Airlines will have to adapt to ‘new world’ after coronavirus pandemic: former Spirit Airlines CEO
Former Spirit Airlines CEO Ben Baldanza predicts there will be a decline in business travel and airlines will have to rely more on leisure travel for revenue.
United Airlines Holdings Inc. on Wednesday said it expects the coronavirus pandemic will continue to weigh on travel demand this year as the airline turns its focus to rebuilding itself.
United reported a net loss of $1.9 billion for the fourth quarter, compared with a profit of $641 million in the same period a year earlier. Altogether, United lost $7.1 billion in 2020.
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UNITED AIRLINES TO BEGIN COLLECTING CONTACT-TRACING INFORMATION FROM PASSENGERS
While the outlook for the next few months remains dim for airlines, United said it has gotten a handle on how to survive its immediate challenges and outlined the broad strokes of its plan to exceed its 2019 profit margins by 2023, through a combination of returning travel revenue and cost-cutting.
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"Aggressively managing the challenges of 2020 depended on our innovation and fast-paced decision making. But the truth is that Covid-19 has changed United Airlines forever," said United Airlines Chief Executive Scott Kirby.
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United's losses come nearly a week after Delta Air Lines Inc. said it lost $12 billion in last year, also its worst-ever annual performance. The two airlines' dismal results reflect the damage the pandemic has inflicted on airlines. Carriers including Southwest Airlines Co. and American Airlines Group Inc. are set to report fourth-quarter results next week.
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The industry's trajectory this year will depend on how quickly vaccines can be disseminated to a point that the appetite for travel is ignited again. Airline executives have taken different views on how quickly pent-up demand for travel could be unleashed, and United's Mr. Kirby has said substantial recovery likely won't get underway until late in the year.
A brief surge in travel during the December holidays helped cushion the blow to airlines in the final months of last year, but the uptick in demand was short-lived and not as strong as airlines had initially hoped. Carriers including United said bookings slowed amid the increase in Covid-19 cases and in the wake of new guidance from the Centers for Disease Control and Prevention to avoid unnecessary travel.
Now airlines are entering what could be an even darker period, as COVID-19 cases and fatalities surge in the U.S. and around the world. January is typically a lackluster month for air travel, and U.S. passenger volumes have stalled at about 40% of pre-pandemic levels.
United, which has operated a leaner schedule than some rivals to match depressed demand, said Wednesday that its first-quarter revenue would likely be 65% to 70% lower than the same period in 2019, before the pandemic, unless Covid-19 vaccines are distributed more quickly.
After raising billions of dollars from investors and borrowing from the government, United said it ended the year with $19.7 billion in liquidity — enough to survive the slow, choppy recovery it is anticipating. The airline said it ended the quarter burning through $33 billion in cash a day including debt and severance payments. But the company said its "core cash burn," adjusted for things like investments that the airline says will make it more efficient as it ramps up, was $19 billion a day, down from $24 billion a day in the third quarter.
UNITED AIRLINES DEBUTS VIRTUAL CUSTOMER SERVICE
Airline executives and analysts expect international and business travel, which United and other major carriers rely on for much of their revenue, to recover more slowly than leisure trips. Several countries have imposed new restrictions on arrivals from abroad in an effort to keep out new strains that have emerged in parts of the world and have already spread widely.
The U.S. last week said it would require all passengers arriving on international flights to test negative for COVID-19 no more than three days before flying. Airlines had hoped the new testing requirements would be accompanied by a loosening of restrictions on travel from the U.K. and Europe, but a spokeswoman for President Biden said earlier this week that the new administration doesn't plan to allow most travel from those countries to resume on Jan. 26 as former President Donald Trump had announced.
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