American Airlines CEO strikes optimistic tone, contrasting with peers at Delta and United
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American Airlines CEO Doug Parker is optimistic that the country may be “ready to get moving again,” even as his counterparts at other major carriers repeatedly warn of tough times ahead for the industry.
“In just the last week we started to see bookings outside of 90 days start to tick up a little bit,” Parker told CNBC on April 15. “Those could be changed in the future… but it seems to be a little bit an indication that maybe our country is ready to get moving again.”
The leader of the world’s largest airline continued his positive outlook in a separate message to travelers posted on American’s website later the same day.
“When you’re ready to fly again, we’ll be here,” Parker said after outlining all the steps American was taking to make travelers feel “safe and comfortable.”
But Parker’s comments stand in stark contrast to those from Delta Air Lines CEO Ed Bastian and United Airlines CEO Oscar Munoz and president Scott Kirby. Delta and United are the world’s third- and second- largest carriers, respectively, as measured by available seat miles for 2019.
“We expect to fly fewer people during the entire month of May than we did on a single day in May 2019,” Munoz and Kirby told staff on April 15. They added that, while receiving $5 billion in payroll assistance from the government, employees should be ready for the airline to shrink its workforce after Sept. 30.
Who, then, is right?
All recent indicators show passenger numbers way down. Screenings at Transportation Security Administration (TSA) airport checkpoints have held around 4% of the number a year ago for several days. Airlines for America data shows a similar bottoming out with passenger traffic down 97% year-over-year during the seven-days ending April 12.
Stabilizing traffic numbers, however, does not necessarily mean a recovery is in the offing.
Many states and major cities in the U.S. remain under shelter-at-home orders, including the economic juggernauts of California and New York. At the same time, restrictions on international arrivals remain in place in many countries around the world.
“I think this industry is going to be smaller for some period of time here as we build back, and I don’t know what that pace of recovery will be,” Bastian told staff on April 8. “It will really be dictated based on when customers feel safe to travel again in large numbers.”
Bastian’s message was, like that of Munoz and Kirby, that Delta would be smaller post-coronavirus — both operationally and in terms of its workforce.
Wall Street analysts estimate that passenger numbers will be around 30% lower next year than they were in 2019. This is about 10 points worse than forecasts just two weeks ago, an indication that things are getting worse — not better.
In a report on April 13, Cowen analyst Helane Becker estimated that a 30% smaller airline industry could result in as many as 125,000 furloughs or lay offs. This would translate to a reduction of more than 35,000 staff at American, 25,000 at Delta and 27,000 at United.
“Job losses will come mostly from American, Delta and United as the other carriers look to wait out the downturn in demand,” she wrote. “The airlines will likely look to make those hard decisions in September when hopefully demand starts to show improvement, with a clear indication of something returning to normal in 2021.”
Aside from Parker’s comments, American has taken steps that show it takes the crisis seriously. The airline was the first to publish drastically reduced May and summer schedules of the major U.S. carriers, and could cut flights further if people do not start traveling again.
In addition, the airline has indicated that it will seek a $4.75 billion loan from the government’s $2 trillion coronavirus bailout package. This is separate from the $5.8 billion in payroll assistance that it has already indicated it will accept.
The funds American plans to tap are, as analysts have pointed out, intended as something of a final alternative for companies that have exhausted nearly all other funding sources. Their only other option, barring the government funds, being bankruptcy.
Featured image courtesy of American Airlines.
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