Specialist
Former Managing Director, Operations Integration at American Airlines Inc
Agenda
- Airlines' historical operational responses to pandemics
- Airlines' responses to the novel coronavirus pandemic to date
- Short- and long-term financial implications of cancellations
- Future impact on route planning, spending and recovery
Questions
1.
How does an airline typically respond to a pandemic?
2.
You said that safety, medical and government affairs personnel are involved, in parallel with revenue management teams. How involved is senior management? Does the pandemic have to reach a certain level before these parts of the business start working together?
3.
The 2009-10 H1N1 pandemic seemed to have a much more significant impact on airline revenues than the 2003 Sars [severe acute respiratory syndrome] outbreak – Delta Air Lines’ passenger revenues were down 20% and American Airlines’ RASM [revenue per available seat mile] was down nearly 15%. What was different about H1N1 to cause such a dramatic drop compared to Sars?
4.
How have airlines’ responses and processes changed since Sars and H1N1? What is different today?
5.
Does the industry use more contract workers than in the past? Delta has just laid off some of its contractors.
6.
In the event of a recovery, how easy is it for airlines to get contract workers back?
7.
American has cut 75% of international capacity YoY from 16 March to 6 May, and United Airlines has cut 85% of its international flights for April. Why do these decisions extend that far in the future, and do you think it is far enough? At what point will they have to make the decision to suspend capacity further or not?
8.
Are the pilots and the flight attendants part of one labour group or separate ones?
9.
Do you think the major international airlines are better- or worse-equipped to respond a pandemic than domestic-focused carriers? Could the impact hit them equally, given the speed of the coronavirus pandemic?
10.
Do you think the cleaning measures could make a difference to customer perceptions about the cleanliness of the planes?
11.
How closely are airlines working with the government through the pandemic?
12.
Before the pandemic began, there were issues with aircraft deliveries of the Boeing 737 Max. How quickly do airlines start cancelling orders in response to the pandemic? Were there order cancellations in the prior pandemics?
13.
How would you characterise the short-term impact of flight cancellations on airlines’ costs and cash flow? Do they have to refund immediately or can they wait?
14.
You mentioned putting aeroplanes into storage. Did that happen during Sars or H1N1? What is the cost associated with putting one into storage and bringing it back out?
15.
Is there any way an airline can incentivise customers to make bookings, perhaps by waiving change fees? Did they learn any effective strategies from previous pandemics?
16.
How would you assess the inclusion of excise tax rebates as part of a government aid package? Is it sufficient to support airlines’ cash flow? How often has that been used in the past for airlines?
17.
What impact do you think the decline in oil prices will have on the airlines? Is there no benefit until the planes start flying again?
18.
Are there any labour deals approaching expiry in the industry that we should be aware of?
19.
You mentioned the 45-60-day notice airlines have to give to pilots and flight attendants. Since the coronavirus outbreak began in the US, have drastic cuts in the lead times been negotiated with the pilots, or is that still to come, possibly in April?
20.
How do you think the labour cost dynamics will impact maintenance spend? On one hand, there are fewer planes flying, but on the other hand, cash flows are squeezed. What did you learn from your experience in prior pandemics?
21.
What is the split of in-house vs outsourced maintenance, and does this vary significantly across US carriers?
22.
Has inventory of spare parts become a real-time business where inventories are typically low? Are parts being held at distributors?
23.
Delta’s revenue was down almost USD 2bn in March with the 70% reduction in capacity, but it also pointed to cost savings of USD 4bn in Q2. Do you think those cost savings are high enough? The run rate of USD 4.25bn is lower than the drop in revenue. Are there further opportunities to cut costs as the pandemic continues?
24.
You mentioned accelerating some retirements of specific aircraft at some airlines. Are there other trends that might be accelerated by the events of 2020 so far?
25.
To what extent do you think route networks and service areas – which markets get served and by whom – could change due to the coronavirus pandemic?
26.
How flexible are airlines in their contracts with leasing companies to retire leased aircraft compared to owned?
27.
What will you be monitoring in the coming weeks, besides the press releases on cancellations of more flights?
28.
Do you have any final commentary on government aid to the industry, US or international? How quickly do you think the response could come together?
29.
Do you have any final comments to share with our clients on your outlook for the industry during the pandemic?
