As the pandemic decimated travel a year ago, a top industry
executive predicted that a major U.S. airline would go bankrupt and the
carriers themselves warned of painful cuts to come.
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Now, with demand for tickets rebounding, airlines are predicting
the summer will be almost normal, and some companies even say they could turn a
profit.
It amounts to a stunning turnaround for an industry that many
people had written off and that had to go hat in hand to Washington for three
bailouts, which provided tens of billions of dollars that helped to prevent
painful layoffs.
With passenger traffic still down more than 40% compared with
2019, airline executives are so confident that demand is coming back that they
plan to call back thousands of employees and hire hundreds of pilots.
Southwest Airlines, which carried more passengers than any other
U.S. airline in 2019, even managed to turn a small profit in the first three months
of this year, the first major U.S. airline to do so since the pandemic began.
“I’m relieved, I’m optimistic, I’m enthused, I’m grateful and
I’m especially thankful to our tens of thousands of employees,” Gary C. Kelly,
Southwest’s CEO, told investors and analysts Thursday. “We’ve got a long way to
go but I’m very, very confident.”
Other major U.S. airlines did not do quite as well in the first
quarter —
American Airlines,
Delta Air Lines and
United Airlines lost more than
$1 billion each — but their executives said they expected the rest of the year
to be much better.
American and United said this month that they would start hiring
pilots for the first time since the pandemic began, with each expecting to
bring on about 300 by the end of the year. Southwest also said that by June, it
will have recalled the 2,700 flight attendants who were still on voluntary
leave.
The nation’s 11 largest airlines are planning to offer nearly as
many seats this July as they did in July 2019, according to Cirium, an aviation
data firm, though schedules could still change.
“There is no doubt the pace of the recovery is accelerating,”
American CEO Doug Parker said.
Many countries have not yet lifted travel restrictions and some
are even imposing new ones. On Thursday, for example, the United Arab Emirates
suspended all flights from India because of a sharp rise in coronavirus cases
in that country. The State Department escalated travel warnings for dozens of
countries this week.
There is some hope, even in international travel. United said
this week that it planned to add summer flights to Croatia, Greece and Iceland,
and an executive told investors last week that the airline hoped to operate a
busy schedule between the United States and Britain once restrictions were
lifted.
While few customers are booking long international trips, many
may still be eager to leave the United States for closer destinations. American
is planning to fly about 60% fewer seats on longer overseas trips in July,
compared with the same month in 2019, but it’s planning to offer about 20% more
seats on shorter trips to nearby countries.
“No matter what the headlines have been, no matter how the
market’s turned, we always tend to find bookings rebounding fastest, soonest
and greatest in those markets,” said Vasu Raja, American’s chief revenue
officer.
United said it expected to be able to make money even with
corporate and long-haul international travel down 35%. (Both are currently down
about 80%.) The airline’s CEO, Scott Kirby, said he was confident United would
beat its 2019 profits in 2023.
While a few small airlines did shut down during the pandemic,
large companies were able to get by. Congress provided the industry with more
than $50 billion in aid to help keep pilots, flight attendants, baggage
handlers and other workers employed. The government also provided $25 billion
in loans. All of that aid came with strings attached, including a ban on stock
buybacks, a restriction on dividends and limits on executive pay.
Airlines also got rid of planes years ahead of schedule, used
some aircraft to ferry cargo and asked tens of thousands of employees to retire
early or volunteer for paid and unpaid leave. They also raised billions of
dollars by selling shares and bonds.
According to the industry trade group Airlines for America, the
nation’s largest carriers — the big four along with Alaska Airlines, Allegiant,
Hawaiian Airlines, JetBlue and Spirit — ended last year with $163 billion in
debt, up from $105 billion in 2019. Those liabilities could weigh on airlines
over time, especially if sales begin to sag.
Some airlines have outlined plans to cut debt quickly. Delta CEO
Ed Bastian said last week that the company planned to cut its financial
obligations by nearly $10 billion by the end of June and sees a “path to
returning to profitability” by the end of September.
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