International Demand

U.S. Airlines Return to Profits as European Counterparts Poor

U.S. airlines are returning to profitability faster than their European counterparts thanks to generous government assistance, a much larger domestic market, and relatively rapid vaccine deployment.

Three of the four major US carriers reported second quarter profit. United Airlines, which posted a quarterly loss, said it expected a return to profitability in the second half of the year.

The rapid recovery stands in stark contrast to the situation in Europe, where airlines suffered record losses during the pandemic as demand for flights collapsed.

Dan Akins, economist at Flightpath Economics, said US airlines are traveling “a lot more” in their domestic market, while European carriers face “international border issues”.

The US airline industry has also benefited from billions of dollars in direct government support to the industry, while European carriers have not received targeted aid beyond generic leave schemes aimed at the economy within the meaning large.

Doug Parker, chief executive of American Airlines, said Thursday that the mix of grants and low-interest loans made available to the aviation industry had been “a resounding success.”

The so-called payroll support program had allowed airlines to keep more workers employed during the pandemic, allowing them to quickly add additional capacity when demand returned.

“If it hadn’t been for PSP, you wouldn’t see the airlines trying to grow, like we are, 45% in a quarter,” he said. “You would see the airlines shut down. ”

He added: “I can’t imagine how horrible that would be. . . not just for the airline industry, but for our entire economy, if it weren’t for the SPP and what it has done to maintain the infrastructure necessary to meet demand.

Ed Bastian, managing director of Delta Air Lines, said this month that the return of American travelers was a tribute to the scientists who developed the vaccines and that jabs would ultimately be “the key to opening the world”.

Delta Air Lines reported second quarter net income of $ 652 million, followed by $ 348 million for low-cost carrier Southwest Airlines and $ 19 million for American. All three reported losses without government assistance which, for the three of them since the start of the crisis, amount to $ 43 billion.

United reported a net loss of $ 434 million, but the company said that with robust demand, it will generate second-half adjusted pre-tax profit. “We don’t just see the light at the end of the tunnel, we come out of the tunnel,” said Scott Kirby, its chief executive this week.

Conversely, European carriers have been hampered by small domestic markets and strict travel restrictions. This week, easyJet reported a pre-tax quarterly loss of £ 318million, bringing its losses for the first three quarters of its fiscal year to over £ 1 billion.

The handful of carriers that reported profits, such as Turkish Airlines, were able to profit from an air freight boom as supply chains seized up and e-commerce exploded in popularity.

Investors see ultra-low-cost carriers Ryanair and Wizz Air in the best position to recover quickly from the crisis, with Ryanair boss Michael O’Leary hoping his airline can break even this year.

The recovery in customer demand in Europe has been hampered by the increase in the number of Covid-19 cases, said Adrian Yanoshik, analyst at Berenberg. The evolution of border restrictions in Europe has also caused uncertainty that has discouraged potential travelers from booking, he added.

“There have been a lot of false dawns,” Yanoshik said. “If I booked a one hour flight to northern Italy. . . I have no idea what’s going to happen.

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