The coronavirus pandemic has been brutal to all aspects of the economy but has been especially brutal to the travel industry, where demand for flights and cruises has dropped off to almost imperceptible levels.
Now airlines are concerned that even mandatory requirements from the government will be unsustainable due to liquidity issues. A lobbying group representing U.S. airlines on Wednesday said federally required minimum service levels are “unsustainable” for carriers as the coronavirus infection has resulted in a dearth of passengers that corresponds to the lowest levels in more than 60 years.
Part of the criteria to receive a piece of the $25 billion in federal payroll grants and loans under the coronavirus rescue package is that air carriers must maintain a minimum number of flights, which depends on the carrier and was determined by networks prior to the dissemination of the pandemic.
With about 50% of their planes parked and the need to slash thousands of flights to try to conserve money, airlines are already posting their first quarterly losses in years.
To make matters worse, Warren Buffett announced Monday that Berkshire Hathaway had divested itself of all airline holdings. Berkshire had over $4 billion invested in various airlines including American, United, Delta, and Southwest prior to the sale. The “Oracle of Omaha” demonstrated respect for the industry but insisted that there are events “on the lower levels of probabilities” that necessitate a change of plans.
U.S. air travel demand plummeted 96% in April, falling to the lowest levels since before the jet age, Airlines for America said. Even with the reduced flight schedule, airlines are averaging meager numbers, amounting to roughly 17 passengers per flight, A4A said.
“We would ask both this Committee and the Administration to seek solutions to address the challenges posed by this unsustainable requirement,” said Nicholas Calio, A4A’s president and CEO, in prepared testimony ahead of a hearing at the Senate Committee on Commerce, Science and Transportation. “Make no mistake, as the duration of this pandemic lingers, the reasonability and practicality of this requirement significantly diminishes. Carriers and communities alike are going to have to come together and acknowledge the footprint and frequency of service in 2019 cannot convey to the 2020 COVID-19 pandemic reality.”
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