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US airline’s massive loss, Oz contorts but China airlines OK

October 16, 2020 Headline News No Comments Email Email

Bombshells for airlines in Australia and the US: the first big US carrier to post a result for the latest quarter (to 30 September 2020) has raised eyebrows with the staggering magnitude of the loss involved; and while airlines in Australia are struggling to cope, those in China are cruising towards “back in black”.

Likely result: China may emerge from this daunting year as the top performing market.

Delta Air Lines yesterday posted an eye-watering US$5.4 billion loss for the latest quarter, results that USA Today said showed “how the coronavirus pandemic is wrecking the airline industry”.

Airlines around the world have been hit hard by the pandemic and its catastrophic effect on passenger numbers. Qantas has battened down the hatches, put aircraft in long-term storage and has taken lately to selling designer leisurewear and even in-flight service carts. Qantas has been in business 100 years; it wants to be in business another 100, which requires seeing off the pandemic.

Virgin Australia is going through all sorts of throes. Chief executive Paul Scurrah will step down from his role in coming weeks, after the airline’s sale to US private equity firm Bain Capital is finalised. Jayne Hrdlicka, well known in the Australian industry for her roles with Qantas and Jetstar, is Virgin’s next chief executive.

Delta is the first of America’s biggest airlines to report earnings for the quarter. The airline noted: “During the September quarter, cash burn averaged US$24 million per day, and US$18 million per day for the month of September.”

For comparison, the airline industry worldwide is burning some US$300,000 every minute, according to IATA.

Delta chief executive, Ed Bastian, added optimistically: “While our September quarter results demonstrate the magnitude of the pandemic on our business, we have been encouraged as more customers travel and we are seeing a path of progressive improvement in our revenues, financial results and daily cash burn.”

“The actions we are taking now to take care of our people, simplify our fleet, improve the customer experience, and strengthen our brand will allow Delta to accelerate into a post-Covid recovery.”

Delta plans to conserve its remaining cash, retiring 400 planes by 2025 and delaying taking new aircraft. The company says it still has US$21.6 billion in reserve to help it weather the crisis.

Airlines are hoping US Congress will extend the US$50 billion in aid it made available when the pandemic struck, funds which ran out on 1 October.

IN CHINA, HOWEVER, the airline industry is eyeing a rapid recovery, with passenger loads similar to last year. Although the Covid-19 coronavirus was first reported in China, the country has brought the disease under control and is prepared to take any steps necessary to make sure it stays that way.

China’s firmness has paid off. About 13.2 million trips were taken on flights during the recent National Day holiday celebration, about 91% of last year’s average. National Day falls on 1 October and the holiday lasts a week.

China is in better shape because of its large domestic market.

“Due to the recent stable domestic epidemic control situation… passengers’ willingness to travel has increased significantly,” the Civil Aviation Administration of China said, in a statement quoted by Singapore’s Straits Times.

An HSBC Global Research report last month suggested that China’s “Big Three” – China Eastern, China Southern and Air China – could be back in the black for the quarter ending 30 September 2020, the same quarter for which Delta has just posted such a monstrous loss.

Air traffic over China at 7pm AEDT yesterday, Thursday 15 October 2020. Source: FlightRadar24.com

Written by Peter Needham

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