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Will one of the U.S. major airlines go out of business in 2020?
Air Transport World Editor-in-Chief Karen Walker responds:
For a number of reasons, it is highly unlikely that any of the major U.S. airlines will cease operations.
First, the U.S. government has been among the world’s most supportive in terms of providing financial assistance to help airlines survive the COVID-19 crisis.
Second, the U.S. majors also entered the crisis as the world’s strongest, collectively, in terms of their cash balances. While those balances are being severely challenged by a steep decline in revenue, those carriers began the crisis on a much stronger financial footing than the majority of airlines worldwide.
Third, the U.S. domestic market is huge. It was the world’s largest until this year (the coronavirus crisis has now made China the world’s largest domestic air travel market). Domestic air markets will recover much more quickly than international ones, so the U.S. majors will have that advantage over many other airlines.
And fourth, even if their debt situation becomes precarious, the U.S. majors have the final option of seeking Chapter 11 bankruptcy protection. That would be a last resort, but Chapter 11 would protect them from creditors while they restructure and continue to operate.
Boeing CEO David Calhoun caused a stir in May when he told NBC’s “Today” show that it was “likely” a major U.S. airline would go out of business before the end of the year. But American Airlines CEO Doug Parker refutes that idea. “There’s no one trying to push anyone else out of business . . . . I think we’re all going to be fine,” Parker said during a May 27 investor event hosted by Sanford Bernstein. “I think we’re all going to go raise enough liquidity to get ourselves through this,” he added.
The bottom line: While the U.S. majors are severely weakened by the crisis, they are among the airlines most likely to survive, albeit reshaped and smaller.
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