Taking too long? Close loading screen.
Connect with us

Tech

Big airlines are hoarding cash to survive the pandemic

Published

on

Photo illustration by William Joel / The Verge

The COVID-19 pandemic has cratered demand for air travel, tens of thousands of people are already out of work, and a recovery — whatever that may look like — is expected to take years. But while smaller suppliers are crashing and burning, the biggest corporations that operate and orchestrate the air travel industry are surviving, thanks to their size and their access to a crucial resource: cash.

The major airlines were hit with historic losses, which they detailed over the last month during their quarterly earnings calls. Collectively, the Big Three — United, Delta, and American — lost a staggering $10 billion during the second quarter of 2020. JetBlue lost $320 million, Southwest $915 million, and budget carriers Spirit and Alaska lost $144 million and $214 million, respectively.

They’ve done a lot of the hard work already, reducing their costs by retiring planes early and pausing most of their routes — but they are also prepping layoffs and furloughs despite government programs meant to keep those people employed. Of the many billions of dollars they took from the Coronavirus Aid, Relief, and Economic Security (CARES) Act, only a portion was dedicated to protecting layoffs. That money is running out, leaving the airlines threatening widespread cuts unless that part of the government program is extended.

The major airlines are simultaneously hoarding cash because there is simply a lot of cash available to them. On top of the CARES Act money, interest rates are at rock-bottom, making it easier — and cheaper — than ever for big companies to borrow lots of money. This makes it possible for these companies to paper over their lack of revenue with a little financial engineering.

Steve Priest, the chief financial officer of JetBlue, said his company’s “number one focus is cash” during a quarterly earnings call a few weeks ago. “Cash, cash, cash, cash, cash, as you would expect it to be in this environment.” JetBlue took $936 million in payroll support from the CARES Act, but Priest said the company has borrowed a total of $3.7 billion since the start of the pandemic, $750 million of which the company got by using its slots at JFK, LaGuardia, and Washington Reagan airports as collateral.

The bigger airlines have, unsurprisingly, borrowed much more. United Airlines has raised $16.1 billion through a combination of debt offerings, stock issuances, and CARES Act payroll grants and loans, with nearly $7 billion of that coming from using its mileage rewards program as collateral. American Airlines is borrowing $4.75 billion under the CARES Act, with $1.8 billion slated for payroll help, and it’s using its intellectual property as collateral for an additional $1.2 billion loan from Goldman Sachs. Delta took the most CARES Act payroll funding from the government, $5.4 billion, but has recently borrowed around $15 billion in total.

This money buys these companies time. Delta says its borrowing has afforded it 19 months of liquidity, even if it keeps burning through $27 million per day (its average for June). And things probably aren’t getting much better anytime soon. Delta CEO Ed Bastian said on NBC last month that he doesn’t expect customers to return to flying until there is a vaccine. “We need some medical confidence back in consumers,” he said. In a letter to employees, Southwest Airlines CEO Gary Kelly described his company as “in intensive care.”

Trade groups now expect global air travel to not return to pre-pandemic levels until 2024 at the earliest. Wall Street is only a tiny bit more optimistic about the industry’s recovery. In a recent report, Goldman Sachs said it expects the rebound to 2019 levels to take an extra year than previously predicted, meaning 2023 instead of 2022. Domestic travel is still expected to come back first, though that will be led by leisure travelers and not the high-revenue business flyers many carriers depend on.

But even with the extra runway, the airlines are eyeing unprecedented employee furloughs and layoffs since only some of the CARES Act funding was specifically for payroll support. And some of them have already found ways to reduce headcount without technically violating any of the terms they agreed to with the government. Some 40,000 Delta employees volunteered to take short-term unpaid leaves, and more than 17,000 chose an early retirement option. American warned it may need to shed 25,000 jobs by October. Southwest said it would not lay off or furlough any employees in October, though nearly 17,000 of Southwest employees have taken voluntary separation packages and extended time off from the company.

The pain is also rippling down the supply chain to companies that do not have multibillion-dollar mileage programs or airport slots to leverage as collateral or the kind of money and resources needed to chart out complicated financial deals that unlock billions of dollars in liquidity. Instead, they’re left only with more straightforward cost-cutting options.

In-flight internet provider Gogo applied for but did not receive a $150 million loan and an $81 million grant from the government via the CARES Act, so the company furloughed 600 workers in April and then eliminated another 143 full-time positions in July. It’s also now trying to sell its commercial aviation division. Southwest’s in-flight Wi-Fi provider, Global Eagle, filed for bankruptcy. Engine manufacturer Rolls-Royce cut about 9,000 jobs. Suppliers alone have collectively cut about 50,000 jobs, according to one estimate. Even. some smaller airlines like Virgin Atlantic are being forced to restructure.

All in all, it’s a grim picture. COVID-19 has devastated demand for air travel. Travel restrictions, both in the US and abroad, as well as a resurgence of the virus in the American South and West, are hampering the modest bounce-back in air travel seen at the beginning of the summer.

The major airlines are suffering record losses, too, but — for now, at least — they’re watching this carnage play out from atop fresh piles of cash.

Source : TheVergeRead More

Continue Reading
Advertisement
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Tech

Charge Your Phone Wirelessly With 50% off a Multifunctional LED Lamp

Published

on

Best Tech DealsBest Tech DealsThe best tech deals from around the web, updated daily.

White Wireless Charge Lamp | $18 | Amazon | Clip coupon + code ABC88699
Black Wireless Charger Lamp | $20 | Amazon | Promo code ABC88699

When you’re ready to turn in for the night, you don’t want to forget to charge your phone— especially if your mobile device doubles as your alarm clock.

With this wireless charger lamp, you can make this crucial step of your nightly routine even easier by just setting your phone on the wireless charging pad and… well, that’s all there is to it!

Advertisement

Other functions include multiple lighting modes as well as a sleep timer option for auto shut-off of the light after 30 or 60 minutes.

This lamp can be yours in white for $18 if you clip the coupon on Amazon (it’s below the original $40 price) and add promo code ABC88699 at checkout.

You can snag the black version for $20 using the same code—no coupon though, sorry.

Don’t sleep on this deal! Who knows how long stock or the coupon code will last?

Advertisement


Source

Continue Reading

Tech

Keep That Hotdish Hot With 65% Off a Luncia Casserole Carrier, Only $11 With Promo Code

Published

on

Best Home DealsBest Home DealsThe best home, kitchen, smart home, and automotive deals from around the web, updated daily.

Luncia Double-Decker Dish Carrier | $11 | Amazon | Promo code SDDU9S7F

It has been a long time since the days we could safely have a potluck or other gatherings, but we have a fantastic deal perfect for once those times return. These double-decker Luncia dish carriers can be had for 65% off when you add promo code SDDU9S7F at checkout and clip the coupon on the site (it’s just below the price). These holders fit 9″x 13″ sized baking dishes.

Advertisement

That means you can insulate and keep two dishes of food warm for only $11 instead of $30. What’s more, your Luncia carrier will arrive by Christmas if you order today as a Prime member.

Just add promo code SDDU9S7F and clip the 5% off coupon to bring the price down to $11 for the blue or the grey option.

Advertisement

Grab this offer while it’s still around!


Source

Continue Reading

Tech

Conquer Your Pup’s Dander and Fur With $700 Off a Cobalt or Charcoal Bobsweep PetHair Plus Robot Vacuum

Published

on

Best Home DealsBest Home DealsThe best home, kitchen, smart home, and automotive deals from around the web, updated daily.

Bobsweep PetHair Plus Robot Vacuum & Mop (Cobalt) | $200 | Best Buy

Bobsweep PetHair Plus Robot Vacuum & Mop (Charcoal) | $200 | Best Buy

Allergies can be bad enough as the seasons change. Don’t let pet hair and dander add to that by vacuuming it up early and often. That chore is easier said than done— unless you have a robot vacuum to do the work for you. This lovely bright cobalt Bobsweep PetHair Plus robot vacuum and mop, only $200 today at Best Buy seems like an ideal option. That’s a whopping $700 off, by the way.

Advertisement

You can get the same deal for the charcoal version of the robot vac, too. This model is not only specially made for picking up pet hair, it self docks and charges when it’s finished with the work.

It also comes with a mop attachment, so it can take care of those kitchen floors for you as well. Grab it while it’s still available for this fantastic price!

Advertisement


Source

Continue Reading

Trending