Winter is coming for world’s airlines

If you think your summer holidays were lackluster in an era of pandemic-induced staycations, spare a thought for the world’s airlines. The industry typically earns some 40% of its profits in the third calendar quarter alone, as the surge in travel gives carriers the chance to finally fill up planes at prices that can
pay off their wage, fuel and debt bills.
There were aspirations a while back that the three months through September might see enough of a recovery from coronavirus lockdowns to keep airlines’ heads above water. The
18% improvement in a Bloomberg index of world airline stocks in August was the best performance for the benchmark since it was first compiled 20 years ago.
Some hope. As the first chills of winter arrive, it’s increasingly clear that the industry is as deep in the hole as it ever was.
EasyJet was one of the carriers better-placed to survive thanks to its low cost structure and strong balance sheet. Nonetheless, it’s in talks with the British government about a second slug of state support after a 600 million pound ($775 million) state-guaranteed loan earlier in the year, a person familiar with the matter
told Siddharth Philip of Bloomberg News. Philippines-based Cebu Air is raising $500 million in bonds and preferred shares after the government ruled out taking over troubled airlines.
Malaysian-based discount rival AirAsia Group Bhd announced a restructuring of its long-haul affiliate AirAsia X Bhd while ceasing operations on its Japanese carrier. It also ended funding for AirAsia India Ltd, people familiar with the matter told Bloomberg News. Its domestic competitor, state-owned Malaysia Airlines Bhd, is talking to creditors about a restructuring and one or other Malaysian carrier may fail by the end of the year, according to the country’s aviation regulator.
In the US, the industry has been kept on life support since Congress passed a bailout bill in March — but that money has now run out, as my colleague Brooke Sutherland has written. Prospects of a second round of support, already shaky at a time when plenty of other industries are suffering, are even more in jeopardy after House Speaker Nancy Pelosi tied it to the on-again,
off-again discussions of a wider stimulus bill amid a packed pre-election legislative calendar.
European and North American airlines have cut domestic travel schedules for the December quarter
by 45%, according to Bloomberg Intelligence analyst George Ferguson, and any hope that the pandemic is on the brink of vanishing seems vain at this point. Deaths from Covid-19, after trending downward since early August, have been picking up again in recent weeks. The 338,779 new cases reported by the World Health Organization on October 8 was a record daily increase.
The grim truth is that the worst period for the aviation industry is probably ahead of it, rather than behind. For months now, carriers have been coasting on their existing bank balances, the early rounds of bailout money received from governments and investors, and the relatively easy cost-cutting of saved fuel and maintenance costs and route and landing fees.
For all that the actions taken to date have been drastic the real challenge will come over the coming months, as carriers have to make hard choices before cash dwindles to zero.

—Bloomberg