Shrinkage in survival mode instead of V-shaped recovery. “It will be more than two years before we see a sustainable recovery”: CEO.
By Wolf Richter for WOLF STREET.
Delta Airlines confirmed today why Warren Buffett dumped his huge stake in mid-crash: Airlines are in an existential crisis, and there is no V-shaped recovery, according to Delta’s earnings report for the second quarter this morning, which was beyond dismal.
There were the huge losses. In the quarter ended June 30, Delta booked a pretax loss of $7.01 billion and an after-tax net loss of $5.72 billion. That translates into a loss of $9.01 a share.
These losses include $2.1 billion in write-downs of its stakes in Latam Airlines and Aeromexico, both of which filed for bankruptcy in the US recently, and in Virgin Atlantic Airways, which may go into “administration” in the UK.
Then there were the revenues, with a breath-taking plunge:
- Passenger revenue – which last year was 90% of total revenues – collapsed by 94% year-over-year to just $678 million.
- Its highly profitable business cabin and other premium sales (usually over 1/3 of total revenues): -95%.
- Revenues, domestic flights -93%; Atlantic -97%; Latin America -98%; Pacific -95%.
- Cargo revenue: -42% to just $108 million.
- “Other revenues” (loyalty programs, its own refinery, etc.): -31% to $682 million.
- Total revenues: -88%, to $1.47 billion, from $12.5 billion a year ago
My “Updates from Ed.”
As a “frequent flyer” with Delta, and since the Pandemic broke out, I started getting periodic emails from Delta CEO Ed Bastian, titled “Your Update from Ed,” which generally dive into, among other things, safety in the new era (“face mask requirements,” additional sanitation procedures, etc.) and reminders to be tolerant of chaos (“As flight schedules continue to change, I know some of you are experiencing long wait times when reaching out to our Reservations team…”). I appreciate those previously unthinkable communication efforts.
Their purpose is of course to get me back on a plane. And like many people, I won’t unless I absolutely have to, and I don’t have to. And I can’t if I wanted to: Our trip to Europe this fall is cancelled since Americans, thanks to our ingenious handling of this public healthcare crisis, are now international pariahs under broad entry bans. My wife is still sitting on a ticket to Japan on United and can’t go without submitting to quarantine and other prohibitive requirements once she gets there, and she can’t get a refund, though she was allowed to reschedule the flight to an unknown future date without change fees.
And that’s the airlines’ big existential problem – the total collapse of their bread-and-butter passenger business. Delta had warned about its existential nightmare over a month ago.
Delta responded by radically slashing expenses and capacity – available seat miles were down 85% in the quarter. These efforts have cut its cash-burn rate to $27 million a day. That’s still $2.5 billion cash-burn a quarter.
To survive, Delta received $5.4 billion in bailout funds from the government, paid out in installments. It was able to extend maturities of $1.3 billion of loans to 2022. It was able to sell bonds and take on new loans. In total, including the government funds, it has raised nearly $15 billion over the past four months.
At the end of the second quarter, it had $15.7 billion in cash and short-term investments. Enough cash to last through most of next year at the current burn rate. But Delta will likely be able to cut its burn rate further and raise more funds, including the final installments from the government, and so the survival horizon might stretch further.
No V-shaped recovery, but planned shrinkage.
The business of flying collapsed in two weeks by 95% – the down-slope of the V – but has yet, four months later, to bounce back. TSA checkpoint screenings, which track how many people enter into the secured zones of airports, remain down 73% from the same weekday last year:
But these airport screenings are lagging indicators of ticket sales. And ticket sales across all airlines and all sales methods started dropping again as a result of the new large-scale outbreaks of Covid-19 in the US, United Airlines warned earlier in July.
Now Delta is singing the same song. This morning, CEO Bastian told the Wall Street Journal that the recovery had stalled, and that as a consequence, the flights that Delta had planned on adding in August will be cut in half, to just 500, providing some detail to Delta’s warning two weeks ago that it would cut the number of flights it had scheduled for August due to lack of demand.
In the quarterly report today, Bastian said, “it will be more than two years before we see a sustainable recovery.”
Delta’s goal for now is simply to stick around in much smaller form in order to still be there and be able to “succeed when demand returns,” it said.
So Delta is shrinking into “a smaller, more efficient airline,” and is shedding its older less efficient planes this year, including all of its ancient MD-88, MD-90, plus its 777 and 737-700 fleets, and portions of its 767-300ER and A320 fleets.
Shedding these planes comes with shedding the people that fly them and take care of them. Today, Delta said it would “proactively manage headcount and rescale operations” via “voluntary separation and early retirement programs.” In late June, Delta said it would send WARN notices to nearly 20% of its pilots, notifying them of potential furloughs. On October 1, the layoff restrictions attached to the bailout funds expire, and then the involuntary layoffs can commence.
With an eye on October 1, and the 60-day-notice requirement for mass layoffs, United already announced mass layoffs to take place on or after October 1, and warned that the “increase in Covid-19 cases is negatively impacting industry demand.” Read… No V-Shaped Recovery for Airlines. Ticket Sales Slide Again. United Announces 36,000 “Involuntary Furloughs”
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Even with this absolutely disastrous report, DAL is only down 2%. Boeing, after reporting 78% fewer deliveries than this quarter last year is actually up 1.2% today.
This stock market is absolutely out of its mind.
Obviously, the government just needs to issue an order for every family and business to keep spending and buying the same things for the same prices as they did last year. If everyone spends the same amount as last year, at the same places, then everyone who had a job last year will have one this year!
Think what this will do for the hardest hit industries like airlines and their employees! They’d have plenty of cash to pay their bills!
This executive order would cause immediate v-shaped recovery!
I cannot spend like last year when I was only saving 35% though.
I’m saving 80% of income now and it gives me the sense of safety and stability that the American economic system was trying to take away from me.
Great you all do that. I’m putting my money in gold and cash while you blow all your money on jetskis…
Yeh.
That’s why I bought some puts on DAL and AAL today, before the close.
3rd time again!
Tourist industry including airtravel, cruise lines, hotels and vacation resorts are toast.
Gauis Marius, it’s sort of like the scheme you yourself instigated back when the rural manpower of Rome able to fund its own training and equipment was faltering, and you then instead changed focus and recruited the urban poor and provided them with a salary in order to fill up the legions.
Similarly the authorities today are now trying to recruit the poor on a salary to put their backs into funding their ongoing purchases, financing their debts and buying stocks.
This crisis is too recent. It takes about 12 month to show the full effects. The investors are overly optimistic. Exuberant optimism is obviously an integral part of the average US mindset.
Staying alive to get more government tax goodies for the CEO’s.
With these kind of drops in passenger revenue ,keeping the airlines in business is not the biggest issue. The biggest issue is. if this goes on for too long will the two makers of commercial airplanes survive? Shoveling money too them won’t work either because they both have huge, sophisticated supply chains that could take a decade to restart if they collapse. A passenger plane is not like a car, without the support of an intact manufacturer providing parts and technical services these planes can not fly for even a week. As far fetched as it might have seemed 6 months ago, we may be looking at the end of air travel for the masses.
Boeing gets 1/3 of its business from the Federal government.
The timing of this is excellent given all the bad news that was coming out of the shale patch pre Covid (and far worse problems now).
At least with 95% of the global aircraft fleet grounded, and shale peaking, we’ll not run into another supply bottleneck spiking oil to $147 (or much higher) again.
Seneca, And you just figured this out?? Next you are going to let us know that commercial realestate (and the investors that hold the paper) are toast, so how will the construction companies survive? Or the health insurance companies (many of which are WAY down in premium income with ZERO prospect of replace it) and the hospitals they are supposed to pay. I suppose you will report that the whole outhouse is aflame, and you just joined the party.
By by Boeing and Airbus. So long Greyhounds of the skies. It never really did make any sense, and now it is going away. Farewell and Via Con Dios!
I sense an earthquake like trembling of the under-structure of modern society as we know it…….will it be a 2 point or 10 point on the Richter Scale??????
I fear towards the larger number.
There is a great disturbance in The Force!
Seneca, I think you’re too pessimistic. If aircraft manufacturing supply chains collapse they might be reestablished in 3-4 years. Probably not much sooner and not the old structure. When only the rich fly the structure will be different.
You need planes to go from the East coast to the west coast. If only the rich can do that then the US will disintegrate.
Bullish!!!
The S&P soon will stand for Small and Poor.
because everyone expects the government to step in and support he economy 4ever <3 <3 Kumbaya
..and so far unfortunately they haven't been wrong.
Of course the government should step in and support the economy! And why should there be limits? No limits!
Look what happened to the whaling industry! All gone because the govt wouldn’t support them! Think of the families that lost those whaling jobs!
Do the whales and porpoises miss the Whale Watching industry? If you’re an intelligent non human mammal, what do you make of the last 8 or 9 months? They may be too busy breeding, or dealing with different predators? Will Hollywood make a movie about this? Will Sonic the Hedgehog show up again?
You forgot to mention the horse and buggy industry. They should have been bailed out and given free money by the Fed, too.
If the economy collapses, there will be no funding for government programs ( Social Security, MediCare, etc. ) as there will be no one to buy government debt.
The economy has collapsed. The Fed has been buying the guvmint debt, and shoveling money at its buddies, like Jamie Dimon, with JP Morgan announcing record profits
Harold, I think at that point the Fed will dispense with the troublesome buying/selling of treasuries and simply provide dollars directly to the US Treasury. There may be some negative side effects.
Death industries should be buried under normal circumstances but we are in the biggest recession ever. Maybe it is not the right time.
ps. This is a polite way to say that that we should pump money into the economy. even if it is 100% wasted it should be done to keep the economy moving
Sure. And I may end up offering you $5000 for that sack of potatoes.
There are no nice choices at the moment. All suck but some suck a lot more than others. Having high inflation but the economy going is a lot better than normal inflation and a giant recession.
Whaling in both Japan and Norway is highly subsidized: in fact the Japanese whaling fleet and Native American whalers in Alaska get their gear from Norway because it’s so heavily subsidized by Oslo it is just too much of a good deal to be passed on.
To give an idea of the incentives, the Ministry of Fisheries pays 50% of the market value of each whale killed in direct subsidies. On top of this there are fuel subsidies and several tax exemptions, plus more subsidies and tax exemptions for the middlemen exporting whale meat to Japan or trying to sell it to local companies, be them restaurants or whatever.
Since whale meat consumption is on the wane everywhere, Norway has tried to push it as pet food. The big problem is Germany, the second largest pet market in the world after the US, wants absolutely nothing to do with the whole scheme. This is a pretty funny thing, at least for me, because German pet food colossus MultiFit made an authentic fortune selling “exotic” dog food that includes kangaroo, shrimps, reindeer, water buffalo and camel. Dogs would probably love to eat whales, except perhaps my neighbor’s Schnauzer, but that thing is the very definition of “fussy”.
mc01 thanks for pointing out that two countries had the good sense to protect their whaling jobs.
If only all the other great jobs had been protected by bailouts and subsidies so many people could be employed today as leech collectors, blockbuster workers, switchboard operators, clock winders, lamplighters and ice cutters.
The proper role of government MUST ensure that no job EVER goes away and no business EVER fails.
The real money has not been affected yet.When
they get hit hard then things will get straight.For now
if you don’t want to wear a mask no problem.Party on.
The irony of the USA turning very quickly into the worlds biggest socialist state after having spent the last 70 years bombing socialist states all around the world back into the stone-age as a matter of principle, is not lost on the rest of the world.
Keep up the good work comrades!
Better than China at least!!!
Communism in China: everything belongs to one party.
Communism in America: everything belongs to two parties.
Two is better than one. USA wins again.
Actually China is a better capitalist economy than the USA. If you want something done just bribe the right people. Money talks. The USA on bails out it’s friends and donors.
Since the Korean War the standard of living in China has been going nowheres but up- in the U.S., nowhere’s but down. This has as much to do with govt. keeping a blind eye to antitrust abuse and a tax system that was sold to the public in 1913 as affecting only the top 1% but today sparing only the top 1%- and half the Fortune 500 companies paying none at all.
There is, of course a huge irony in that the supposedly Communist system in China makes room for billionaires, but on the other hand, the Shkrelis and Madoffs of the world are not tolerated there, and some financial miscreants actually have to pay for the firing squad’s bullets.
The irony may not be lost on the rest of the world, but it’s certainly lost on U.S.
He wanted to build a wall to keep the foreigners out and it turns out they are the ones keeping us out!
Its hard to understand how these companies are worth anything. They simply do not exist anymore (airlines, fly planes, bankrupt companies occupy storage). However, I just read that some 2 Million new retail brokerage accounts have so far been created in 2020 in the US. Common sense tells you there should be 2 Million less accounts, but well, that’s the world we live in. See a group of Lemmings going over the cliff, so lets all follow and see where they are going…maybe they will find Common Sense or Nirvana.
Robinhood, it is absolutely the right name, contracted to Robbing the Neighborhood.
Charles Schwab came on the scene as the first “discount broker,” offering modest brokerage fees, and taking a chunk out of the Merrill Lynch crowd. In a very, very peculiar- and I think sinister- move, Schwab and other “discount brokers” are now charging no commissions whatsoever- so naturally the punters are banging on the door. But it looks like Roach Motel to me, though I have not figured out the scam quite yet.
$28 bn of property and equipment which I guess is almost all planes and parts.
Worth how much on the second hand commercial plane market?
$8.7bn of equity isn’t going to last long if they stick in asset write downs besides operating losses.
$15bn of liquidity for a clearly dead duck makes you wonder just what the US government is doing.
My beef with Delta, American, and United is how bad their service under normal circumstances. Their ranking is pathetic, they aren’t even top 40 airlines worldwide.
They give away so many tickets as card rewards and to family members and friends of retired and current employees that only a few suckers end up actually paying for their ticket.
I rather take Emirates or Cathay which don’t do this and where everybody pays for their ticket resulting in a much higher level of service.
Leanfire_Queen,
I’ve flown Cathy Pacific from Newark to Hong Kong and then on to Manila. Only one stop and I agree, great service. But I needed to switch to flying out of Philadelphia and I have been very impressed with Delta for those long Asian flights.
A friend in the Philippines trying to get back to Germany had his Emirates flight cancelled at the beginning of June. I think he just got back to Germany recently.
Emirates have better service because they don’t make a profit, get money from their state and pay their workers less. I don’t think that is exactly commendable.
leanfire
BINGO! ++++++++ you nailed it
Brainard says the fed should just buy the economy…….well…….at least the pretense is over,,,,,,,,,we now live in the Soviet Union…….how kids will learn the merit of creating capital in a country where it is punished and appropriated for others……nope……they have and will learn to spend……which is how we continue down the slope.
Its over folks……..just a matter of a decade or two. So sad.
ECONOMY is NOT the stock mkts! (contrary to what Trump thinks)
Mr. Powell is goosing up Corp credit mkts and in turn EQUITY mkts.
Absolutely NOTHING to do with productive economy of any kind!
Capitalism caused this crisis. Capitalism is preventing a solution. Ergo, Capitalism must go.
I flew on business 50% of the time since 1981, and ending in 2018. I was in all the frequent flyer programs in the U.S. and even in Canada. The best airline I have ever flown on was Singapore Airlines, bar none.
These U.S. airlines have been bad for a good 15 – 20 years. And really bad the last 5 or so. I have no desire to fly anymore and will drive to where I want to go, even if it takes several days.
I used to fly Continental in the 1980s, remember them, it was like riding the subway with hostesses. Among the worst flights was one where they didn’t have breakfast for the first class passengers, me, but gave out bagels to the cheap seats. When I asked for the bagel, they said they only had enough for the economy passengers. But I could have all the free drinks I wanted, at 7a.m.
We might have been in the same cabin together as I was flying Continental in FC then from either NY to LA or LA to Houston round trips.
Do you remember the Tuesdays “kid fly for free” flights? And Triple Miles? Nuts!
Kids 12 and under use to fly for a penny on Value Jet, until an accident involving the same carrier in the Florida everglades took out a disproportionate number of them in 1996. What a horrible accident.
I flew them a lot NY to KC, and the plane continued to LA.
“But I could have all the free drinks I wanted, at 7a.m.”
So what are you complaining about? I’d been all over that.
Commercial pilot?
Ah, yes, that kind-hearted gentleman, Frank Lorenzo…
I wish the Delta/KLM non-stop flights from Portland to Amsterdam wouldn’t use so much tarragon in beef dishes for business class. It’s too overpowering for the subtle flavors in the dijon-wine sauce.
*chef’s kiss*
??
You want a captive audience?
The Mayor of Toronto, Ontario, Canada is threatening 60% tax increase if they do not get a minimum 1.35 billion dollars from either Premier Ford or Prime Minister Trudeau. As they are paying 17 hotels for the homeless and immigrants. Trudeau can create the money while Ford has to borrow it.
Sitting back with my popcorn not living in Toronto.
This really encourages investors?
Business travel sucks. I was one for a time. Being away from home was awful. The team of Road Warriors I worked with felt the same way about it.
Some made the most of it, collecting mileage club points to get upgrades or free leisure trips for their families. But, to a person, those weren’t coveted perks. They were consolation prizes for the miserable travel.
Some day, I may meet a Road Warrior like the shallow superficial George Clooney character in that movie, who claims to like it. Haven’t met one yet. I have known a couple of traveling service reps who were using a road warrior role to be running away from a toxic home life. That’s not the same thing as enjoying the travel.
Now we have learned, what many of us came to know already over the years, that almost all business travel is discretionary, and unnecessary. Yay!
As someone for whom the climate crisis is always top of mind, I’m loving the fact that the airline business is collapsing and oil companies are going bankrupt.
But I do wish it could have gone down differently. We could have spent the last few years gently scaling down these industries and plowing resources into building the new, green economy. But decisionmakers simply refuse to act appropriately in the face of this crisis.
Be careful what you wish for…..
Unless you expect to live in a mud hut somewhere growing your own crops and taking game. In which case, I kindly suggest getting off the internet and start practicing what’s on the top of your mind.
The oil industry will not go away. And by the way, if the majors in the US and Europe collapses, that just mean that you’ll be buying your oil related products from countries like Russia, Saudi Arabia, and such. I’m sure you’ll be happy to live with their stewardship of the environment.
I continually find the ignorance of the so called “environmentalist” to be amazing, touting things they know almost nothing about, where the idea is to build a “new, green economy” by shifting the pollution elsewhere.
Further to MCH point, please look around your abode and pick out one product…just one, that has not been created or transported by fossil fuels. It can’t be done.
Be careful what you wish for.
This morning I hilled by hand 135 hills of russian fingerling spuds. The bugs ate me and my shoulders now hurt. We will probably use 50 hills worth and give the rest \way to my neighbours if they do their own digging. But, but I do this in case the whole damn economy stagnates. Between everything we grow and our freezers full of fish, we won’t starve….at least this winter.
I really really like using my gasoline powered truck and tractor. Could care less about flying and aviation, and I write this as an ex-pilot. Good riddance. Will drive, or maybe try a train trip one day. Never fly again after my last episode of being one of 78 on a Q 400, full capacity = 78, plus two stews and too many goofs packing carry on duffles. Never again, virus or no virus.
What happened on the flight? It must have been something pretty impactful for you to quit flying. What was your pilot certification type? I’m just wondering.
Mother nature sure picked a good way to “whack” one of the human’s nasty habits (flying). You have to wonder what she has in mind for monster trucks and off road vehicles.
Maybe there is a market to haul well heeled air travelers around at say $5000 a head to Europe and back in style. A Dreamliner all first class++ no steerage or cattle class . 175 on board comes to $875,000 per round trip to Heath Row. Pack all others that want to fly in a Covid 19 flight at their own risk. No mask restrictions. The TSA is useless against the best terriost weapon available today and the easiest to get on a plane which is a bunch of people with a customized virulent strain of C 19 from the Gain of Function virology labs ran by governments. We are in the new age of the ever changing Rolling Dilemma.
And feed the rabble on the Covid 19 flights free cake!
That was great, Willy! (add stewardesses dressed as Marie Antoinette complete with beauty marks and hoop skirts.)
No mask restrictions? I know a lot of people who don’t want to wear mask but few that want others to not wear them?
My wife and I are part of this market. We are 70 and will not go “sardine”. Our close family is distributed between the Netherlands, LA and NY. Increasing our budget and decreasing the frequency of our travel would work.
For all you people who don’t understand about a rising stock market in the face of a disaster of an economy, let me ask you, where else do you earn more than 1% on your money??, it is that simple, ordinary punters don’t give a flying you know what about the basic fundamentals, Tesla being the classic example, they care that their money is beating savings accounts and inflation, period.
The stock market in Zimbabwe it soared as the economy collapsed, no one wanted cash, the accounts didn’t keep up with inflation, foreign exchange wasn’t possible, only two places left, gold and the stock market, and a small amount of bitcoin.
This comment is really missing the forest for the trees. Zimbabwe has a rising stock market? Sure, but it’s also a banana republic. Vandalism, theft, corruption, etc are endemic. The United States is NOT supposed to be a banana republic.
If all you are advocating is basically survival of the richest, what’s the point of having a country? Why not go to the streets now and just kill one another?
I think you miss Franks point entirely with an ill thought out strawman. Also by the way the USA murder rate with firearms is 16x greater than Zimbabwe’s is.
But the murder rate, in general, is higher in Zimbabwe according to Macrotrends…. 5.30 in the U.S. to 6.70 in Zimbabwe. Doesn’t matter that it’s not by firearm….. you’re just as dead.
Fair enough not much of a win though huh, richest nation in the world has a murder rate marginally lower than Zimbawe.
You’re correct Frank. Besides, where else can you lose 20-30% of your money in a few days?
Yey!!!!!!!
Bring back Concorde!!!!!!!
No cattle class, so less overall aviation emissions, so no guilt for supersonic flight!!!!!!
Turn the rest into disposable Gillette, the best a man can get!!!
I hate flying. In every situation, it’s a necessary evil. And I’ve flown different classes, but even first class is still flying (if that makes sense). I hate having to go through security, I hate airports, I hate crowds, I hate waiting in the waiting area, etc. But it is the best way that I’ve found to move between continents…
I wonder what travel was like when ocean liners were the only option. Slower, but perhaps more tolerable. Of course, I’d probably have ended up in the ‘steerage’ class, among all the migrants…
All of that being said, I feel bad for the airlines (that is, their employees) But I won’t fly again. I got my still beautiful Lincoln Continental. Heck of way to make a road trip.
I sailed across the ATlantic twice in high school as my dad was stationed with the 6th Fleet flagship, home ported near Nice France for two years. We sailed from Brooklyn Navy yard on an MSTS (military sea transportation service) passenger ship to (2nd stop) Marseilles, There were still many US bases in Europe then, so lot’s of families to transport. Two years later we sailed back on the commercial USS Independence. Both trips were quite pleasant and many kids my age to hang around with. And great food! Absolutely beat any flight I have ever had. I did travel back and forth to the US to go to boarding school space available on MATS (military air transport service) flights – military DC 6’s three legs stopping for fuel in the Azores and Newfoundland.. Not much fun and a long haul..
Ocean liners use more oil per passenger and take orders more time. They are slower like walking is slower than driving. And not normal driving but speeding in a Ferrari. They are not financially sustainable against a 747 and the only reason they still existed in the sixties was those ships were already build.
While ”passenger ships” per se might be less efficient, cargo ships, in general are the most energy and cost efficient method of moving things in the world,,, and the only method ‘on the dirt’ even close is trains…
So, in any kind of a rational world, which may be our only choice going forward, ships will once again reign — on the ocean…
And, with just a little bit more of rationality, we might even get back to some sort of hybrid of motorized sailing ships, likely the eventual winner of cost as well as environmental effectiveness, eh
I have personally cranked hard on the numbers re cargo shipping when developing a project at a port in FL, with engineers in Denmark, owner in UK, several suppliers in Italy, etc…. could not believe the profits implied the first time through, re-did the calcs, twice, on my own time, to make sure…
As anyone could say “I saw enough… This is it…”
Life turns back “Little did he know…”
Tesla, Hertz, Oil companies, SPY and now this airlines can always pull up another rabbit from their hat. Fed is ready to start another QE (or whatever it will be called), people will cash on the sidelines, Robbin good traders and permanent 401K investors the stocks might go up. Forever it seems. Business as usual…
Do not short anything. Just stay on the sides with cash on the reserves and watch the show for your personal amusement.
There is a simple solution to the airlines covid dilemma that would make airline travel more palatable.
Airlines must replace their “nozzle blast of recycled air in the face”, with a dedicated line of purified air similar to that used by fighter pilots. Now, we don’t need to get too fancy, just a simple filter mask at the end of a hose that will take out 99.9% of all airborne contaminants.
The airplanes must be completely remodeled for safety. The planes must be UV sanitized between boardings.
Short of that, I won’t be flying any time soon.
In the quarterly report today, Bastian said, “it will be more than two years before we see a sustainable recovery.”
How the heck do they know that? Its jibberish.
On second thought. He’s saying don’t think about recovery before 2 years. That’s bleak enough for it to be honest insight.
“..is shedding its older less efficient planes this year, including all of its ancient MD-88, MD-90, plus its 777 and 737-700 fleets, and portions of its 767-300ER and A320 fleets.” – but who is going to buy them?
Well, aluminum is recyclable. Cheaper beer cans?
The MD-88 and -90 are long overdue for a trip to scrapyard. The 737-700 will probably end up as freighter conversions in South Asia. The 767 will need to be throughly inspected and evalued due to age before eventually heading for freighter conversions as well. The A320 are high hours hulls so they may end up scrapped. The 777 are all old -200 hulls, part LR and part ER. There’s presently a glut of -200LR on the market while the -200ER is still awaiting a freighter conversion Boeing promised several times but which will never deliver. Unlike the -300ER there’s very little market for these models.
As an aside as part of the ongoing LATAM Group bankruptcy, Delta has agreed to take over the purchasing rights of 10 A350 originally ordered by the Chilean group (into which Delta had a whooping 20% stake).
Typo / math inconsistency in the middle:
“That’s still $2.5 billion cash-burn a quarter.”
…
“At the end of the second quarter, it had $15.7 billion in cash and short-term investments. Enough cash to last half a year at the current burn rate.”
15B / 2.5B = 6 quarters worth of cash, so “enough cash for a year and a half” – not half a year…
Wolf
thank you for the interesting read on United earnings and future peril. Question1) WHO are the holders of these leases on the airplanes that all these airlines are “turning back in”
I assume some financial institutions lent the BILLIONS and then created some synthesized debt obligation to scrape their 10% with minimal risk. – (CLO of some variety)
but someone is on the hook big time – would appreciate your insight as to who these poor folks may be
thanks in advance