US airlines hope for 2021 take-off

RIDER: THINGS WILL GET WORSE BEFORE GETTING BETTER

Four big carriers suffered losses of about R477 billion as result of pandemic.

US airlines expect a better year in 2021 after last year’s disastrous showing but the comeback will be gradual and include more pain in the short-run.

On Thursday, Southwest Airlines pointed to “stalled” demand in January and February, while American Airlines described a continuation in early 2021 of the same anaemic booking trends that pummelled the industry in 2020.

In total, the biggest four US carriers suffered losses of $31.5 billion (about R477 billion) as Covid-19 restrictions devastated travel.

The arrival of coronavirus vaccines has allowed the industry to begin to contemplate the contours of a post-Covid market. But the expectation is that a full recovery could take another two years and that leisure travel will return before business and domestic will outpace international.

“Our fourth-quarter financial results close out the most challenging year in our company’s history,” said American Airlines chief executive Doug Parker.

“While we don’t know exactly when passenger demand will return, as vaccine distribution takes hold and travel restrictions are lifted, we will be ready.”

American reported an $8.9 billion loss in 2020, compared with profits of $1.7 billion in 2019, as revenues plunged 62% to $17.4 billion.

Like its peers, American has trimmed its capital budget, retired older aircraft, deferred delivery of new planes and reduced headcount through early retirement.

It has also taken on billions of dollars of debt to ride out the downturn.

Carriers have pointed to gradual progress in lowering their cash burn rates as they contend with revenues that are only about one-third of last year’s.

Delta said this month it expects a sustained recovery to start in the second half of the 2021.

After continued “demand choppiness” early in the year, the market will shift once vaccines become more widespread and travel restrictions are eased.

A third phase of 2021 will see worldwide vaccines and offices begin to reopen, said Delta President Glen Hauenstein.

However, a survey of Delta clients showed 40% of corporate customers see a return to 2019 levels by 2022 and another 11% see a full return by 2023.

United Airlines described 2021 as a “transition year” towards a comeback but that it expects to exceed its pre-coronavirus profit margins only in 2023.

United chief executive Scott Kirby said a key turning point will be once the US reaches critical mass on vaccinations, which should lead to a dramatic rise in demand. –