier now than it was two months ago.
While Neeleman and Levy have their funding, other aspiring
airline barons would struggle to raise capital in the near future—a calamitous
collapse tends to shake investor confidence. But some of the hardest elements
of a successful start-up—identifying good markets, sourcing cheap but desirable
aircraft, and finding qualified people—are about to become non-issues.
Sean Broderick
Senior
Air Transport & Safety Editor Sean Broderick covers aviation safety, MRO,
and the airline business from Aviation Week Network's Washington, D.C. office.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
CARES Act Aid Terms Catch Industry Off Guard
Ben Goldstein April 15, 2020
The loans have terms lasting 10 years, and can be repaid early anytime at par.
Credit: Rob Finlayson
WASHINGTON—The terms of the agreement in principle reached
between 10 airlines and the U.S. Treasury Department regarding $25 billion in
payroll assistance provided under the Coronavirus Aid, Recovery, and Economic
Security (CARES) Act surprised industry-watchers, many of whom had previously
expected the aid to consist entirely of grants.
Under the new agreement in principle, payroll aid will now
consist of 70% grants and 30% unsecured term loans. The loans have terms
lasting 10 years, and can be repaid early anytime at par. It is not clear yet
what interest rate will be charged, but carriers have disclosed that they will
be low-interest loans.
The deal will provide carriers just 76% of the funds they asked
for to keep workers paid through Sept. 30, as the total amount requested
exceeded the $25 billion made available under the CARES Act Payroll
Support Program (PSP).
The requirement to repay 30% of the payroll support, first
reported over the weekend by Reuters, came as a surprise to airline analysts
and employee unions, most of whom had been operating under the assumption that
the aid would not have to be repaid. The airlines themselves lobbied hard
through Airlines for America for grants only, but Treasury Secretary Steven
Mnuchin held firm during whirlwind negotiations last weekend.
The agreement also spells out carriers’ obligations for
compensating the Treasury, a topic that emerged as a sticking point during
negotiations. Under the latest terms, the amount of warrants to be issued to
the Treasury will be equal to one tenth of the loan portion of the payroll aid.
The warrants will be based on carriers’ closing share prices as of April 9.
They expire five years after issuance and will be exercisable through either
net share settlement or cash. Warrants will come with customary anti-dilution
provisions and will not carry any voting rights.
Airlines will be able to use the payroll aid they receive after
Sept. 30, if they have not already exhausted the funds by that date. The PSP is
separate from an additional pot of $25 billion in loans and loan guarantees,
which the Treasury will work on after the payroll funds have been distributed.
Several carriers, including American Airlines and Alaska Airlines, have already
indicated plans to pursue the additional loans.
American Airlines looks set to receive the largest amount of
funds, reporting that it will get $5.8 billion in total assistance, consisting
of a $4.1 billion grant and a $1.7 billion loan. The carrier will issue
warrants to the Treasury worth 13.7 million shares of common stock priced at
$12.51 per share and will seek a further $4.75 billion of loans and loan
guarantees when the additional financing becomes available.
Delta Air Lines will receive $5.4 billion total, including a
$4.2 billion grant and a $1.6 billion loan, and will provide warrants equal to
roughly 1% of the company’s stock, priced at $24.39 per share. “We still need
volunteers to consider short- and long-term leaves of absence ... It is a vital
part of our effort to safeguard jobs,” Delta CEO Ed Bastian told employees in a
message announcing the aid.
United Airlines will get $5 billion, including $3.5 billion in
grants and a $1.5 billion loan, and will remunerate the Treasury with warrants
equal to roughly 4.6 million shares of common stock. “These funds secured from
the U.S. Treasury Department will be used to pay for the salaries and benefits
of tens of thousands of United Airlines employees,” United said in a statement.
Southwest Airlines will receive roughly $3.2 billion under the
program—$2.3 billion in grants and a $1 billion loan—and will issue roughly 26
million warrants to the Treasury. JetBlue Airways said it will receive $935
million; $685 million in grants and a loan worth $250 million. Alaska Airlines
will receive $992 million in funding—$267 million which would be repayable to
the government—and will issue Treasury warrants to purchase 847,000 shares at a
price of $31.61/share.
The four other airlines that signed onto the agreement in
principle—Allegiant Air, Frontier Airlines, Hawaiian Airlines and SkyWest
Airlines—have not yet disclosed the size of their PSP awards. The Treasury is
currently negotiating with other carriers, including Spirit Airlines, about
participating in the program.
Regional Airlines Association president and CEO Faye Malarkey
Black also confirmed that two of the association’s members—believed to be Mesa
Airlines and Republic Airways—are continuing talks with Treasury over potential
participation.
Ben Goldstein
Based in
Washington,
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
OP-ED: A better air transport industry will emerge
Martin Gauss April 15, 2020
AirBaltic CEO Martin Gauss
Credit: AirBaltic
There was a
successful start to 2020 but suddenly it was interrupted by the exceptional
circumstances caused by the global spread of COVID-19.
On March 17,
our airline, airBaltic, stopped scheduled passenger flights out of the Baltics.
Since then, we have focused on repatriation, charter and cargo flights.
Looking at the
situation globally, the impact of the airline industry is highly visible and
there is a break in the value chain. Both business travel and the leisure
industry are suffering. Restaurants and hotels are empty. Global events and
conferences have been postponed or canceled. Millions of passengers’ travel
plans are affected. The restrictions have completely changed how we live, build
personal relationships and work and could continue to affect us for years. All
of this will have a significant economic impact that will come in the next
months.
In my opinion,
we will see a lot of airlines restarting after lockdowns are lifted, but then
realizing that new passenger demand is not sufficient to maintain their old
business models. This will lead to mergers and insolvencies that will continue
after the virus-related restrictions are gone.
A full return
to the passenger demand growth forecast in 2019 will take years to happen
because the economic impact will limit the ability for companies and
individuals to afford travel. But airline networks and connections are also
vital for economic development. This crisis demonstrates that without a
functioning aviation infrastructure and connectivity, the impact on the global
economy will be even more severe.
Naturally,
there will be some people who will hesitate to fly because of safety concerns,
and it will take them longer time to embrace flying. But there are those who
want to fly. Already, we are seeing new bookings coming in for flights in
October, November to places where people expect the situation to be over by
then. Tourist travel will shift to destinations where people feel comfortable
about taking a vacation and about being able to safely return regardless of
quarantine rules. The return to normal flying might be made easier if certain
health checks are conducted before the flight.
This crisis
also gives us a chance to make our industry even better. Sustainability will
become an important factor because the pause of flying and industrial
production has made clear their environmental impact. New and even stricter
health and safety travel procedures will improve things for passengers and
those who work in this industry. Airlines are reviewing their business models,
adjusting their networks and fleets. We all have to become more efficient and
creative to recover from the toughest crisis for our industry.
Martin
Gauss is CEO at Latvia-based airBaltic.
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
RE:
2020 “All Years” Delta Deceased Pilots & Spouses List
Hi Mark,
Attached below is the All Year composite of the Delta Deceased Pilots
& Spouses List. This is a work in
progress as you know but this is a good copy to put on your PCN web site if you
wish.
It is in Excel spreadsheet format but it can be saved and formatted
many different ways as needed.
Regards,
Dave
Editor: This list is among our published lists of deceased pilot
colleagues for the PCN only and available to you at our PCN Web Site: http://pcn.homestead.com/FlightWest.html
(Please NOTE lists with more sensitivity like Seniority Lists and
Oldest Living Pilot List are also available to our group on our password protected
page at this URL): http://pcn.homestead.com/Archived_Oldest_Liv.html
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Tony Fauci
- on the modeling problem for this pandemic
(transcribed and paraphrased from an interview on national TV April 10th)
Interviewer, “Dr Fauci, the
pandemic modeling went from 2.2 million deaths, effecting US policy, then
decreasing to 100-240,000, then within a week period of time ratcheted down 93,
000, then 81,000 now the latest (on 4/9) is 61,545. How can you explain this incredible inaccuracy
and failure of predictive modeling?”
Fauci, “I am not a fan of
models.”
With the above in mind, the following article points out that a
lot of dependence on modeling early on really affected national policy and
there will be lots of questions about that. I’m sure your interest has been peaked about
this pandemic modeling. Maybe when this
thing is over and done with we will have some better questions answered about
predictive modeling and national policy.
What do you think?
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Full post disclaimer in left column. PCN Home Page is located at: http://pcn.homestead.com/home01.html
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