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US airlines brace for change in face of COVID-19

  • Multi Asset
  • Industrials
  • Global

The fate of US airlines is, to a large extent, out of their hands. How the COVID-19 pandemic unfolds over the next few months will determine flight schedules, passenger volumes and, ultimately, revenues. Government bailouts as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) — totalling over USD 20bn — have so far enabled the major US airlines to battle through economic turbulence, but funding will soon come to an end. Third Bridge Forum spoke to several airline experts to understand how the industry’s make-up could fundamentally change because of COVID-19’s impact on business, behaviours and mindsets. 

Among the biggest anticipated shifts is a significant, and potentially long-term, reduction in both international and domestic high-margin business travel. Although, at the time of writing, leisure travel has gained momentum, one expert interviewed by Third Bridge Forum predicts that a considerable portion of business revenue will be lost indefinitely. “If business revenue goes down 5-10%… that will impact supply, it will impact networks, things like that, and it’s pretty easy to see that happening,” the former JetBlue Airways Corp executive said. Even if a vaccine becomes available, business travel may not return to pre-pandemic levels, which could prove problematic for the industry given business travellers represent a significant chunk of industry revenues. For example, 35% of Delta Air Lines’ revenue comes from business class tickets.

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