Just How Bad Is It Going to Get for US Airlines?

“We are preparing for the possibility of further reductions to our schedules as the virus spreads.”

By Wolf Richter for WOLF STREET.

The IATA (International Air Transport Association), which represents some 290 airlines, issued a press release this morning, exhorting airport regulators globally to suspend “immediately and for the 2020 season” the rules governing airport slots “due to the impact of COVID-19 (the Coronavirus).” In its reasoning for this request, it said:

“IATA research has shown that traffic has collapsed on key Asian routes and that this is rippling throughout the air transport network globally, even between countries without major outbreaks of COVID-19.”

And:

“The world is facing a huge challenge to prevent the spread of COVID-19 while enabling the global economy to continue functioning. Airlines are on the front line of that challenge and it’s essential that the regulatory community work with us to ensure airlines are able to operate in the most sustainable manner, both economically and environmentally, to alleviate the worst impacts of the crisis.”

It gave some examples, without naming airlines:

  • “A carrier experiencing a 26% reduction across their entire operation in comparison to last year”
  • “A hub carrier reporting bookings to Italy down 108% as bookings collapse to zero and refunds grow”
  • “Many carriers reporting 50% no-shows across several markets”
  • “Future bookings are softening and carriers are reacting with measures such as crew being given unpaid leave, freezing of pay increases, and plans for aircraft to be grounded.”

On Sunday, Delta Air Lines announced that it would suspend flights to Milan, Italy, until early May, after already slashing its flights to South Korea last week. On January 31, it had announced that it would suspend all its flights to China from February 6 through April 30.

On Saturday American Airlines announced that it would suspend its flights to Milan through April 24, after having already suspended all flights to China and Hong Kong. “We will continue to evaluate this schedule and make any adjustments as necessary,” it said at the time.

United Airlines has not yet announced suspensions of flights to Milan but told employees in a memo on Saturday, that, “based on current trends, it is likely that additional schedule reductions will be necessary.”

United – the US airline with the most flights to Asia – had announced on Friday that it would extend the suspension of all flights between US airports and Beijing, Chengdu, Shanghai and Hong Kong through April 30; and that it would reduce flight capacity from the US to various airports in Japan, Singapore, and South Korea.

And when, in a memo cited by CNBC, it asked pilots of widebody aircraft used on long-distance flights to take a month off at reduced pay of 50 hours a month, instead of the normal 80 hours a month, it added: “We are preparing for the possibility of further reductions to our schedules as the virus spreads.”

Americans are now also starting to cut their domestic travel. Countless conferences in the US have been cancelled, including big tech conferences in the San Francisco Bay Area, and many more will be cancelled. Companies are now exhorting their employees to avoid all unnecessary flying to anywhere.

In personal conversation – and this is strictly anecdotal – several people I know have cancelled personal trips within the US, or have scuttled the idea of booking a flight, as the virus is just now becoming an in-your-personal-life issue, after having been something that only distant countries had to face.

Airline stocks have been getting crushed, first by the issues stemming from the Boeing 737 MAX, and now by the issues stemming from the coronavirus containment efforts, even this morning, despite the tumultuous rally in the US stock market overall.

Since January 18, just before the measures to contain the coronavirus outbreak began threatening the travel industry, through around mid-day today, the stocks of the seven largest US airlines by market capitalization have all plunged:

  • Delta Air Lines [DAL]: -27%
  • Southwest Airlines [LUV]: -17%
  • United Airlines [UAL]: -35%
  • American Airlines [AAL]: -36%
  • Alaska Air Group [ALK]: -26%
  • JetBlue Airways [JBLU]: -21%
  • Spirit Airlines [SAVE]: -37%

These seven stocks are the components of my market-cap-weighted SADJAUS (pronounced sad-jaus) stock index. The combined value of those seven companies has plunged by 43% since the peaks in January 2018 and July 2017, including the 27% plunge since February 12, to the lowest point today since February (market cap data thanks to charting site, YCharts):

Is the plunge enough?

In China, the government has just taken over HNA Group, the troubled conglomerate that, after a debt-fueled global acquisition binge, ended up with about 18 airlines in China and Hong Kong, plus the world’s third largest aircraft leasing company, plus airline caterer Gategroup, plus the world’s largest airport ground and cargo handling company Swissport, among other acquisitions. The government takeover was designed to avoid a messy collapse.

For US airlines, travel restrictions will continue to tighten, and Americans will continue to reduce their travel plans, even domestically.

Even after the coronavirus fades as an issue, whenever that may be, travel will take time to recover. Meanwhile, the ongoing operating expenses and interest expenses, mixed with the sharp reduction in revenues will likely result in negative cash flows, putting a heavy cumulative financial burden on airlines.

After the plunge in share prices, PE ratios are now low, but once losses are reported – and they will be – those PE ratios will disappear. If this drags out, dividends might be at risk too, which would further weigh on share prices. And rate cuts by the Fed are not going to undo flight suspensions or change the minds of potential fliers who, worried about catching the coronavirus, have decided to stay home. So this is going to be a tough slog for airlines.

The charts are brutal. Read…  China’s Non-Manufacturing & Manufacturing PMIs Show to What Unfathomable Extent the Economy Has Collapsed

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  123 comments for “Just How Bad Is It Going to Get for US Airlines?

  1. Sporkfed says:

    Teleconferences for the win.

    • Mike G says:

      Zoom stock (ZM) is, well, zooming.
      It can be yours for a P/E ratio of only 3123.

      • JFP_SF says:

        Zoom Technologies (ZOOM) is zooming even more due to people buying it who think they are buying the other Zoom.

    • Noryl says:

      “Teleconferences for the win.” Yes!
      And hand-washing, mask-wearing, self-quarantining measures for the “win.” This will slow it down.

      Everyone is going to be exposed to the Wu-Flu… after all, it’s the flu and it’s contagious. It’s only going to be a real problem is everyone gets it at the same time: meaning stores won’t operate (with no employees) and many other essential services will go dark.

      I’m really a little disappointed with Trump in this matter. He could have said we’re ALL likely to be exposed, so let’s just try not to ALL get sick at the same time to minimize harm to the economics of daily life!

      (only a small part of the population is likely to die: smokers, young AND old, plus others with underlying health problems… just like with the regular flu.)

      • Prairies says:

        Not one historical leader has ever said “Don’t worry, only some of you will die.” Not even when going to war.

        • Noryl says:

          Well, alright. Skip that part – but the idea is to do things that make sense. In this case: concentrate on making the impact STAGGERED. The real harm would come from large groups of people getting this flu all at once. We don’t have that with the regular flu because there is a reservoir of acquired immunity in every town and city. Otherwise the Wu-flu is not that much different than the regular flu(s).

          I sat and watched the Russell 2K fall as Trump spoke and that spoke volumes. What a sad performance!!

    • sunny129 says:

      ‘rate cuts by the Fed are not going to undo flight suspensions or change the minds of potential fliers who, worried about catching the coronavirus, have decided to stay home’

      same sad story with hotels, vacation resorts, cruise lines, global logistic transportation industry. Immobility and staying away from crowds also impacts, restaurant, sports, theme parks etc. A wide impact on the service economy, unlike any time before!

  2. Old Engineer says:

    Unless there is a drastic change for the better, sometime in the next couple of weeks it is quite likely the EU will suspend all flights from the US. They are probably going to regret not doing it sooner. That will hurt.

    • LessonIsNeverTry says:

      Considering they have an order of magnitude more cases than the US, why would the regret this? Everyone is sharing the same bowl at this point.

      • Thomas Roberts says:

        Almost nowhere are people getting tested, so It’s not clear whether the EU or America has more infections. Any shutting down of transportation, but especially long range will help slow the infection rate. Although shutting down transportation within EU would be more effective, it would have a much greater social and economic impact compared to shutting down between America and the EU. Slowing the infection rate will give more time to help understand how to best fight coronavirus, prepare for it, and prevent hospitals from getting overwhelmed as much. It might also delay the major outbreaks long enough until the summer, when it’s possible that people’s immune systems would be better able to fight it.

        • Happy1 says:

          It’s true that testing is not widespread, but the number of deaths and sick ICU patinents is much higher in the EU, and that is probably a general marker of the overall number of infections. The US is probably just a little farther behind on the same curve.

    • VintageVNvet says:

      Agree OE, and especially with the sentiment that they are going to regret not doing it sooner, as this virus appears to be gaining traction very quickly in USA, and IMHO has been here and circulating for at least a month, maybe 2.
      Now starting to test in TPA bay area after a couple of nearby cases showed up yesterday, and I am currently suffering, although exactly with what is TBD.
      Heard from friend in Tahoe that they had bad virus in family early Feb, but they all young and hearty, so no worries, and, in fact, I hope they did get enough of it to manufacture the antibodies that the FED is now working to disseminate at least throughout USA,,, dig dig
      ”Stiff upper lip now lads.” Really not much else we peons can do at this point of this saga, eh?
      BTW Wolf, after asking for investment suggestions, and not seeing or hearing much, I have decided to invest in Wine,,, don’t expect to do as well as my BIL who bought futures for his grandaughter the day she was born, up about triple since. But, seriously, do you have any of your wonderful graphics to show Wine Futures? Such might be comforting for some of us older than boomers…
      Thank you.

      • Unamused says:

        Stop being old, VVNV. It sets a bad example for the rest of us.

      • Wolf Richter says:

        VintageVNvet,

        “BTW Wolf, after asking for investment suggestions, and not seeing or hearing much, I have decided to invest in Wine”

        I used to follow wine as an asset class and post some charts back in the day. But I could never quite take it seriously. The thing with wine is this: the final purpose of wine is to be pleasure-fully ingested. And when you do that, the value of your investment goes to zero.

        So to avoid the value of your investment going to zero, you can never drink the wine. But wines don’t last forever, and keeping them around for a decade or more requires great care and a controlled environment. So they’re expenses involved too. And eventually they become undrinkable. And the value goes to zero – except for curiosity purposes.

        Wine futures keep you distant from the actual wine, and you’re just betting on temporary price movements, which is fine, and you’ll never be tempted to drink your futures, unless you end up having to take delivery of the physical wine :-]

      • Happy1 says:

        Extremely unlikely that the mild upper respiratory symptoms you or your friends have is Covid19 unless several of their family members are now in intensive care.

        It will be pretty obvious when there is widespread community transmission in the US because people will be in intensive care.

        • Goldbug says:

          How many won’t be admitted to intensive care in US due to lack of insurance or punitive co pays? Will they ever show up on official stats?

    • MCH says:

      I wonder if that’ll include the UK…. it’s technically not the EU any more, although it still has to follow EU rules.

      seriously though, this is almost certainly an overreaction at this point. No amount of isolation and quarantine will make any difference now, it’s liking sticking your finger into a leaky dam that already have hundreds of tiny holes.

      I figure if the international business is taking a hit today, before the end of the month, the domestic travel will be in trouble, that’s when the bread and butter part of the business is going to suffer. No chance that it won’t. The summer travel season is probably going to get whacked.

      It won’t be about reality, it’ll be about perception and fear. We’re in the stage now where perception will outrace reality in some quarters, and lag way behind in others. I figure the coronavirus is already worldwide, and in most communities in some form or another. But the news about it is still slow in coming out, when that happens, it’ll be another overreaction. Thanks to the news media, this thing now feels like it’s airborne Ebola or something like it. No amount of assurance will change that perception.

      When it finally dies down, it’ll be weeks before reality catches up with it.

      • njbr says:

        As has been said many times before, the key to better survival rates is to throttle the flow of infection so the medical system can keep up.

        The hard-hit cities in China, Italy, Korea and Iran already have too many cases to admit to the hospitals.

        So do you think that will increase the worse outcomes?

        Number of hospital beds per 1000 people

        South Korea 12.27 (2nd highest -after Japan)
        China 4.34 (before corona)
        Italy 3.18
        USA! USA! 2.77

        And it gets worse when needless exposures happen (UC Davis and the staff at the WA nursing home). It’s criminal that testing was not started earlier. Now there are thousands of needless cases.

        • Happy1 says:

          Hospital beds are one measure of a communities ability to care for sick people.

          But there are vast differences in how hospitals are utilized across different cultures. Japan for instance needs more hospital beds because almost a quarter of the population is over the age of 65, and the culture in Japan is to keep people in the hospital for prolonged periods. Culture in the US is to get people home as quickly as possible.

          for example, the average hospital stay in Japan is 18 days, and in the US, 5 days.

          hospital beds however do not keep people alive with acute respiratory failure, intensive care beds do. By that measure the United States is better prepared than any other nation by a large margin, with 20-30 ICU beds per thousand people, no other country has even half that many. It may not be enough in a true epidemic, but you will be much better off in the US if you need ventilator support than you would be in any other country.

          My data source for ICU beds is 8 years old and could have changed. I would provide the link but that tends to hold comments in the moderation tank. This is the article name if you care to Google.

          International comparisons of intensive care: informing outcomes and improving standards

        • Happy1 says:

          Apologies, those ICU bed numbers are per 100,000 people, and remember that there is little international standard on what constitutes ICU, so take all with grain of salt.

          As you can see, it wouldn’t take much of an epidemic to overwhelm ICU care in any country.

    • sunny129 says:

      Forget NOT just the US, look at Italy:

      Cases have been spotted after apparently transported from Italy to
      Scotland, Iceland, Finland, Czec Repub, Algeria, Netherlands, Mexico, USA,
      Luxembourg, Spain, Norway, UK and Brazil!

      h/t mishtalk

  3. Unamused says:

    Just How Bad Is It Going to Get

    DJIA presently up over 700. Mr. Market is unconcerned.

    • Frederick says:

      Up 655 now Topped out up 777 We shall see

    • Jdog says:

      Dead cat bounce based on the mistaken belief the Fed can do something to lessen the impact of this pandemic. They can’t. Lower interest rates is not going to get people out of their houses and spending money when the virus hits their city.

      • Frederick says:

        Jdog I think you’re right Up 517 with an hour left in trading
        It’s been a slow downward slog all afternoon Wonder if we
        crash into the close

      • Social Nationalist says:

        You need rally’s like this to bring in ammo during the next crash.

      • sunny129 says:

        Are the infections peaking? any country or any where in the world, including china?
        Is the virus going away next week or the next?
        How are the earnings for 1st (guidance)and 2nd qtrs?
        Is this ‘pavlovian’ response unable to get unhinged with investors (both prof and retail?) Group thinking – got to go with the crowd!

        Fundamentals don’t matter just more easy-peasy money from Fed & Cbers!
        Will it fly this time, like for the last 10 yrs?
        Me thinks NO!

    • Wolf Richter says:

      Unamused,

      Despite the tumultuous rally in overall stocks, airline stocks are still down today. You see what I’m getting at?

      • Unamused says:

        My attempt to expand the subject crashed and burned. So to speak.

      • W.R. Sebastian says:

        Isn’t it great? I am quite happy about this. I wonder if there will be any healthcare response.

      • sunny129 says:

        The whole travel & tourist industry are getting massacred and no end in sight. Nothing optimistic in the horizon. Matters little if fed cuts rates and QWs to infinity!?

        I could still go ( today) and buy puts at these industries after twice – rinse & repeat! It feels like in 2007-‘081 Lost nothing during GFC!
        ( Been in the mkt since ’82)

    • Synergy says:

      I was happy to cash out some small positions I did not cash out earlier just a few moments ago.

    • nick kelly says:

      Now Dow ends up 1200 or so. Check run up to 29 Crash. Market swung wildly in both directions. Roulette ball falls on black then it’s red. These swings are not characteristic of a healthy market.

      Check the real economy which is NOT Facebook etc.
      In the last few weeks before the mania, WS warned that both Ford and GM needed to reinvent themselves, fast.

      I don’t think it’s possible for GM, but we’ll see.
      Back out (separate chassis) trucks which are protected by a stiff 25% tariff and there really isn’t much left of either in NA.
      Check ocean shipping, losing a billion a month as rates plunge. Airlines were not rosey before this, now all down double digits.

      That great boondoggle, shale, is nearing the final curtain. Also torched by WS several times.
      It’s not a viable business to produce a billion dollars worth of oil if it costs over a billion to do it.

      Apart from coffee, burger joints, and food delivery, the healthiest sector of the US economy is arguably health care which is slowly devouring the economy.

      I have to admit, I was shocked and scandalized to hear that a main supplier of drugs and precursors to the US was freaking China! The US has the gall to charge ten times the Canadian price for insulin and it sources drugs from cheapo land?

      • njbr says:

        …coffee, burger joints, and food delivery…those will go out when you no longer want the potential illness of public exposure

        …health care… either health insurance is going to throw their clients under the bus or they’ll go broke, in either case they’ll break the hospitals/clinics/providers.

        • char says:

          Nationalization. May not be so bad for the hospital/clinic stocks but would be murder for their suppliers

      • nick kelly says:

        PS: shale is going to take out a few banks. It was oil and gas lending that took out Penn Square in the 80 s causing a domino effect taking out several more that had lent to Penn. Penn’s energy guy got 2 years.

        • turlock says:

          FYI bankers are a protected class now. No charges, convictions, or jail time. A big fine here and there just to maintain the facade of law and order.

    • elysianfield says:

      “Mr. Market is unconcerned”

      Unamused,
      Perhaps because Mr. Fed said they would do whatever it takes to mitigate the situation? On Friday past?

    • nick kelly says:

      Now Tuesday down 500 AFTER a 50 bp cut!

      Keerist

  4. Matthew Brandley says:

    one major thing you are all forgetting . It is estimated that half of all freight in the world is moved by commercial airlines. problems are arising moving things in the eu and asia. 42 ships have cancelled port calls on the west coast from China as well as Baltimore. The ports look like ghost cities . no goods to bring over.

    • baldski says:

      I sincerely doubt that half the freight in the world goes by air. A single container ship, the “Emma Maersk” can load 156,000 tons of cargo and these are long tons = 2240 lbs. How many 747’s to equal that?

      • unit472 says:

        All of them?

        This virus will burn itself out or an effective treatment will be found. Not so sure about a ‘cure’ as the common cold has defied medical science and its a coronavirus too but, at some point people will need to fly again. At that point the airlines still flying will be money printing machines

      • Wolf Richter says:

        baldski,

        I don’t have the data at my fingertips to weigh in here. But I just want add: freight is measured by weight and by value. A plane full of iPhones at $600 (or whatever) per little box vs. a ship full of crude oil at $45 a barrel.

        Measured in tonnage, air freight has a very small share. Measured in dollars, its share is much higher. Only high-value items that don’t weigh much are shipped by air, but not commodities, raw materials, heavy equipment, frozen food, autos and auto components, etc.

      • char says:

        I think he meant passenger planes carry about half the commercial air freight. A number i have seen before.

    • Thomas Roberts says:

      I’m not quite sure what you mean, but, commercial airlines might be responsible for half of all air freight. But, I think I remember air freight only being 1% of all freight. Between China and America I expect 99% “not an exaggeration” to be by ship.

  5. Roger Sterling says:

    Maybe it’s time for Doug Parker and his band of lieutenants to make another show of buying AAL shares.

  6. Jdog says:

    I think people really underestimate how much impact this is going to have across the board. People who do not fly, also do not need hotel rooms, or rental cars, or meals, or drinks at the bar. The effects in China are being seen mostly in manufacturing, because that is China’s biggest portion of their GDP, but in the US and Europe the biggest portion of GDP is service which is going to get hit even harder than manufacturing….. In addition, lowering interest rates will do nothing to restore peoples confidence in using service sector business so any hope the Fed can rescue this situation is misplaced.

    • W.R. Sebastian says:

      I live near an airport. The air seems cleaner now. It would be kind of funny since corvid is a respiratory sickness.

  7. raxadian says:

    I fear some of these airline business will be rescued just like banks were rescued over a decade ago. Only the big ones that are the current USA president campaign supporters of course.

    And of course instead of “Too big to fall” there are going to be “Too heavy to fly”.

    Heavy with what? Debt of course.

    • Jdog says:

      Big difference. The Fed’s shareholders are the the major banks. Like any corporation, which the Fed is, they look after the interests of their shareholders. The airlines are not shareholders in the Fed…..

      • raxadian says:

        You forget this is a campain year and no one who uses the speech of “America first” can afford being accused of letting big American companies fall during a campain year.

        There is also the fact that America needs to have their own airlines just like it needs to have their own petrol oil. No matter how much of a bad business it is.

        So yes, at least a few Airline companies will be saved.

        • Jdog says:

          No one said this would be the end of all the airlines. As these things go, flu epidemics wane in the summer months, although they sometimes reappear the next winter as was the case with the Spanish Flu. In my life I have seen times when the Airlines mothballed a portion of their fleets before until business picked up. Do not forget, the Fed is not a government entity, and is not under control of the President or Congress. It acts primarily in the interest of its member banks.

    • MC01 says:

      The Three Sisters (American, Delta and United) and SouthWest are all in overall good financial health.
      Delta has invested a lot of money in the South American market ($1.9 billion for a 20% stake in LATAM alone) and is probably the most vulnerable of the lot, but it’s still in overall good shape. I wouldn’t worry about them too much. The big problems lay elsewhere.

      The Gulf money pits are seeing passengers disappear just like everybody else, but this comes after years of big losses and precisely at a time when oil and LNG prices have already been comatose for a while AND after another decade of idiotic useless expenses, from subsidized steel mills in a world drowning in steel to ice skating rings in places where 40°C is business as usual.
      Etihad has already started to slash expenses like mad. Others will follow as money gets tight. I don’t see any Gulf airline folding outright since they are basically vanity projects for the local rulers and their families, but if restrictions are introduced for the Hajj (July 28-August 2 this year) we’ll see a lot of fireworks.

      Now, Europe and Asia are another matter completely. The “heavy with debt” airlines are there, and while bailouts are depressingly common, they consume as much political capital as financial one. After a while people get tired of seeing their taxes sunken into moneypits, be them Alitalia or Malaysia Airlines.
      Then there are all the startups with enormous order books and whose ability to raise extra capital depends on showing double digit quarterly growth to the yups. Even the Chinese government, with its opaque financial and fiscal structure, “let’s make it up as we go” rulebook and huge (albeit dwindling) currency reserves, is scratching its head on how to keep all these outfits afloat. It’s rumored forced mergers will come, together with small but steady order cut cuts, but so far the CAAC (Civil Aviation Authority of China) has its hands full dealing with most immediate troubles.
      Imagine how countries like Vietnam will fare.

      As I said before I don’t see a mass culling, but a steady and unstoppable streak of bankruptcies, bailouts, forget mergers and other **** going on for at least a decade.

      • Harrold says:

        Airlines are in terrible shape. The value of their assets are sinking day by day.

        Whose in the market to buy a used airplane?

        • MC01 says:

          It depends.

          If you have an Airbus A380 you are just better off selling if for scrap. Nobody wants that stuff.
          But if you have a Boeing 737-800 or -900ER you’ll have a line of prospective buyers and/or leasees in front of your metaphorical door.
          And if you have a Boeing 757, 767, Saab 340, ATR42 etc with decent life remaining you would be surprised at the number of people interested in it. This stuff in super-hot demand for cargo conversions, and that’s in spite the overcapacity problem affecting the industry worldwide.

          But if you have a business jet, you should just consider committing insurance fraud and torch the damn thing: the market is completely saturated with them. Nobody wants a Falcon or a smaller Citation, and with the ADS-B mandate finally effective an already oversupplied world has seen a steady influx of US registered aircraft as well.
          With fractional owenrship all the rage, and fractional ownership outfits preferring versatile stuff with a good resale value such as the Pilatus PC12, the market will chnage dramatically over the next decade.

        • Shiloh1 says:

          How low will Boeing stock in next 2 years?

      • MCH says:

        waiting for the new motto, you fly for free, but if you want your underwear with you when you get there, it’ll be $700 per bag.

      • SwissBrit says:

        There are already issues arising that may affect the Hajj; foreigners are currently banned from entering either Mecca or Medina

        https://www.newsweek.com/coronavirus-threatens-hajj-2020-pilgrimage-saudi-arabia-suspends-travel-mecca-1489506

        • MC01 says:

          Funny thing: not Mecca and Medina, but can enter the rest of the country. Insert here your jokes about Saudi Arabia not being able to function without hired foreign labor. ;-)

          Israel has introduced a travel ban for foreigners coming from several Asian countries (including China, Thailand and Japan), and a 14-days quarantine for all Israeli citizens returning from there, but I feel before long the ban will be extended to other countries such as Italy.
          While not as huge as the Hajj, Easter pilgrimages to Jerusalem are a big chunk of the Israeli tourism industry and make charter operators a steady bundle. Easter (NS) is a little more than a month away, and as Italian health authorities said even if the present measures are effective they will only start to be felt in a week or two.

          This is going to be major, but apparently the important thing right now is to… buy Apple stocks?

    • Nodak65 says:

      Raxadian, after 911 the airline stabilization board was created and 10 billion was set aside to be applied for,,, only a small amount was approved for a few small airlines..and no Ual Dal Aal was given any of that money So there was no Bailout, and the last time I bothered to check the head of that board went to work for……..CHASE!

    • char says:

      The companies are not important. The planes are and the pilots that fly them, the kerosone that is burned, the stewardess that serve etc.
      If the plane is near empty it wont fly and giving cash wont solve that.

  8. Jest says:

    Not many want to get on a boat that flies in the sky, and even fewer on those Big ones that go on the water!

  9. Seneca's cliff says:

    I was scheduled to go to Las Vegas this coming weekend for a reunion of my Fraternity Pledge Class. I have canceled as Vegas seems like it is (or will be) a hot bed for the virus given the flights coming in from all over the world. Seems to me the hard core gambling addicts are unlikely to self-quarantine when their compulsion is on the line.

  10. Wisdom Seeker says:

    Suggest changing SADJAUS to JUSSADA. or ADJUSSA. Both are easier to spell and remember. ADJUSSA hints to coming “adjustments” in air travel as well?

    News reports full of organizations cutting back on travel. Hasn’t hit my own workplace yet but I know people are starting to talk about it.

    Hindsight will show that the failure to employ multi-source test kit development path, to provide immediate nationwide testing capability, will have been one of the most grievous errors in the US response. We have been blind to community spread for a month and are about to find out that there’s a huge iceberg under the bow…

    • boomka says:

      SADJAUS is perfect, you just need to read it as a Spanish speaker would and then it says SAD HOUSE.

      • Wisdom Seeker says:

        Sorry, but that’s a fail. In Spanish it would be a Casa not a House or a JAUS whatever that is.

        I don’t think this one’s gonna catch on like FANG, FAANG, or FANGMAN.

        • Saltcreep says:

          I suspect boomka is referring to how a Spanish ‘J’ in there could make it sound sort of like how e.g. Manuel in Fawlty Towers (British 70s sitcom) might pronounce ‘Sad House’ in English.

    • Wisdom Seeker says:

      Even better acronym: SAD-USA-Jet.

    • Daedalus says:

      I think you’re correct, Seeker. China released the genetic sequence of the virus a while ago. The arrogance of some who considered it a ‘Chinese problem’ led to inaction. The resulting dearth of testing kits and the delayed consideration of a plan for a wide testing program leaves the US in the dark as to the dimensions of the outbreak as well as the percentage of asymptomatic ‘carriers’.

      This not-so-unpredictable outbreak has laid bare the state of our health care system.

  11. jc says:

    “IATA research has shown that traffic has collapsed on key Asian routes … even between countries without major outbreaks of COVID-19.”

    People are hunkering down and that’s going to be the biggest drag of all and that’s going to last much longer than a virus. A virus that may be around for years. 100’s of millions if not billions are switching to a different state of consciousness. Like when you drive home from work and can’t remember the drive. That was a brief state of consciousness different than the one when you got home.

    This is going to be a huge shift in everything. There will be a new normal and it’s not going to be just about the virus.

  12. Unamused says:

    A virus that may be around for years.

    Or centuries. Cases of the Black Death, or bubonic plague, which wiped out millions in 14th century Europe, still get reported occasionally to the CDC every year, mostly from western states. It’s still prevalent in Africa but less so in Asia and South America.

    • Greg Hamilton says:

      These once in a lifetime pandemics seem to be coming more frequently:
      SARS 2004
      AVIAN 2006
      SWINE 2010
      MERS 2012
      EBOLA 2014
      ZIKA 2016
      EBOLA 2018
      CORONA 2020

      But this time I think we should all panic.

      • David Hall says:

        This is not the first coronavirus outbreak. A coronavirus can not survive as long on a warm surface as on cold surfaces. Like the flu, coronaviruses are more contagious in cold weather. You do not see pandemic in the southern hemisphere. Unfortunately airports and planes are chilly. Building air conditioners are turned down too low.

        • Harrold says:

          Hong Kong is not cold. They are managing the outbreak only by closing all schools and by closing the border with China, shuttering businesses and by putting 12,000 people in quarantine.

        • Les Francis says:

          Tropical Singapore has only contained cases by strict movement control and immediate medical attention fir anyone remotely suspected of having the virus.
          Otherwise it would be widespread there.
          This is not the flu. It’s yet to be defined if hit or cold climes have an effect on propagation. Indonesia is now reporting cases – a country that straddles the equator.

      • Curious says:

        @Unamused.
        Panic? I don’t think so. Add together all the deaths worldwide due to those epidemics, and the total is a fraction of the deaths we in the U.S. cause ourselves each year:

        Smoking: 480,000
        Alcohol: 88,000
        Homicides: 11,000
        Car crashes: 40,000
        Drug overdoses: 70,000
        Suicide: 47,000
        Obesity: 300,000

        Trump actually moved very fast to limit flights to and from Asia’s hot-spots, which even caused China’s Xi to complain he was “overreacting.” By the time we or some other country has a vaccine or treatment, I doubt that the total deaths here will even surpass those from drug overdoses alone.

        Recall during the Ebola epidemic how Trump wanted to keep potentially infected people out of the U.S. He probably worries more about diseases than the average person, which implies that his comments are merely meant to prevent panic. Especially since we only have a half-dozen deaths so far.

        • Unamused says:

          @Unamused. Panic? I don’t think so.

          Who’s panicking. We simply closed the gates and are watching the show.

          moved very fast to limit flights to and from Asia’s hot-spots, which even caused China’s Xi to complain he was “overreacting.”

          He’s already got a tariff war going against China, so why not?

      • Happy1 says:

        I’m a medical professional and was unconcerned with any of these other diseases because they are relatively less communicable. SARS was a big deal if you lived in Hong Kong, and Ebola for parts of Africa. Covid19 is in a different category.

    • sc7 says:

      That is caused by a bacterial infection, which generally have much higher fatality rates, but don’t spread life wildfire in modern living conditions.

      A large-scale Black Death breakout is unlikely. It’s also fairly easily treated with modern antibiotics.

  13. Bob says:

    I’m at a conference in Florida with people from all over the US. Everything seemed pretty normal in airports yesterday, though the international terminal in Atlanta was pretty quiet (for some reason my domestic connection left out of that terminal). The hotel here on Amelia Island is packed. Conference only had a couple no-shows, and people don’t seem concerned. I suspect things will change quickly, as the US numbers are probably a result of inadequate testing more than anything, but for now my anecdotal experience is that domestic business travel appears pretty normal.

    • KamikazeShaman says:

      First time caller, long time listener. I love this website… Thanks Wolf and all the commenters that generate some seriously interesting conversations.

      I am a backstage AV technician in the live corporate event industry. I do a lot of the big tech shows and create the presentations for C-Level execs from Google, IBM etc. I also operate the screen content live during the show. I travel all over the place doing these shows.

      That being said, I had an event with ZenDesk that was supposed to begin yesterday and after flying to Miami on Saturday they abruptly cancelled the conference on Sunday morning due to Coronavirus fears. We all had to scramble to book flights out of there less than 24 hours after we landed. Never seen that happen before.

      It was scheduled to have 2500 attendees at the south beach convention center but they pulled out even after the entire production crew was onsite and attendees would have been flying in that very day. The entire South beach area was branded with their conference graphics and the convention center is a ghost town instead of the bustling expo it was intended to be. I cannot imagine how much $$$ they just burned due to their irrational fears.

      A bit of a different experience than your FL conference!

      I am scheduled to do 3 more “mega-shows“ at the Moscone Center in SF (2 for google and 1 for IBM) over the coming 3 months and I have a gut feeling that they will be abruptly cancelled. I’ll be shocked if they go through with any of them.

      Gonna hit me and everyone else in this industry really hard. same thing happened after 9/11 and 2008 bubble.

      People/Companies are not panicking over the virus, they are panicking over the panic!

      My theory is that they fear the PR disaster if one of their conferences were to end up being a place where thousands of people get infected. Bad headlines and PR are what these companies truly fear as that has lasting effects on their reputation and market value. I’ve sat in on candid conversations with some of the biggest names in tech and when their companies get bad press they freak out like you cannot imagine. Their image is more valuable than the millions and millions they forfeit by canceling an event so I would expect to see more and more of this.

      The trickledown effect from this will be considerable as corporate events is a 1 trillion dollar industry.

      Looks like this “everything bubble” just found its sharp pointy (although microscopic) object.

      It’s going to be a rough year for me and my family so send me some free beer too (sorry Wolf, I’m gonna need it!) Stone IPA please…

      • Wolf Richter says:

        KamikazeShaman,

        Thank you for sharing your observations. Here are two spiritual mugs filled to the brim with spiritual Stone IPA [_]? [_]?

        I hope you’ll get through this alright.

      • Bob says:

        Sorry to hear that KS. I did see on Twitter that another conference that was supposed to start yesterday was also canceled last minute, an association for physics professors had a conference scheduled in Denver and cancelled abruptly when many attendees were already in town. Probably the geographic scope of the conference, with attendees from Italy and Asia, made a difference. I think you’re probably correct that a lot of organizers will take a “better safe than sorry” approach. Best to you and your family.

      • hidflect says:

        Love these tell-tale anecdotes. They’re worth an hour of talking heads financial experts. The virus is not even the issue anymore. The shockwaves are what is killing the market but we still have both.

  14. CLN says:

    Looking ahead, I’m wondering what this is going to do to MLB attendance when the virus gets rolling (to a point where people in the USA practice active avoidance).

    It’s important to have priorities, after all.

    • Harrold says:

      They will cancel the season after the first $40 million/yr player gets covid-19 and can’t play.

    • Wisdom Seeker says:

      Watch the Italian response to outbreaks among their football (that is, soccer) players.

      They are already playing to empty stadiums. Still capturing the TV ad revenues which are probably larger anyway.

    • Shiloh1 says:

      MLB Attendance? I remember when Cleveland Indians would fill up the 70,000 seatbMistake By The Lake with Nickel Beer Night.

  15. Curious says:

    Cathay Pacific, Hong Kong’s flagship airline, recently put 75% (25,000) of its employees on unpaid leave, since their flight schedules for March showed a decline of around 75%.

  16. JFP_SF says:

    Finding a parking spot at SFO has been easy the last couple of weeks. That’s a big change.

  17. c1ue says:

    Its going to be months, if not years, for the ramifications of nCOV and its associated panics around the world – to be felt.
    I just watched a video of a Russian journalist who travelled into Hubei province from Shanghai by car – it was eerie just how little traffic there was in Shanghai and in all of the areas in between.
    If this public traffic mirrors economic activity, the world is in for a lot of supply chain disruption starting with Amazon day.

  18. No Expert says:

    NZ tourism industry facing severe cancellations. Flip side, great time to travel domestically – less tourists and going to get a lot cheaper with over-capacity I would say.

  19. unit472 says:

    OTOH if this persists ( and it probably will as the virus is still localized even in China then people will still have to travel and their is a way to do that that does not involve common carrier. It is called the automobile. Accommodations as luxurious as a private jet but much cheaper. Its not as fast but I’ve driven from SF to Miami in 50 hours ( with some help).

    So will car sales go up and will people replace European vacations and cruises with camping trips this summer? Maybe go long RVs this year?

    • Social Nationalist says:

      I doubt it. More likely car sales will drop, especially with the unwinding beginning with subprime.

  20. W.R. Sebastian says:

    Enjoy it while it lasts!

  21. Cyclops says:

    Like breathing filthy cabin air. CDC recommends turning off the air nozzles above your cabin seats!

    Hold your breaths until your face turns beet red!

    • MC01 says:

      Starting with the Airbus A300-600, airliners have been fitted with hospital-grade cabin filters to protect fans and ducting from “airborne contamination”, basically all the pathogens flying around in the air. If I remember correctly these early filters were made by Pall of New York, which then went on to introduce the A-CAF (Advanced Cabin Air Filter) which is now industry standard.

      So relax, the air in the cabin won’t kill you. The dreadful conversation of the guy sitting next to you however…

  22. Paulo says:

    Here is the insanity!!!! Right now the Pence led virus task group is having a news conference. The are citing stats; 49 confirmed cases, 27 of which are in ______. Yet, in most states no testing has been done. This weekend 15,000 kits were sent out. 15 thousand, not 15 million.

    It’s like saying there is no crime because there is no police force or court system.

    Hawaii is said to have no confirmed cases. However, there has been no testing yet in Hawaii. God forbid a tourist hears there is a virus outbreak and they cancel their trip. Hawaii is experiencing mass buying panics by residents…but no confirmed Covid-19 cases. BC has 8 confirmed cases with roughly 1% of the US population. It has tested more people than the entire US. Simple extrapolation suggests an infection number in the thousands below 49deg.

    The point of this comment is to ask a few questions. Why is a lack of information or data being trotted out as fact? Why would anyone base their travel plans on faulty info? And why on earth would anyone get in a germ filled aluminum cigar tube, crammed ass to jowl, with recirculated air, no between flight cleaning, and sit still for hours at 30,000+ feet?

    Last question: How will any debt laden airline survive this disruption in revenue?

    • Unamused says:

      Last question: How will any debt laden airline survive this disruption in revenue?

      That’s easy: more debt.

      Next.

      Why is a lack of information or data being trotted out as fact?

      SOP.

      • WES says:

        Unamused:. Yes, airlines can continue to fly with more debt!

        If one measures the air flow over and under the word “debt”, it is clear that an air molecule has to flow faster over the top of “debt” than it would under “debt”.

        This creates the necessary lift airlines need to keep flying!

    • Happy1 says:

      There is one sizable outbreak right now in the US, in a nursing home in Kirkland Washington. That will probably change in a week or two, but that’s where we are now.

      You seem to mistake a lack of testing for a lack of an ability to identify an outbreak of Covid-19. This is not the case, except for in isolated cases of viral pneumonia.

      If there is a cluster of viral pneumonia in any city right now, it’s probably Covid-19, the testing confirms clinical suspicion. In Italy and South Korea, these clusters of pneumonia were identified before testing confirmed the diagnosis. They weren’t subtle at all, dozens of people quickly required ICU care and deaths multiplied within days. In China, they didn’t have capacity to test everyone who is I’ll, so they used imaging as a confirmation. If we have a large outbreak, that may also happen here.

      To use your example, if Covid-19 was widespread in HI, there would be a full ICU somewhere and you can bet it would immediately be in the press. We wouldn’t be trying to test healthy people just to see if it’s there, it will be pretty apparent, at least it has been so far elsewhere.

      I think we are very likely to see similar spread here in the US, but it will take a few weeks. And the US population density is much lower than the other countries that have had major outbreaks, who knows what it will look like here? It’s all very uncertain.

      We shouldn’t be testing healthy people anyway, those resources are needed for the sick.

    • Happy1 says:

      Per NPR as of March 1, 3,600 people in the US have been tested (probably several hundred more today), per the Canadian government website, 520 people have been tested as of March 2. So BC hasn’t tested more people “than the entire US”.

      Unless Canada is also in on the conspiracy to underreport Covid-19?

      The facts are that all governments are scrambling to get ahead of this.

  23. Unamused says:

    Just How Bad Is It Going to Get for US Airlines?

    Not that bad at all. People are just overreacting.

    As it was told to CNBC, “It’s one person coming in from China, and we have it under control.”

    “It’s going to be fine.”

    The whole thing is just a hoax, a conspiracy intended to make a certain prominent politician look bad. Besides, a vaccine has been promised in a few weeks. Most people won’t be able to afford it because a ruthless drug company exec runs the US HHS, but because it’s “totally under control” nobody will need it.

    And if worse comes to worse, well, scapegoats have already been lined up.

    Don’t worry. Be happy.

  24. OutWest says:

    I’m an older guy (mid 50’s) with 20 years experience working in healthcare. I’ve traveled domestically and internationally a fair amount over the years and never shyed away in the past from traveling due to pandemic threats. Until now.

    I just cancelled a planned trip to FL in May not because I fear contract the virus but because of the unknown logistical headaches as new travel precautions are rolled out.

    Panicking? Nope, not me.

    I’m self-selecting out of a potentially stressful vacation which is probably what a lot of people are doing. It is, after all, a rational thing to do if you believe in science, statistics, and probabilities.

    From my perspective, this Administration has taken a “don’t test, don’t tell” approach which has almost certainly resulted in radically under counting US infection rates. Just a hunch.

    I’ll be traveling a lot this summer in the mountains near where I live with little tourist congestion I suspect. The airlines are in big trouble. Excellent reporting!

    • WES says:

      Outwest:. You may find remote mountain sites more crowded than tourist resorts!

      Say hi to Yogi for me!

  25. Tyson Bryan says:

    The working $ denominated world has once again out-produced its capacity to consume its production. The supply chains have been clogging up at a worsening rate for a year or more ( e.g. autos). COV-19 is here to provide a little quick temporary relief.
    More service economy?
    People forget (or never realized) that their national currencies are backed in significant part by net human air miles traveled.
    Old people may now choose to be stuck at home, or go for broke risking their lives in the airlines flying inoculation chambers.
    Currency debasement, by one creative means or another; is now international bank policy. Equities, over time; should continue to explode upward.

  26. squirrel says:

    Does anyone think this rally today is over blown? Last week it was the end of the world and today a bunch of tech companies that have exposure to the supply chain in China and South Korea are up big today. Another head fake or do people understand the impact on valuations? I think I need to grab and drink and forget about today.

  27. Bobber says:

    Hmmmm. In Seattle, 12 of 24 kids were absent from my son’s elementary school in the Seattle area today. This means lots of parents were likely working from home to babysit for them. This can’t be good for productivity in the area (think Microsoft, Amazon, Boeing, Costco, etc.). Also, it indicates to me that schools in the area will be closing soon, so they can keep all the kids schooling at the same pace, in the same program.

  28. njbr says:

    The key fact left out of “when will it return to normal” is the recent confirmation that some (what % ?)”recovered” people still carry and transmit the virus weeks after they get better.

    So when can China open up Wuhan for business? Because when they open the gates, they know a certain percent of people will carry the virus out into the wider world, and start new infections.

    So my feeling is that more and more bits and pieces of the world go off-line, slowing the economy more and more until enough effective vaccine is administered to provide “herd immunity”.

    It all depends on a vaccine.

    Until then the best thing to do is to slow new cases as much as possible to allow for better rates of treatment.

  29. Squirrel says:

    Bobber, thanks for the info.. Also the news out of Seattle with the 4 new deaths and an increase in cases. No one knows how many other people are infected and I think it will get worse before it gets better. I think sitting on cash instead chasing the market might be the smart decision.

  30. Michael Engel says:

    1) DOW up > 5% today.
    2) Anomaly, DIA (the DOW ETF) : today bar is the largest since the plunge, twice as big as yesterday bar, but today volume is only half.

  31. Bobber says:

    Driving around East Seattle, I can say traffic is easily down 30% today, and possibly 50%.

  32. 911Truther says:

    AAL is a great short candidate. The company had negative -$10B of working capital and negative stock holder’s equity of -$118m on their last filing. Their balance sheet is not ready for this. As equities continue to sell off, their pension problems only get worse.

  33. mtnwoman says:

    Got an email from American Airlines announcing free to cancel flights if booked in March.
    I suspect they will extend this policy if the infection rate increases.

  34. Michael Engel says:

    1) If Boing MAX is good to go, they will get zero orders.
    Since the MAX open orders are max, BA will crash.
    2) The short covering might end today.

    • Wolf Richter says:

      Michael Engel,

      I noticed in your past comments that you’re using “Boing” for Boeing. Is that the result of an autocomplete bot gone haywire? Or is it on purpose (I can kinda see that)?

  35. Tonymike says:

    I on the other hand, am looking to book a trip back to Thailand, the Philippines, and Vietnam for the next several months. I note that some of the ticket prices have dropped to non peak pricing, but not really a lot of deals to be had so far that I can see.

    As an aside, I did fly on Air China from Bangkok, through Beijing in late January and everyone was wearing masks to include the pilots in the cockpit and babies. I had been wearing a mask due to bad air quality in Hanoi, Bangkok, and Manila, so this is no big deal; only fear porn. MASS MEDIA creates MASS HYSTERIA.

    I hope the invisible hand of the markets leaves the airlines to their fate and no bailouts, bail ins, or other tax payer financed nonsense is provided to them. Remember, they just raised bag fees AGAIN (ok, jetblue). If they are assisted in anyway as they have been in the past, its once again socialism for the moneyed class and naked capitalism for the peasant class.

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