Many Midwestern states 'didn’t see the community spread they’re seeing now': Doctor

Emergency Medicine Resident Physician, PGY-3 Emergency Medicine, UT Health San Antonio Dr. Owais Durrani joins Yahoo Finance’s Kristin Myers to discuss the latest developments over the coronavirus, as cases climb in the Midwest.

Video Transcript

ZACK GUZMAN: To wrap up the week, it looks like we are going to get a little bit of a win streak broken here on Friday. The NASDAQ had been heading for eight straight days of gains, though it is off by about 1% right now, paring a bit of those losses. Of course, tech stocks have been hit pretty much all afternoon. They're the weakest sector performing right now in the S&P.

The strongest, on the flip side, we are seeing a 2% gain in utilities. On the 10-year, we did see the yield, a gain by about 2 and 1/2 basis points right now, sitting by about-- sitting around 0.564% right now on the 10-year. And we'll keep you up-to-date on all those market moves.

But I want to discuss this, as more and more people seem to be traveling right now, there are a lot of layoffs looming in the airline industry. We got the latest update here, reportedly Delta looking to potentially push 3,000 more flight attendants to take unpaid leave or perhaps shorten schedules to get around all the issues we've seen in the slowdown here. Still well below the more than 2 million daily travelers we saw here in the US. Still haven't topped 800,000 here since the pandemic hit.

So joining us now for more on all the pain being felt in the airline industry right now is John Grant, Senior Analyst at aviation data specialist OAG. And John, good to speak with you again. I mean, when we talk about this, I guess we'll start just by looking at the traveler data here in the US.

Because I want to point out, I mean, it's been trending in the right direction, but it seems like it's petered off right now and kind of aligns with the case count rising that we saw a few weeks ago, people getting nervous to fly again. So what do you make of that and how the summer is always kind of a very popular time to travel, but not necessarily seeing it this year?

JOHN GRANT: No, it's not, and I don't think it's going to get better before the end of the year, quite frankly, Zack. As you say, TSA numbers are plateauing between 25%, 30% of last year's levels being processed on a daily basis. We saw the recovery in terms of demand, but it's just completely plateaued.

And however hard the airlines are trying, they just cannot stimulate demand, because wherever you are in the world, you know, there is a story that's about a COVID spike, or some countries still haven't even come out of COVID round one. So the airline industry is just getting buffeted, literally, from one government to another. And it's really hard for them to work their way through all of this.

ZACK GUZMAN: Yeah, and when we look at it, I mean, regionally, it tells a very different story. Obviously, China was kind of the first country to deal with all this, and they had seen their country add back a lot of capacity, back now at this point about 90% where they were in January. So they've seen kind of a V-shaped recovery there. Maybe that might point to optimism for other regions as well. But the longer this takes, I mean, what do you make of-- of kind of how it looks less and less likely that we'll-- that we will see a quick snap back in travel?

JOHN GRANT: Oh, we're not-- we're not going to see a quick snap back at all. I mean, there's-- you know, we went-- we came out three weeks ago and said 2024 is looking like the year that we may get a recovery back to 2019 levels. But you've got to remember, China has stimulated that market and has got load factors of about 65% to 75% at the moment.

But many of those are what are being described as cabbage fares. You know, they are really, really cheap fares. And not just for China, but the size of the Chinese domestic market is immense. But without that international capacity from China that radiates out to South Korea, and to Japan, and Southeast Asia, those countries can't start flying again at all. Hong Kong and Singapore are still literally at between 5% and 10% of their January capacity levels.

So they're-- you know, global brands like Cathay Pacific and Singapore Airlines are just not in the market, and it's really, really frustrating for them. And every airline is now going back and looking for a second tranche of cash, going back to lenders, reworking all the numbers, which is where we get to in the United States at the moment, because the CARES Act is about to run out. And that is a ticking time bomb for all of the US airlines. The uncertainty that is going to create is leading to these decisions about furloughing more staff.

ZACK GUZMAN: Yeah, let's talk about that here because, obviously, that's in focus here as we're watching Republicans and Democrats continue to debate. But when you talk about the CARES Act rolling off, we know that airlines agreed not to lay off workers, at least through September, when they took that $25 billion in stimulus money. But if demand stays this weak, how forced are these layoffs going to be?

Because United says 30,000 people, or 40% of its global workforce, is going to have to go. Delta, as we said, reportedly pushing 20% of their employees into buyouts or early retirement packages. So when you look at the bottom line, how necessary are these moves?

JOHN GRANT: Oh, it's a fact. It's going to happen. It's inevitable. And that blanket that has been wrapped around these airlines for the last five, six months disappears. We enter the winter season. That's when business demand should pick up. There is no business demand at this moment in time.

You know, what we are seeing is leisure traffic, and that is not going to be carrying forward, because people have got to go back to work and start driving revenues and building the economy back in every country in the world. And so what we're seeing is airlines around the world making those decisions about resources and their networks with a view to sustainable operations through to the end of March 2021. It's desperate, Zack, it really is, you know, a real struggle for the airlines today.

ZACK GUZMAN: Yeah, the desperation there. I mean, I guess also potentially going to be seen in terms of what stimulus might come through here in a fourth round of what airlines might be willing to take or will need to take. When you try and put a dollar size on what it will be up from that $25 billion in the last round of stimulus, what's the number that you see in your mind for something that will need to come through to help airlines weather all this?

JOHN GRANT: Between $30 and $40.

ZACK GUZMAN: Again?

JOHN GRANT: Again. Yeah, absolutely. And you know, we've got to understand that these air-- these are loans. A large part of this is loans, and the airlines are, in theory, obligated to pay back at some time. When the CARES Act was announced, the devil was in the detail. And you know, when the airlines' CEOs saw the detail, they didn't particularly like it, but they accepted it.

And now, of course, if this is going to extend now, that's-- that's a double-- a doubling of loans, or debt, or financing structures. And the air-- well, it's really difficult for the airlines, because, you know, without it, they're not going to operate many of the routes that they have or provide the capacity. And there is another side of the argument that says, well, let natural market forces ride out. You know, these are city payers, essential air services that perhaps no longer can be operated.

ZACK GUZMAN: Yeah, and lastly, I mean, on that capacity front, it is something that you guys at OAG have been highlighting here of added back capacity, at least in some of these US operators. We look at some of those, I mean, are there any, I guess, standouts there in terms of people maybe getting ahead of the demand we're seeing right now?

JOHN GRANT: Well, I think they're all following each other. You know, none of them want to be seen to be out of sync with each other. So we're seeing every airline having a bit of capacity one week and dip-- shave a bit more off the next week. But we're broadly at about 40%.

The big issue for your big three carriers is the lack of international access. You know, the transatlantic market, we're not going to see-- the way it looks at the moment, we will not see transatlantic services at any reasonable level of service before 2021. And if that is the case, you know, the damage that will be inflicted, not just to the big US majors and Southwest, but to the European brands like British Airways, KLM, and Virgin Atlantic, who've got their own cash flow issues at this moment in time, will be very, very serious.