For US airlines, the summer looks promising

With the acceleration of COVID-19 vaccination, sales of airline tickets by American companies have started to take off again. While business travel and international flights still lag behind, some hope to make money again this year.

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“Even though the pandemic is not over, we believe the worst is behind us when it comes to the severity of its impact on demand for travel,” Southwest CEO Gary Kelly said Thursday.

In the first quarter, the turnover of the companies remained clearly down compared to the same period in 2020: -53% at American Airlines, -60% at United Airlines, -60% at Delta and -52% at Southwest .

American lost $ 1.25 billion, United $ 1.4 billion, and Delta $ 1.2 billion. Southwest achieved a net profit of $ 116 million from more than $ 1 billion in government aid.

“The situation remains difficult for the entire sector (…). We don’t like to lose so much money, ”Doug Parker admitted Thursday in an interview with CNBC. But there was clearly “an acceleration at the end of the quarter,” he added.

After some stagnation in January and February, all companies saw a sharp upturn in bookings in March, as the vaccination campaign progressed, already administered to half of adults in the United States, but also the reopening of tourist attractions.

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At American, the surge in demand was driven by leisure travel to the United States, Mexico, the Caribbean and Latin America.

This improvement has allowed companies to limit the amount of money they lose every day.

American reduced the rate at which it burns cash for the quarter as a whole. It went from an average of $ 27 million per day in the quarter, to just $ 4 million per day in March.

Southwest hopes to stop losing more cash every day than it earns “by June.”

Delta expects a return to profitability in the third quarter.

United Airlines, for its part, expects to return to net profit when demand for business travel and international flights returns to around 65% of its 2019 level – from less than 20% currently.

United boss Scott Kirby said business travel could start to pick up in the fall, along with kids returning to school and office workers, and really picking up in January, when business returns. will have started to budget for them again.

Long-haul flights are “completely dependent on the reopening of borders,” he said during a conference call Tuesday.

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When United Airlines announced new flights to Greece, Iceland and Croatia the day before, which again welcomes tourists on condition that they show proof of COVID-19 vaccination or a negative test, the the company recorded 3,000 reservations the same day.

If Washington and London decide to lift the restrictions between the two countries, “it might be difficult to find a hotel room in the UK,” Kirby said on a conference call Monday.

It also remains difficult to predict customer behavior if the virus gains strength next fall. “We have to remain flexible,” Parker stressed. “It has already lasted a lot longer than we thought.”

In any case, the immediate upturn in demand is not without some friction, particularly in terms of maintenance of aircraft that have sometimes been on the ground for several months or the training and recruitment of pilots.

“We know that the competition to hire the best drivers is going to heat up and we are not standing still,” said United Executive Director Brett Hart.

Discussions about possible bankruptcies among large American companies are in any case a long way off, says Peter McNally, sector specialist for investment firm Third Brigde.

Investors and banks “have continued to happily lend them money” since the start of the pandemic, including to repay some government aid, he notes.



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