U.S. Airline CEOs Plead Case for More Gov’t Aid

Madhu Unnikrishnan
September 27th, 2020 at 9:10 AM EDT

  • Southwest CEO Gary Kelly appeared on CNBC, discussing the industry’s efforts to secure a six-month extension of federal payroll support. As of this writing, Congress has yet to act despite what Kelly described as “broad backing” among legislators of both parties.

    As for Southwest itself, revenues are still down 70% y/y, with no reason to believe things will improve anytime soon. Yes, things are better today than they were in April, when revenues were close to zero. But for the past two months or so, week-to-week demand has remained largely flat. Southwest does have nearly $15b of cash in the bank and would have drained $3b of that were it not for the first round of federal aid.

    Kelly, looking on the bright side, said he’s pleased with Southwest’s accomplishments in raising money, cutting costs, managing spending, and delivering a good product throughout the crisis. He’s a “huge fan” of Covid testing but stresses the necessity of having tests that can be commercialized and produced at scale. Does cargo help? A bit, but it typically represents a mere 1% to 2% of Southwest’s total revenues. Ultimately, for Southwest to exit the crisis, passenger demand must return.
  • JetBlue CEO Robin Hayes spoke with CNBC as well, giving his arguments on why Washington should extend payroll relief for another six months. Like Southwest, JetBlue continues to see revenues down about 70% y/y. And without the extended support, Washington will still pay a price in terms of unemployment benefits and lost tax revenue from tens of thousands of furloughed airline workers. The extra six months of support, he adds, will be a bridge to somewhere, not a bridge to nowhere. By March, better therapeutics and the start of vaccinations will better position the industry to recover, underpinned by a strong desire among Americans to get back to travelling again.

    Besides, “the industry doesn’t need a full recovery to stand on its own two feet.” But what about the criticism that more federal aid unfairly benefits airline shareholders? Well, said Hayes, more than half of JetBlue’s employees are shareholders.
  • Add American’s Doug Parker to the list of U.S. airline chiefs taking to the airwaves in support of extended federal fiscal support. He told CBS “Face the Nation” he sees “enormous bipartisan support” and thinks there’s enough time between now and Thursday (Oct. 1) to get a deal done. American, he said, has seen some improvement over the past six months, with revenues down 85% in Q2, 75% in Q3, and according to forecasts, 65% in Q4. 
Madhu Unnikrishnan
September 27th, 2020 at 9:10 AM EDT

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