The Airlines Are Saved. So When Should You Start Booking Flights Again?
So, with a $25 billion rescue package in the works, the airlines will stay in business, fit for purpose when there are once again passengers to fill the seats.
When might that be?
Analysts at the International Air Transport Association represent the industry’s best guess at how fast the airlines will recover. They assume a gradual lifting of travel bans after the first wave of infections recedes.
As an encouragement, they cite “some signs of a turning point in the Chinese domestic market already.”
In North America they see a recovery to 75 percent of the normal number of flights in the third quarter of this year and predict that traffic will be back to 90 percent of pre-virus levels by the end of this year.
IATA says the stimulus package will help to lead to a “strong recovery” in 2021.
The good news for American travelers is that, whatever the worldwide picture, our airline industry has been recognized for what it really is, an essential public utility that had to be saved.
Does this mean that you should already be looking for bargain fares?
It’s too early to make a judgment on international flights. The ability of airlines in other countries to recover will vary greatly, and our own airlines with international routes won’t be able to resume flying with any certainty of the traffic volume on most routes for a while.
One permanent casualty could be the disappearance of the largest transoceanic jets, the Airbus A380 and the Boeing 747. They were the first to be pulled from long haul routes as the passengers disappeared and are just not viable unless high passenger loads return.
The largest twin-engine jets, the Boeing 777 and the Airbus A350, can carry slightly fewer passengers far more efficiently and, as a result, they will be replacing the jumbos.
As for domestic flights, as always, looking at the fine print is vital.
For the moment fees for cancellations and changes are waived as there was no alternative in an emergency. It’s not clear when those fees will reappear, so if you are booking far ahead that needs to be a concern.
There’s little to lose with Southwest, which has no cancellation or change fees (although if a changed flight involves a higher fare you have to pay the difference), is running a flash sale right now with most fares below $200 and a minimum fare of $39.
And it’s good that the airline rescue package ensures airline staff will themselves be ready to return to full service as needed. Under the deal, the airlines are obliged to keep their staffing levels, wages, salaries, and benefits to at least 90 percent of where they were from April to September last year.
Sara Nelson, the president of the flight attendants’ union, who has emerged as a powerful influence on legislators, said, “This is an unprecedented win for frontline aviation workers… this bill will save hundreds of thousands of jobs and will keep working people connected to health care many will need. This is not a corporate bailout, it’s a rescue package for workers.”
Nonetheless, this deal is a massive injection of public funds to keep the airlines whole. Without it, they could only have survived by filing for bankruptcy protection—as American Airlines, Delta and United have done in past crises caused by the aftershocks of the 9/11 terror attacks and the 2007 financial crash.
By taking that course they were able to cut many thousands of jobs, slash benefits, and relieve themselves of the burden of “legacy” pension plans. But this time it was different. They were not facing insolvency because of burdensome labor contracts, but because of the coronavirus.
So the unions and legislators came together to tell the airlines that, in return for being rescued, it would no longer be business as usual.
Under the terms of the bailout, the loans are conditional on the airlines not doing what they have been doing for more than a decade of fat profits—using the free cash like an ATM machine to buy back their own shares and push up the stock price instead of building reserves for a rainy day. Nor can they pay dividends. They must avoid layoffs “to the extent practicable.”
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