%1

Last March, the government provided U.S. airlines a $50 billion lifeline in one of the largest industry-wide interventions in American history. The industry received a further $29 billion through the bipartisan year-end relief package and President Joe Biden’s stimulus plan. The enormous volume of support raises a question, according to a Bloomberg commentary: Was this in taxpayers’ interest, or was it a classic case of corporate welfare that primarily benefited shareholders? A careful examination of the record shows that the initial intervention during the height of the panic was certainly the best available alternative. But more recent support to an industry the government had already stabilized raises questions about the marginal return on taxpayer dollars. With airlines now adding routes as part of the broader economic recovery, it's easy to forget how precarious the future of the industry was a year ago. The general economic shock from the virus was unprecedented, but the speed and scope of the impact on the aviation industry was particularly breathtaking. More than 95 percent of demand evaporated almost overnight.

*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

United Airlines said it expects first-quarter revenue to drop by 66%, which is near the lower end of its prior forecast, buoyed by improving demand for domestic travel, Reuters reported. The company said that it now expects first-quarter revenue to fall 66% to $3.2 billion from the same period in 2019. It had previously forecast a drop of between 65% and 70%. The airline said its average daily cash burn for the quarter is expected to be about $9 million per day, an improvement of about $10 million compared to the fourth quarter of 2020.

Airplane-parts maker Tect Aerospace Group Holdings Inc. has filed for bankruptcy ahead of a planned asset sale, hurt by Boeing Co. ’s halt on production of the 737 MAX jetliner and by travel reductions during the coronavirus pandemic, WSJ Pro Bankruptcy reported. The Wichita, Kan.-based manufacturer has arranged a $60.2 million financing package from Boeing to maintain operations during the chapter 11 case, filed Monday in the U.S. Bankruptcy Court in Wilmington, Del. Boeing has the option to use its debt as currency to buy the business, according to court papers. Tect parts are used in flight controls, fuselage and other sections of both civilian and military aircraft world-wide. The company said it has 381 full-time employees at its headquarters, at a manufacturing plant in Everett, Wash., and at facilities in Wellington, Kan., and Park City, Kan. The pandemic, coupled with last year’s halt in 737 MAX production, caused purchase cutbacks and production stoppages in the aircraft industry, severely impacting Tect, Chief Restructuring Officer Shaun Martin said in a sworn declaration.

As airlines rebuild schedules amid vaccine-fueled demand, they’ve abandoned historical travel data and are now scheduling in a different way. They are loading "placeholder" schedules chock-full of flights into reservation systems six to nine months before departure dates, the Wall Street Journal reported. Then a month or two before flights would actually take off, carriers will load the real schedules. Flights with lots of reservations will actually happen, and more trips or larger planes may even be added for close-to-departure bookings. Flights with few advance purchases will get canceled, shifting a few customers to other flights. "In my 20-year career, there’s only one other time I’ve used incoming bookings to plan an airline and that was after the Sept. 11 attacks," says Brian Znotins, American’s vice president of network and schedule planning. "All the airlines have had placeholder schedules out there and then they publish refined schedules as they get closer to it." American, United and Delta all say they will publish their real summer schedules in a few weeks.

Aircraft leasing company AeroCentury Corp. filed for chapter 11 protection in Delaware, citing the dramatic decrease in air travel during the coronavirus pandemic, Bloomberg News reported. The company, which buys used regional aircraft and leases them to domestic and foreign carriers, joins a long list of businesses felled by disruptions related to COVID-19 over the past year. AeroCentury, which will seek to sell aircraft assets during the court restructuring, will continue to operate in bankruptcy. “Due to the COVID-19 pandemic, the aircraft industry as a whole has experienced a substantial and sustained decrease in air travel,” AeroCentury’s Chief Financial Officer Harold Lyons said in court documents. “This downturn has resulted in lower utilization of the debtors’ aircraft assets, which in turn materially and adversely affected the debtors’ businesses, revenues, financial condition, and results of operations.” AeroCentury has entered into a so-called stalking horse agreement for Drake Asset Management Jersey, its sole secured lender, to acquire aircraft collateral backing the debt as a means of repayment. The sale is subject to higher and better bids. Even before the pandemic, the company faced cash-flow problems, according to court documents. AeroCentury defaulted on its credit line in 2019 and had a deficit on the loan’s borrowing base. Lenders agreed to forbearance to allow the company time to shore up its finances, but the pandemic upended those efforts with worldwide travel restrictions and lockdowns. By the third quarter, AeroCentury’s revenues had plunged 85% from a year earlier, Lyons said. The publicly traded company listed assets of about $121 million and debt of almost $125 million as of Sept. 30, according to its bankruptcy petition. The only holder of more than 5% of stock is Chairman Toni Perazzo.

Monarch Alternative Capital LP is betting roughly $600 million in three bankruptcy cases that the travel industry will bounce back from the coronavirus pandemic, WSJ Pro Bankruptcy reported. The distressed-debt investor, which has about $9 billion in assets under management, is working on deals to acquire 15 hotels, including operating rights to the Queen Mary in Long Beach, Calif., for $470 million as well as the Crowne Plaza Orlando Universal Boulevard in Orlando, Fla., for $35.7 million. Monarch is also positioned to take over retail space in the renovated George Washington Bridge Bus Station in northern Manhattan, according to court papers filed Thursday. The deals come amid indications that tourism and travel are picking up as the COVID-19 vaccine rollout continues across the U.S. Passenger volumes at U.S. airports hit a fresh pandemic high this week, with more than 1.5 million people passing security on Sunday, according to the Transportation Security Administration, although volumes remain down about 40% from 2019 levels. While Monarch has traditionally invested in the debt of distressed and bankrupt companies, it has grown increasingly interested in real estate. The firm said on Friday in announcing the Crowne Plaza Orlando deal that it sees significant opportunities in the hospitality sector despite its setbacks.

The latest setbacks to the return of air travel are stoking concern that a cash crunch is about to bear down on the airline industry, Bloomberg News reported. A second summer lost to the coronavirus crisis would likely trigger a spate of airline failures and bankruptcy filings, alongside a repeat of 2020’s bailouts, job cuts, and jetliner deferrals and cancellations, according consultants IBA Group. In just the past week, the optimism that took the Bloomberg World Airlines Index to the highest since the start of the pandemic has evaporated. TUI AG, the world’s biggest tour operator, scaled back its summer schedule to reflect a peak season that won’t start until July, at least two months later than normal. Ryanair Holdings Plc held a press briefing to reassure would-be holidaymakers they could change flights for free and exhorted them not to be “panicked” by negative headlines. “The ground is shifting from one day to the next,” IBA’s Stuart Hatcher said in an interview. Governments are aware that pushing back the reopening of travel will mean more pain for the aviation industry but have been spooked by resurgent infection rates even as vaccine rollouts continue, he said.

United Airlines plans to add more than two dozen new flights starting Memorial Day weekend, the latest sign that demand for leisure travel is picking up as the national vaccination rate moves higher, the New York Times reported. Most of the new flights will connect cities in the Midwest to tourist destinations, such as Charleston, Hilton Head and Myrtle Beach in South Carolina; Portland, Maine; Savannah, Ga.; and Pensacola, Fla. United also said it planned to offer more flights to Mexico, the Caribbean, Central America and South America in May than it did during the same month in 2019. The airline has seen ticket sales rise in recent weeks, according to Ankit Gupta, United’s vice president of domestic network planning and scheduling. Customers are booking tickets further out, too, he said, suggesting growing confidence in travel. “Over the past 12 months, this is the first time we are really feeling more bullish,” Mr. Gupta said. Airports have been consistently busier in recent weeks than at any point since the coronavirus pandemic brought travel to a standstill a year ago. Well over one million people were screened at airport security checkpoints each day over the past two weeks, according to the Transportation Security Administration, although the number of screenings is down more than 40 percent compared with the same period in 2019.