%1

U.S. airlines have yet to tap $29 billion in federal pandemic relief loans as they wait to see whether the re-opening of the economy revives demand and diminishes the need for money that comes with government strings attached, Bloomberg News reported. Although the four largest U.S. passenger airlines have applied for the Treasury Department program, only American Airlines Group Inc. has said it intends to tap the pool of funds. Southwest Airlines Co., United Airlines Holdings and Delta Air Lines Inc. say they plan to wait until fall before deciding whether to take the money — after a summer travel season that could see more people return to the skies. The wait-and-see approach illustrates how airlines are preparing for an uncertain future amid early signs of a recovery after Americans all but stopped flying in April due to the coronavirus and travel restrictions. A second wave of infections could make the situation worse. It also highlights how only a small portion of hundreds of billions of dollars available to the Treasury Department has actually been doled out to help companies. “That pool of money is designed as backstop financing and for those who can’t raise money elsewhere,” said Helane Becker, an analyst at Cowen & Co. in New York. U.S. airlines have separately raised billions in capital through methods including secured loans, bond offerings and equity sales, and Becker said that the federal loans are a last resort. The government loans would impose restrictions such as a cap on executive compensation and require carriers to offer equity or other financial stakes to the government in exchange for the aid.

American Airlines Group Inc. is not considering a chapter 11 bankruptcy filing, Chief Executive Doug Parker said yesterday and dismissed speculation that a major U.S. carrier could disappear due to the coronavirus pandemic, Reuters reported. The U.S. airline industry is expected to be 10 to 20 percent smaller in the summer of 2021, Parker said, and its recovery would depend on how passenger demand and revenues evolve. Earlier this month, Boeing Co. Chief Executive Dave Calhoun said he thought that a major U.S. carrier could go out of business in the fall, when government payroll aid for airlines will expire. U.S. airlines, suffering an unprecedented downturn in air travel because of the pandemic, have warned they may need to eliminate jobs after Oct. 1 but Parker said the company aimed to avoid furloughs. Nearly 40,000 of its more than 100,000 employees have opted for an early retirement, reduced work schedule or temporary leaves, he said. American’s revenues are down by about 90% due to the outbreak, but demand is improving and net receipts have been in positive territory for the past 2-1/2 weeks after a period when airlines were receiving more cancellations than new bookings. Read more. 

In related news, American Airlines Group Inc. said in a letter to employees that it must reduce its management and support staff by about 30 percent and may have to cut frontline employees as it downsizes due to the coronavirus outbreak, Reuters reported. All major U.S. airlines have said that they will need to shrink in the fall, once U.S. government payroll aid that bans involuntary job cuts expires on Sept. 30. Competitor United Airlines Holdings Inc. has also said it will need to reduce its management and administrative staff by about 30 percent. Read more. 

LATAM Airlines Group SA said today that the company and its affiliates in Chile, Peru, Colombia, Ecuador and the United States have filed for chapter 11 bankruptcy protection in the U.S., Reuters reported. Latin America’s largest airline said that it secured funding from shareholders, including the Cueto and Amaro families, and Qatar Airways, to provide up to $900 million in debtor-in-possession financing. LATAM Airlines said that its affiliates in Argentina, Brazil and Paraguay were not included in the filing.

Southwest Airlines Co. Chief Executive Officer Gary Kelly said yesterday that the airline industry is not likely to recover to pre-coronavirus levels for at least the next six to 12 months, Reuters reported. The COVID-19 pandemic has brought a virtual halt in air travel, leading to an unprecedented number of flight cancellations globally and forcing airlines to book hefty losses. Southwest last month posted its first quarterly loss in nine years and warned that there was no major improvement in air travel in the second quarter. As the industry grapples with the crisis, Kelly said in a video posted on the airline’s website that the company was offering employees more options to opt-in for leaves as well as voluntary separation packages. About 21 percent of the company’s active workforce is volunteering to take some form of time off or partial pay program, Kelly added.

Even as Delta and the other major airlines in the United States dramatically slash schedules, they are averaging an anemic 23 passengers on each domestic flight and losing $350 million to $400 million a day as expenses like payroll, rent and aircraft maintenance far exceed the money they are bringing in, the New York Times reported. Passenger traffic is down about 94 percent and half of the industry’s 6,215 planes are parked at major airports and desert airstrips, according to Airlines for America, a trade group. Yet, devastating as the downturn has been, the future is even more bleak. With much of the world closed for business, and no widely available vaccine in sight, it may be months, if not years, before airlines operate as many flights as they did before the crisis. Even when people start flying again, the industry could be transformed, much as it was after the Sept. 11 terrorist attacks. The current crisis could push some airlines, especially smaller ones, into bankruptcy or make them takeover targets. Consumer fears about catching the virus on crowded planes could lead to reconfigured seating. Carriers may initially entice wary travelers with discounts, but if they can’t fill up flights, they may resort to raising ticket prices. To get through the next few months, airlines successfully lobbied for a huge federal rescue. But half of that money was intended to cover payroll and that will run out by the end of September. Few in the industry expect Congress or the public to tolerate another bailout. So, for now, airlines are preparing for a long, lonely fight for survival.

Avianca Holdings, Latin America’s second-largest airline, filed for bankruptcy on Sunday, after failing to meet a bond payment deadline, while its pleas for coronavirus aid from Colombia’s government have so far been unsuccessful, Reuters reported. If it fails to come out of bankruptcy, Bogota-based Avianca would be one of the first major carriers worldwide to go under as a result of the pandemic, which has crippled world travel. Avianca has not flown a regularly scheduled passenger flight since late March and most of its 20,000 employees have gone without pay through the crisis. Avianca, the second-oldest continually operating airline in the world after KLM, had $7.3 billion in debts in 2019. The airline filed for chapter 11 bankruptcy in New York and said that it would continue operations while it restructured its debts.

U.S. airlines are collectively burning more than $10 billion in cash a month and averaging fewer than two dozen passengers per domestic flight because of the coronavirus pandemic, industry trade group Airlines for America said in prepared testimony for today's. Senate Commerce, Science and Transportation Committee hearing. Even after grounding more than 3,000 aircraft, or nearly 50% of the active U.S. fleet, the group said its member carriers, which include the four largest U.S. airlines, were averaging just 17 passengers per domestic flight and 29 passengers per international flight. “The U.S. airline industry will emerge from this crisis a mere shadow of what it was just three short months ago,” the group’s chief executive, Nicholas Calio, will say, according to his prepared testimony. Net booked passengers have fallen by nearly 100% year-on-year, according to the testimony before the Senate Commerce Committee. The group warned that if air carriers were to refund all tickets, including those purchased as nonrefundable or those canceled by a passenger instead of the carrier, “this will result in negative cash balances that will lead to bankruptcy.” Read more. 

For more information on the hearing titled "The State of the Aviation Industry: Examining the Impact of the COVID-19 Pandemic," scheduled for today at 2:30 p.m., please click here. 

The head of the Aerospace Industries Association will ask the Senate Commerce, Science and Transportation Committee at its hearing today to consider providing temporary assistance to the aerospace manufacturing sector and warned that more jobs are in jeopardy due to the coronavirus pandemic, Reuters reported. Eric Fanning, the group’s chief executive, will urge Congress at a hearing to consider “temporary and targeted assistance for the ailing aviation manufacturing sector…. There is strong support in our industry for a private-public partnership to protect jobs and keep at-risk employees on the payroll through the pandemic.” His written testimony also raised concerns that many companies may not be eligible for a $17 billion U.S. Treasury Department national security related loan program and suggested revisions to the lending criteria. Major aviation manufacturers have already announced thousands of layoffs amid a steep air travel falloff. Read more. 

United Airlines Holdings Inc. plans to cut at least 3,400 management and administrative positions in October as the coronavirus pandemic crushes air travel demand, and has told pilots to brace for changes as well, Reuters reported. Chicago-based United is among the U.S. airlines that have accepted U.S. government payroll aid that bans job or pay cuts before Sept. 30. However, United and other carriers have warned that demand is unlikely to recover to pre-crisis levels by that date, forcing them to shrink in the fall. The United memos are the first indication of just how much major airlines might downsize due to the health crisis. “We have to acknowledge that there will be serious consequences to our company if we don’t continue to take strong and decisive action, which includes making decisions that none of us ever wanted or expected to make,” Kate Gebo, Executive Vice President Human Resources and Labor Relations, said in the memo to some 11,500 management and administrative employees.

Switzerland and Austria pledged to help Lufthansa with state-backed loans as the German airline pursues talks with Berlin over a 9 billion euro ($9.8 billion) rescue package, Reuters reported. The Swiss government said yesterday that it will ask parliament for 1.275 billion francs in loan guarantees for Lufthansa units Swiss and Edelweiss. Strict travel restrictions to contain the coronavirus pandemic have brought flights to a near-halt across the world and there is no end in sight for when they can restart, leaving many airlines begging governments for rescue packages. The International Air Transport Association this month estimated that revenue losses from the coronavirus pandemic have risen to $314 billion. Lufthansa’s Austrian airline AUA said on Tuesday that it had applied for 767 million euros in state aid, of which a large part should be repayable loans and the remainder grants. An AUA spokesman said these grants were still under negotiation and both Switzerland and Austria attached conditions on their participation in the bailout.

Superior Air Charter LLC filed for bankruptcy protection, unable to keep its private charter service aloft while the coronavirus curtails travel, Bloomberg News reported. The aviation company listed liabilities of $50 million to $100 million and assets of no more than $10 million, according to a chapter 11 petition filed with the U.S. bankruptcy court in Delaware. Superior is affiliated with JetSuite, the private jet charter company, which had to ground its fleet of planes April 15 and furloughed most of its crewmembers, according to its website. JetSuite cited the COVID-19 outbreak, which has forced travel corporations across the globe to shut operations to stem the spread. The filing gives Superior Air’s management a break on its debts while it works out a recovery plan. Superior Air arranged a $3.6 million bankruptcy loan to help maintain operations during its restructuring process, court papers show. The loan will be made by JetSuiteX Inc., which is Superior Air’s ultimate parent, and Delux Public Charter, LLC, another JetSuiteX affiliate, according to court papers. JetSuiteX isn’t included in the bankruptcy filing. Managers will consider selling the company or individual assets as part of the bankruptcy. JetSuite is a private jet airline that charters flights on its fleet of Embraer Phenom 100s, Phenom 300s and a Legacy 650. The company offers private flights throughout the U.S., Mexico, and Canada. Alex Wilcox, chief executive officer and founder of the company, was also a co-founder of JetBlue Airways Corp.