Just how bad was 2020 for the airline industry? The six biggest U.S. airlines lost US$34 billion, and Southwest suffered its first full-year loss since Richard Nixon was president and gasoline sold for 36 cents a gallon.
It was a disaster for airlines, worse than 9-11 or the global financial crisis – some very small carriers didn’t survive it – and the new year is off to a grim start.
On Thursday, Southwest, American and JetBlue reported that they lost a combined US$3.5 billion in the final three months of the year. All issued dismal revenue outlooks for the current quarter that echoed similar pessimism from Delta, United and Alaska, which posted financial results earlier.
The airlines are looking past spring and hoping that as more people are vaccinated against COVID-19, they can salvage something from the peak summer vacation season.
But even that cautious optimism is threatened. Yes, the number of new reported cases of coronavirus in the U.S. have eased in the last few weeks, but they remain high. And now a halting rollout of vaccines threatens to further delay a recovery in travel and the travel industry.
President Joe Biden reinstated COVID-19 travel restrictions this week on most non-U.S. travellers from Brazil, the U.K. and South Africa. There is also a new U.S. requirement that non-citizens provide proof of a negative test for COVID-19 before boarding a flight to the United States.
On Thursday as airlines reported results, a new coronavirus variant identified in South Africa was found in the United States for the first time, with two cases diagnosed in South Carolina.
„Travel restrictions on international have resulted in a reduction in demand,“ American Airlines CEO Doug Parker said. „We have seen that particularly on the short-haul international travel, things like Mexico and the Caribbean.“
The airlines support testing international travellers, viewing that as a way to eliminate other border barriers and quarantine requirements. However, they are dead-set against testing travellers within the United States, calling it costly and impractical.
A top official at the U.S. Centers for Disease Control and Prevention said this week that the health agency is „actively looking“ at testing passengers before they board domestic flights.
Southwest CEO Gary Kelly argued that the U.S. has limited testing capacity and should focus its virus-control efforts on vaccinating people faster.
„Why pick on air travel?“ Kelly said. „If you want to test people, test them – but test them before they go to the grocery store, test them before they go to a restaurant.“
With travel likely to remain weak for several more months, airlines are continuing to slash costs and encourage workers to leave. Federal aid has averted more furloughs, at least through March. Airlines short on revenue have amassed tens of billions of dollars from private lenders and taxpayer-funded relief to help them get through the pandemic.
The focus is now on the rate of cash burn, a balancing act that is essential to riding out the global pandemic. American said it will lose US$30 million a day in the first quarter. Southwest expects to burn US$10 million to US$15 million a day.
Wall Street analysts expect the airlines will lose money again this year, although not as much, according to data compiled by FactSet.
American Airlines Group Inc. reported a loss of US$2.2 billion in the fourth quarter and US$8.9 billion for all of 2020 after earning nearly US$1.7 billion the year before.
Fourth-quarter revenue dropped more than 64 per cent, to US$4.03 billion, and the Fort Worth, Texas-based airline predicted a similar trend for the first quarter of 2021 – it expects revenue to lag year-ago numbers by 60 per cent to 65 per cent.
American expects to burn about US$30 million a day in the first quarter, roughly the same pace as the fourth quarter.
Shares of American soared 17 per cent. Analysts say American is now caught up in volatile trading that has seen other stocks, notably GameStop, become wrapped up in a battle between small investors and short sellers. Parker declined to discuss the situation or say whether American would issue new stock while the share price is elevated.
The fourth-quarter loss amounted to US$3.86 per share, after removing special gains. Analysts expected a loss of US$3.92 per share, according to a survey by Zacks Investment Research.
Southwest posted a US$908 million loss for the fourth quarter, compared with a profit of US$514 million a year earlier, and said bookings have stalled in the face of high numbers of new reported cases of COVID-19.
The Dallas airline predicted that January revenue will fall 65 per cent to 70 per cent compared with the same month last year, and February revenue will fall 65 per cent to 75 per cent.
Kelly said vaccine availability „should mark the beginning of the end of this pandemic“ even if current passenger bookings aren’t showing it.
Southwest’s adjusted loss of US$1.29 per share was smaller than Wall Street expected. Analysts in the Zacks survey predicted US$1.69 per share.
Revenue fell 65 per cent to US$2.01 billion.
Southwest shares rose nearly 2 per cent.
JetBlue reported a loss of US$381 million, after reporting a profit in the fourth quarter of 2019. The New York-based airline said its adjusted loss was US$1.53 per share, compared with the average forecast loss of US$1.72 per share in the Zacks survey.
For the year, JetBlue lost US$1.36 billion.
JetBlue shares rose slightly.