Being one of the worst-hit sectors from this coronavirus pandemic, the airline industry has had a challenging year so far. However, things could have been much worse if the federal government hadn’t stepped in. The Trump administration authorized around $25 billion in federal aid back in March through the CARES Act in an effort to prevent airlines from cutting tens of thousands of jobs. However, with this current aid package expiring by the end of the month, airline companies are becoming increasingly worried about what the future will hold.
On Thursday, CEO’s of America’s top airlines all came together to ask the Trump administration whether it would approve further coronavirus aid in an official meeting. This included American Airlines CEO Doug Parker, Southwest Airlines CEO Gary Kelly, as well as United Airlines CEO Scott Kirby, all of them meeting with White House chief of staff Mark meadows in a last-minute meeting to try and make an arrangement.
President Trump had stated earlier in August that it’s considering executive action to further prop up the airline industry to prevent massive job losses. The airline industry asked for another $25 billion in federal payroll grants, giving the companies in question an extra six months of financial breathing room.
Many airlines have already laid off a considerable number of their employees. American Airlines had already said that it plans to cut around 19,000 jobs in the coming weeks. This included over 7,400 ‘voluntary’ departures, and in total, represents a 25% cut in the company’s workforce. Other airlines, such as Delta, have taken similar cost-saving measures as well, with Delta shaving of around 20% of its own workforce. United Airlines said earlier that its revenue figures were down almost 90% in comparison to last year, warning that it could end up cutting around 1U6,000 employees as well if further federal grants weren’t extended.
“We airline CEOs are here on behalf of the people that work for us … keeping our country moving when our country is largely paralyzed. Without action they’re going to be furloughed on Oct. 1 and it’s not fair,” said American Airlines CEO Parker. He also added that he had made contact with other Washington lawmakers about a new coronavirus support package as well should President Trump shy away from using executive powers.
Most airline stocks have been battered over the past few months. While typically, this represents a good deal for more value-oriented investors, given that this pandemic should be temporary, even some of the most value-focused funds are shying away from airline stocks. Warren Buffett famously dumped his entire holding in the airline industry, a move that surprised a lot of investors. With things still uncertain for the industry, now’s not the best time to be putting your money into this area.
United Airlines Company Profile
United Airlines operates more than 4,500 flights a day to five continents. United’s hubs include San Francisco, Chicago, Houston, Denver, Los Angeles, New York/Newark, and Washington, D.C. United operates more than 740 mainline aircraft. The airline is a member of the Star Alliance, which provides service to 192 countries via member airlines. In 2019, the carrier posted $43.2 billion in revenue, of which $39.6 billion was passenger revenue. – Warrior Trading News
