News:

This morning, President Trump suggested an extension of the current bailout for the airline industry by $20 billion until Congress can compromise over a stalled overall coronavirus relief aid package. Should that suggestion be approved, a large number of airline furloughs could be averted.

The expiration of the current aid package yesterday had American and United, two of the big four US carriers announcing 32,000 furloughs, while Delta and Southwest have held off for now. Both American and United would reverse the furloughs if the compromise package was accepted. Approximately 13% of the workforces of the two carriers would be impacted. 

Analysis

With traffic levels still hovering at about 30-40% of last year, the airlines clearly need to be subsidized or dramatically cut costs to match capacity with traffic. But that is something that cannot be easily reversed, as pilots, flight attendants, and mechanics have specialized skills, require recurrent training, and could be difficult to retain once furloughed. The best solution is keeping them employed, trained, and flying to the degree possible.

We’re now coming into the quarters with the lowest demand levels, and it is hoped that the progress made over the last few months can continue. Since the beginning of the pandemic in March, traffic fell substantially but is returning slowly. We don’t foresee a spike in demand in the near term but rather a slow build of traffic to former levels. The trend, as shown below in year over year traffic graph, shows we still have a long way to go.

Insight

Saving the airline industry is critical to the US economy. Unlike Europe or Asia, where train travel is a viable option, in the United States, it basically comes down to flying or driving. Without airlines, the US would be devoid of long-distance transportation, and saving this industry is essential.

We had hoped that Congress would have by now agreed upon a spending bill, but in an election year, partisan politics seem to have a way of disrupting everything. As illustrated in the recent debate, the tenor is not one of cooperation. We hope that the interim solution can be enacted as a compromise that both sides agree on as they move forward with their negotiations. If they don’t, the old adage may be true — if con is the opposite of pro, then Congress is the opposite of progress.

News:

This morning, President Trump has suggested an extension of the current bailout for the airline industry by $20 billion until Congress can compromise over a stalled overall coronavirus relief aid package. Should that suggestion be approved, a large number of airline furloughs could be averted.

The expiration of the current aid package yesterday had American and United, two of the big four US carriers announcing 32,000 furloughs, while Delta and Southwest have held off for now. Both American and United would reverse the furloughs if the compromise package was accepted. Approximately 13% of the workforces of the two carriers would be impacted. 


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