CDC’s ‘stay home’ advice is more terrible news for airlines
American Airlines says the rise in COVID-19 cases and a growing number of travel restrictions leading into the Thanksgiving holiday is slowing demand for travel and will push its daily losses to the higher end of previous expectations.
In an investor update released Friday morning, American said its daily cash burn will come in at the high end of its $25 million to $30 million day forecast for the fourth quarter, a time period that airlines had hoped would result in renewed confidence in the pandemic-weary sector.
But with new COVID-19 cases growing to more than 1.1 million in the U.S. in the last seven days, according to government data, airlines are warning that their financial recovery won’t be as robust heading into the winter months.
“Following a strong start to the fourth quarter of 2020, rising COVID-19 case counts and associated travel restrictions in the immediate period leading up to the Thanksgiving holiday have resulted in a slowing of net bookings growth, which has persisted into December,” American said in the financial filing.
Southwest, JetBlue and United Airlines have all sounded similar warnings in recent weeks and cited an increase in COVID-19 cases nationwide for a recent uptick in cancellations and a slowdown in passengers booking new air travel.
While airports saw record crowds over the 10-day Thanksgiving week, DFW Airport CEO Sean Donohue said the usually frantic Thanksgiving week was no busier than Labor Day weekend, at least when looking at the recovery in air traffic compared with a year ago.
“The impact in the recent surge of cases and the impact of the (Centers for Disease Control and Prevention) guidelines clearly resulted in more cancellations,” said Donohue at the airport’s board meeting Thursday. “While we were active, we’re really never that busy. We don’t have a crystal ball on December, but again all of those same factors are in place in terms of the surge in cases.”
DFW International Airport is American’s biggest hub and has taken on a bulk of the carrier’s business during the recovery. A slowdown there indicates that traffic was likely weaker across the country.
On Wednesday, the CDC told Americans that they should continue to avoid large gatherings for Christmas, too.
“Cases are rising and the safest thing to do is to postpone holiday travel and stay home,” said CDC’s travel branch chief Dr. Cindy Friedman.
American Airlines said it expects to end the year with $14 billion in liquidity, including loans still available through the original pandemic stimulus bill from March. The company has expanded debt to historically high levels and sold billions in stock to have enough cash to buy its way through the pandemic.
“The company continues to expect the recovery in demand to be volatile and difficult to accurately forecast,” American said in its filing.
On Thursday, Dallas-based Southwest issued furlough warnings to 6,828 workers, including pilots and flight attendants, after company leaders said they would need a 10% pay cut from workers to find financial footing in 2021. Southwest has never furloughed an employee in its 50-year history.
American Airlines furloughed 17,500 workers earlier this year and laid off another 1,500, although CEO Doug Parker said he doesn’t anticipate needing any more furloughs because past cuts were so deep. Another 23,000 American Airlines employees took voluntary leave and buyout packages to help reduce the company’s payroll costs.
This article originally appeared on Chicago Tribune