It is D-Day for the US airline industry as at the stroke of midnight yesterday the US Payroll Support Program (CARES Act) expired. As it did so, airlines across America had no alternative but to send out the already prepared letters of furlough and layoff notices to avoid risking falling into administration.
American Airlines CEO Doug Parker sent a letter to employees Wednesday evening announcing the airline would begin to furlough some 19,000 employees on Thursday writing: “I am extremely sorry we have reached this outcome,” wrote Parker. “It is not what you all deserve.”
At the same time the letters from United Airlines were sent, saying it would furlough some 13,000 workers: “Today is a very sad day for all of us here at United.”
Reduced hours, layoffs and furloughs are now taking effect across the US airline market including at Alaska Airlines, Allegiant Air, Delta Air Lines, Frontier Airlines, Hawaiian Airlines, JetBlue Airways, SkyWest Airlines and Southwest Airlines. The total as printed here previously, is expected to be in the region of 53,000 furlough and redundancy notices across the US airline sector during this 24 hour period. On top of this we can expect at least that number again at airports, MRO companies and third-party suppliers all the way through from cleaners to workers in airport stores.
The failure of Capitol Hill to agree a new scheme before the deadline is sad, but if you prop-up one sector you have to prop-up all sectors in fairness. That’s the reasoning at the back of many minds on Capitol Hill at this time, along with the fact that they have to keep a strong suite of measures in reserve should the banks require help, which is being mentioned more and more. But there still may yet be a stimulus package on the way at some point.
The contraction of the US airline market on this scale does mean that it will be impossible to ramp-up services speedily following a global vaccine/opening up of markets. Indeed, it also shows what we all now know to be the likely case, that we are looking at a deep U recovery rather than a V recession at best, and at worst a global depression if unemployment moves towards 20% in the major economies. We are some way off of that at this time but all indicators across the board are bad on every level save for one – countries are not calling in international debt as they did in the 1920s. One thing to bear in mind is: if the airline sector contracts at the current rates for another six months (which is likely), where does that leave globalisation post COVID-19?
Meanwhile, across in China, the mass movement of people is well underway for the Golden Week, this year with National Day coinciding with the Mid-Autumn Festival. Some 13 million passenger trips have been made or are underway this week according to Chinese state media, that is down 4 million from the 17 million reported movements for 2019. Even so, China’s Aviation Authority has estimated that bookings for domestic flights have increased 10.5% on 2019 levels. The primary reason for this will be the lack of international destinations due to COVID-19 keeping travel domestic. Indeed for those outside China the images of packed airports, rail stations, attractions and shopping streets seems like images from a past that we will not see for many months to come.