Airlines’ losses mount, but demand for travel grows
Executives say vaccine needed for passengers to return in full force
Summer was a bust for U.S. airlines. Now they are anxiously watching a fragile uptick in demand to see if it will hold as the number of new coronavirus cases increases.
Southwest Airlines Co. and American Airlines Group Inc. both tempered their plans for summer flying after rising Covid-19 infection rates triggered a new round of travel restrictions.
Airlines’ losses are mounting as revenues plunged during what is typically their most lucrative season. Southwest lost nearly $1.2 billion (U.S.) during the quarter. American lost $2.4 billion. Alaska Air Group Inc. on Thursday reported losing $431 million. Rivals United Airlines Holdings Inc. and Delta Air Lines Inc. also reported massive losses during the third quarter last week.
After spending the summer cooped up at home, however, Americans are tentatively starting to travel again. Transportation Security Administration data on airport security screenings show that more people are traveling now than they have since mid-March, when the pandemic brought normal daily life in much of the U.S. to a near standstill.
Southwest said its bookings in October and November are showing modest improvement and it expects flights to be over half full, on average. Still, the TSA figures show that travel volumes remain down by more than 60% from last year. And U.S. airline executives aren’t expecting much of a holiday season, as passengers aren’t likely to return in full force until a Covid-19 vaccine is available and has been distributed widely.
“Until we have widely available vaccines and achieve herd immunity, we expect passenger traffic and booking trends to remain fragile,” Southwest Chief Executive Gary Kelly said Thursday.
Southwest said it expects its fourth-quarter capacity to be 40% lower compared with the same period in 2019, while American, which also said it was seeing improving demand, said it plans to keep fourthquarter capacity down by more than 50%.
One sign that Southwest is looking to return to something more closely resembling business as usual: it will resume selling middle seats Dec. 1 after keeping them open for months in an effort to set passengers’ minds at ease and reduce the risk of infection. Mr. Kelly said keeping middle seats open was important early in the pandemic when little was known about how the virus behaved on planes, but he cited more recent studies showing that ventilation and filtration on planes reduce risk of infection during flights.
American and United Airlines Group Inc. have been filling middle seats for months, while Delta Air Lines Inc. has said it would not start selling those seats again until sometime in the first half of next year.
Airlines have been slashing costs and raising as much cash as they can to weather the prolonged downturn. American said Thursday that it would sell up to $1 billion in equity to raise more money, adding to the $13.6 billion stockpile of liquidity at the end of the quarter.
The airline furloughed 19,000 workers this month, saying it would bring them back if Congress approves another round of aid for airlines.
Southwest has so far avoided job cuts, but Mr. Kelly said the airline would have to resort to furloughs early next year––a first for the airline––unless unions agree to pay cuts or the airline receives more federal aid.
Excluding one-time items, Southwest reported an adjusted loss of $1.99 a share, better than the $2.35 per share loss analysts were expecting. American’s loss after adjustments was $5.54 a share, beating the $5.86 per-share loss analysts had expected.