rudder

https://www.google.ca/amp/s/www.cnbc.com/amp/2020/04/02/coronavirus-update-american-airlines-cuts-summer-international-flights-by-60percent-as-demand-suffers.html

“Just 146,348 people were screened at U.S. airports on Tuesday, a nearly 93% decline from a year earlier, according to the Transportation Security Administration.” https://www.cnbc.com/2020/04/01/coronavirus-news-american-apologizes-for-mistakenly-offering-hundreds-of-pilots-voluntary-leave.html

https://www.google.ca/amp/s/www.bloomberg.com/amp/news/articles/2020-04-02/boeing-expected-to-announce-voluntary-buyouts-to-all-employees

Airlines will offer fewer choices and higher fares after the coronavirus crisis https://www.cnn.com/2020/04/01/business/airline-industry-outlook/index.html

Revenue - Expense. Revenues are almost nil.

AA first to use COVID crisis to accelerate permanent fleet reductions. https://www.reuters.com/article/us-health-coronavirus-american-airlines/exclusive-american-airlines-to-retire-more-jets-including-vintage-737s-in-coronavirus-downturn-idUSKBN21I28W https://onemileatatime.com/american-airlines-retiring-737-a330/

DL employee town hall meeting March 31st - company estimated loss rate of US$5B per quarter. DL was previously considered very healthy. AA has already applied for $10B+ in government financial aid. AA considered most likely to file CH11.

Air travel itself may come to a halt (or a virtual halt). Not convinced that would be overly effective other than blocking inbound passengers from high risk jurisdictions. Lots of people still moving around using other modes of unmonitored transportation (i.e. cars/buses). Current passenger loads are almost non-existent. Not sure how much discretionary travel is still happening. Is it ALL essential travel? No. Seems some folks are still just trying to get home to hunker down.

The COVID economy is starting to look like 9-11 and 2008 stacked on top of one another. US carriers already telling staff that they will be smaller going forward. Add a merger on top of the that? Good luck. AC operates in the same global market as the US carriers. It is not somehow immune or reading magic tea leaves.

There is a consistent theme circulating amongst the US carriers - they are going to be smaller out the back side of this. No V-shaped recovery for passenger demand. Only question now is whether it will be this side or the other side of a CH11 filing.

Delta stock has been bushwhacked along with the rest of the airline industry in recent weeks, seeing its stock plunge 45% year-to-date – and that’s even taking a recent positive surge into account. The board earlier this month suspended dividend payments for the immediate future. And numerous media reports indicate Delta and other companies that receive federal bailout money will be restricted from offering dividends as long as they have outstanding loans from the government. Without its dividend, how does Delta stock rate among airlines? Let’s take a closer look. DAL Stock at a Glance Delta CEO Ed Bastian has already said Delta’s revenues will plunge about 80% – or roughly by $10 billion – in the second quarter. The company grounded more than 600 of its 1,340 aircraft as it cut capacity by 70%. On the payroll side, Bastian says more than 10,000 of Delta’s 91,000 employees have taken a voluntary unpaid leave package. Even after those cuts, however, Delta says it is burning through about $50 million a day. Looking at Delta’s debt obligations, the company reported at the end of 2019 having $2.9 billion in cash against $11.2 billion in debt and finance leases, $6.1 billion in operating lease liabilities and $14.4 billion in adjusted net debt. Delta’s adjust net debt as a percentage of 2019 revenue was 31%. This week, S&P Global Ratings downgraded Delta’s credit rating to junk territory, moving it from BBB- to BB. Delta recently secured a new $2.6 billion credit facility and drew down $3 billion from existing facilities. Delta says it should close this quarter with “at least” $5 billion in liquidity, which will help it remain afloat. It also has airlines to borrow against – assuming it can find a customer in this climate. Delta Will Be Smaller After It Recovers Famed investor Warren Buffett of Berkshire Hathaway (NYSE:BRK.A, BRK.B) hasn’t been scared off by the airline industry’s downturn, and recently increased his stake in DAL by close to a million shares. In fact, Berkshire now owns nearly 72 million shares of DAL stock, or roughly 11% of the company. If you’re a disciple of the Oracle of Omaha, that’s an investment that gets your attention. But what will Delta look like after the COVID-19 coronavirus threat fades and people start flying again? “We’re going to be smaller coming out of this,” Chief Financial Officer Paul Jacobson he told employees during an internal webinar. “Certainly quite a bit smaller than when we went into it, and we’ll have the opportunity to grow.” Delta’s fleet is one of the oldest in the industry, averaging about 15 years. According to The Points Guy, a travel site that focuses on credit cards and loyalty programs, Delta planned to retire its McDonnel Douglas MD-88 and MD-90 jets this year as it becomes a “more modern, more nimble” fleet. The company also has 100 Boeing (NYSE:BA) 757-200s and 56 767-300s, with many of them suitable for retirement. “I would not be surprised to see not only Delta return as a smaller airline, but also American(NASDAQ:AAL), United (NASDAQ:UAL) and even Southwest (NYSE:LUV) use this as an opportunity to cull some aircraft from their fleet,” Atmosphere Research president and founder Henry Harteveldt told TPG. “The question every airline will wrestle with is ‘what is the right number.’” The Bottom Line for DAL Stock Delta’s dividend made it unique among its peers. With a yield of more than 5% and an annualized payout of $1.61 per share, Delta’s dividend was more generous than American (2.6%) or Southwest (1.8%). United didn’t even offer a dividend. But those payments are sadly at an end. And although the coronavirus downturn is destroying DAL’s dividend as well as its profitability this year, the company appears to have a solid plan to rebuild its business. Dividend investors will surely miss DAL stock’s dividend, but in this case, all good things must come to an end. In the long term, Delta has the best potential amongst its peers to come out of this downturn in decent shape. There will be a lot of short-term pain with airline stocks in 2020 and into 2021. But if you are looking at a long investment window, then Delta’s deeply discounted shares can’t be ignored.

“Based on how doctors expect the virus to spread and how economists expect the global economy to react, we expect demand to remain suppressed for months after that, possibly into next year,” CEO Oscar Munoz and United’s president, Scott Kirby, who’s scheduled to take the helm in May, wrote in a message to employees. “That means being honest, fair and upfront with you: if the recovery is as slow as we fear, it means our airline and our workforce will have to be smaller than it is today.” https://www.cnbc.com/2020/03/27/corovanirus-fallout-united-airlines-warns-aid-isnt-enough-to-avoid-workforce-cuts.html

“We’re going to be smaller coming out of this,” Chief Financial Officer Paul Jacobson he told employees during an internal webinar. “Certainly quite a bit smaller than when we went into it, and we’ll have the opportunity to grow.” https://www.yahoo.com/finance/news/delta-big-gamble-without-dividend-134044216.htmlThere’s

Before COVID-19, there seemed to be a consensus that 1+1=2.x (some number greater than 2). Now, it is more like the Titanic is sinking and they have just figured out that life boat space is finite and well below the amount of passengers on board. That is reality.

SEC. 4117. TAX PAYER PROTECTION. The Secretary may receive warrants, options, pre- ferred stock, debt securities, notes, or other financial in- struments issued by recipients of financial assistance under this subtitle which, in the sole determination of the Secretary, provide appropriate compensation to the Fed Government for the provision of the financial assistance. SEC. 4114. REQUIRED ASSURANCES. (a) IN GENERAL.—To be eligible for financial assistance under this subtitle, an air carrier or contractor shall enter into an agreement with the Secretary, or otherwise certify in such form and manner as the Secretary shall prescribe, that the air carrier or contractor shall— (1) refrain from conducting involuntary furloughs or reducing pay rates and benefits until September 30, 2020; (2) through September 30, 2021, ensure that neither the air carrier or contractor nor any affiliate of the air carrier or contractor may, in any transaction, purchase an equity security of the air carrier or contractor or the parent company of the air carrier or contractor that is listed on a national securities exchange; (3) through September 30, 2021, ensure that the air carrier or contractor shall not pay dividends, or make other capital distributions, with respect to the common stock (or equivalent interest) of the air carrier or contractor; Apparently airlines are already looking at how to comply to qualify for grant aid but mitigate direct payroll expense both now and if the travel demand downturn drags on beyond September. One concept under consideration is downgrading as many CA as possible and then significant employee layoffs effective Oct 01st. What the legislation does demonstrate is how far out ahead the US is on specifically stabilizing the airline industry. The alternative would have been CH11 filings by June.