US Airlines Seek $50 Billion In Aid Following Slump In Demand

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U.S. airlines are asking the federal government to help bail them out to the tune of $50 billion following a massive slump in demand. This latest fallout from the coronavirus pandemic comes on the back of the Dow Jones Industrial Average recording it’s biggest-ever one-day loss in more than three decades.

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Airlines saw as much as 20% wiped off their value in one day. Photo: Getty

As investors continued what has now become a massive selloff, fearing the consequences of the coronavirus on the economy, airlines led the way. United, Delta, and American Airlines have all seen as much as 20% wiped off their value.

The coronavirus could reshape global aviation

While talking to MarketWatch, J.P. Morgan analyst, Jamie Baker said that he had lowered his target on airline stocks as he believes the coronavirus pandemic “has the potential to materially reshape global aviation, meaningfully more than the events of 9/11.”

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In an attempt to get federal aid in the form of grants, loans, and tax relief, trade group, Airlines for America, the body which represents airlines in the United States announced yesterday that they were looking for $50 billion.

If granted this amount would far exceed the $10 billion in loan guarantees and $5 billion in grants that were given to the airline industry following the terror attack on New York and Washington in 2001.

Now following a decade of what for many airlines was years of record profits, airlines suddenly find themselves in a downward spiral with no bottom.

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The crisis started in January

The crisis for the airline industry first started in January with the cancellation of flights to China due to the coronavirus outbreak in Wuhan and has now escalated to include a total ban on flights entering the United States from Europe after the virus has forced entire counties into a state of lockdown.

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Airlines could run out of money by the second half of the year. Photo: Getty

Putting forward its worst-case scenario, Airlines for America said that without the government stepping in, airlines would run out of money in the second half of the year and even sooner should credit card companies withhold cash generated from the sale of airline tickets.

The trade group’s members include the nation’s six largest airlines:

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  • Delta
  • American
  • United
  • Southwest
  • Alaska
  • JetBlue

In an effort to stem losses, United Airlines announced late Sunday night that they would be cutting 50% of their capacity in April and May and that it expects what flights it still operates to be only 20 to 30 percent full.

In a letter to the airlines’ employees carried by News4SA United Airlines CEO Oscar Munoz and President Scott Kirby said:

“We expect both the number of customers and revenue to decline sharply in the days and weeks ahead.”

Staff are being forced to take unpaid leave

Meanwhile, the world’s largest airline, American Airlines said on Monday that is was suspending about 75% of its long-haul international flights until the second week in May.

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United expects its planes to be only 20 to 30 percent full. Photo: Getty

Along with the grounding of aircraft, airlines are forcing staff to take unpaid leave and pay cuts in an attempt to stay in business.

At the moment, it would appear as if airlines think that the situation will improve by May, but there is still no way of knowing how the spread of coronavirus will play out.

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Nancy Pelosi's Bartender

No. Not a chance. You have had record profits, low oil prices, multiple fees, tax breaks, concessions, etc. Get bent.

Henning

50 billion U.S. dollars is a lot of money. Maybe it’s cheaper and better to let them go in bankruptcy so new owners with fresh capital can use their assets that can withstand an healthy business model

flyer

No bailout for you unless you GUARANTEE passenger’s benefits like EU261 + HUMAN TREATMENT on the place. No more cattle treatment!

Martyn

It is also mentioned in other press that Boeing is asking for a handout

PowerfulNomad

Instead of giving them large bailouts, they should give them a business plan and a small bailout.

Jack

There’s Qantas hunckering down with cash reserves in Australia with little over 100 aircraft in it’s main fleet and planning to wait it out, and the airlines in the U.S with 900+ aircraft in their main fleets asking for financial assistance because they made some bad descisions. I know some routes or flights are unprofitable but isn’t that the most part of almost every airline at some point?

John

The airlines can cry a river. One only need look a few quarters back to see them bragging about record profits and stock buybacks. If they want bailouts, then there should be strings attached. EU style consumer protections at a minimum.

Otherwise they can apply for loans or have the government do a partial buyout if they’re that desperate.

Roy Ducker

Don’t US airlines moan when airlines of other countries get state aid but now its ok for them to ask for it.