The Big Four Of American Airlines Lost 14.8 Billion US Dollars In The First Half Of The Year

In August, a number of airlines at home and abroad disclosed their financial reports for the first half of 2020, and the global aviation industry suffered the most serious damage in decades. "2020 will be the worst year in aviation history, with an average daily loss of $230 million," said Alexander de junyak, President and chief executive of the International Air Transport Association (IATA) The association predicts that the global aviation industry will lose more than 84 billion US dollars (593.2 billion yuan) in 2020.

This is the "darkest moment" in the history of global airlines. American Airlines, in particular, lost more than 14.8 billion U.S. dollars in half a year, even worse than the worst year after September 11.

"This year is bound to be the worst year in American aviation history since the 21st century." Cao Yunchun, director of Airport Economic Research Center of Civil Aviation University of China, pointed out in an interview with 21st century economic reporter on August 28 that, unlike "9.11" and financial crisis, the impact of the epidemic on aviation industry is comprehensive, extensive and far-reaching.

As of the press release, China's four major airlines have also issued this year's interim report, with a total loss of more than 36.5 billion yuan in the first half of the year.

U.S. aviation industry in trouble

Affected by the "9 · 11" incident and the rising international fuel prices, the U.S. aviation and transportation industry had experienced a recession in the early 21st century. The global financial crisis from 2007 to 2009 made it more seriously impacted. As a result, 2009 was known as the "Great Recession" in aviation history. IATA's report reported that the global aviation industry lost 11 billion US dollars in 2009.

But this figure is not worth mentioning in front of this year's loss. In the first half of this year alone, American Airlines, United Airlines, Delta Airlines and Southwest Airlines lost as much as 14.8 billion US dollars.

Photo by Xinhua News Agency

The case of Southwest Airlines, which has been profitable for 45 years, is worth mentioning. The American airline, which is famous for its cost control, lost $1.009 billion in the first half of this year, down 189.45% year-on-year; its operating income was $5.242 billion, down 52.6% year-on-year.

Before that, when the whole industry was in trouble, Southwest Airlines still achieved continuous profits. In 2008, the company's net profit was 178 million US dollars, and the net profit in 2009 was 99 million US dollars. But the outbreak has broken its steady profit-making pace. Southwest's CEO said the airline industry is unlikely to return to its pre outbreak levels for at least the next year.

American Airlines, the largest airline in the United States, performed worse. According to the financial report, the revenue of American Airlines in the first half of 2020 is 10.137 billion US dollars. In terms of profit, the net profit in the same period last year was $847 million, and the net loss this year was $4.308 billion, down 608.62% from the same period last year.

According to the annual report previously disclosed by American Airlines, the company had a net loss of $2.1 billion in 2008 and a net loss of $1.5 billion in 2009. Today, the loss in the first half of 2020 is more than the sum of the two worst years in the past.

Compared with the above two airlines, United Airlines and Delta Airlines have experienced the fate of bankruptcy at the beginning of this century, and now the loss is still a record high.

United Airlines lost $3.3 billion in the first half of this year. Among them, the first quarter revenue of United Airlines was $7.98 billion, a year-on-year decrease of 16.8%, and a net loss of $1.7 billion, ending the previous 10-year record of profit. Revenue was $1.68 billion, down from $1.68 billion in the same period last year.

In contrast, Delta's performance appears to be more tragic. Delta Airlines had a net loss of $6.251 billion in the first half of this year. Among them, the loss in the second quarter was as high as 5.717 billion US dollars, a year-on-year decrease of 496.19%; the operating income was 1.468 billion US dollars, a year-on-year decrease of 88.29%.

Prior to that, Delta Airlines had accumulated losses of nearly 10 billion US dollars from 2001 to 2005, including a loss of 5.2 billion US dollars in 2004, which was the highest annual loss of American Airlines. It can be seen that Delta's second quarter loss has set the largest loss record since 2004, and the loss amount also exceeds the net loss sum of United Airlines, American Airlines and Southwest Airlines in this quarter.

In addition to grounded flights and seeking government help, layoffs have become an important means for us airlines to reduce expenses. American Airlines said it would cut 19000 jobs on October 1. United said it would lay off 2850 pilots between October 1 and November 30 if the government did not extend the assistance program to help airlines pay their employees. This reduction will account for 21% of its pilots.

At present, about 100000 employees of the four major American Airlines - American Airlines, United Airlines, Delta Airlines and Southwest Airlines - voluntarily take unpaid or low paid leave, which is equivalent to about 26% of the total number of employees of the four major airlines by the end of 2019.

"The impact of pilot layoffs on American society will be great." Cao Yunchun told reporters that at present, the layoff structure of American Airlines includes ground crew and pilots, and the profession of pilots is highly professional and targeted. Their professional competitiveness is mainly reflected in aircraft flying. Once this group of people lose their jobs in a large scale, the impact on society will be incalculable.

The dawn of Asia Pacific Airlines' recovery

It's dark in the eastern hemisphere. Cirium, a global travel and data analysis company, said the airline industry was experiencing a gradual recovery, especially in mainland China and the Asia Pacific region, after the outbreak caused unprecedented damage to global air capacity. Zou Jianjun, Professor of China Civil Aviation Management Cadre College, also told reporters in an interview that the recovery of global aviation industry cannot be generalized. "On the one hand, the aviation industry in areas where the epidemic situation is well controlled will recover better. On the other hand, if the internal fleet configuration and business strategy of each aviation division are good, the performance will be better. "

According to the disclosed data, some airlines in the Asia Pacific region have turned losses into profits, and China's market has accelerated its recovery.

Korean Air's revenue in the second quarter was 1.69 trillion won, a year-on-year decrease of 44% and a net profit of 148.5 billion won. Hana's revenue in the second quarter was 818.6 billion won, a year-on-year decrease of 45%, and an operating profit of 115.1 billion won, ending six consecutive months of losses.

The two airlines achieved profits mainly due to the substantial growth of freight revenue. In the second quarter, the freight revenue of Korean and Asiana Airlines increased by 95%, reaching 1.23 trillion won and 639.1 billion won respectively.

Similar to the two airlines, China Airlines in Taiwan also made a net profit of $2.253 million in the second quarter.

China Airlines in Taiwan pointed out that, affected by the new crown pneumonia epidemic, the overall passenger revenue decreased compared with the same period last year; however, during the severe epidemic period, the transportation demand of medical materials in various countries increased sharply, which made the air cargo market demand hot. In response to the changes in the freight market, the company made full use of the capacity advantages of 18 747-400 full cargo aircraft and made good use of the abdominal compartment capacity of passenger aircraft, so that the overall freight revenue was higher than that of last year It increased over the same period.

Although they have not fully enjoyed the benefits brought by the growth of freight demand, the domestic airlines have entered the fast track of recovery thanks to the effective prevention and control of domestic epidemic situation and the gradual recovery of shipping market.

In the first half of 2020, China Airlines released the interim report, with a revenue of 1.984 billion yuan, a year-on-year decrease of 19.96%, and the net profit attributable to the parent company was 8.2277 million yuan, making a profit. By the end of June, the company's flight execution rate had returned to 82%. Hongdu Aviation's revenue in the first half of the year was 2.218 billion yuan, with a net profit of 10 million yuan, a year-on-year increase of 118.77%. In June, the domestic passenger traffic volume of Chunqiu Airlines increased by 12% year-on-year, and in July, it achieved a year-on-year increase of more than 24%. It took the lead in achieving a positive growth of domestic passenger traffic volume, and the overall passenger traffic volume also recovered to more than 90% in the same period of last year.

However, in addition to these Asia Pacific Airlines, other major Asia Pacific Airlines have more losses than gains. Air China, China Southern Airlines, China Eastern Airlines and Hainan Airlines also suffered the worst performance in history. According to the latest interim report data disclosed by the four airlines on the evening of August 28, China Southern Airlines lost 8.418 billion yuan, China Eastern Airlines 8.787 billion yuan, Air China 9.596 billion yuan and HNA 9.724 billion yuan in the first half of this year. The losses of the four airlines exceeded 36.5 billion yuan. However, the performance of domestic airlines may be reversed in the third quarter. The latest operation data of airlines also shows that the passenger turnover, seat rate and number of passengers in July have increased significantly. For example, in July, the passenger investment of Air China and its subsidiaries decreased by 52.5% year-on-year, increased by 21.1% month on month, passenger turnover increased by 29.4% month on month, average seat rate increased by 4.6% month on month, and number of passengers increased by 31% month on month.

In addition, the Asia Pacific Airlines division, which is dominated by international flights, is still in the winter of continuous loss.

In the first quarter of fiscal year 2020-2021, Singapore Airlines achieved a revenue of US $851 million, a decrease of 79.3% over the same period of last year, and passenger transport plummeted by 99.5% and a net loss of US $1 billion. After a record net loss of rm803.55 million (about RMB 1.328 billion) in the first quarter, Asia Airlines' loss in the second quarter expanded to 99289 million ringgit (about 1.641 billion yuan). Cathay Pacific had a net loss of HK $9.865 billion, or HK $2.508 per share, compared with a profit of HK $1.347 billion in the same period last year. Cathay Pacific says the first half of 2020 is the most challenging period in its 72 year history.

Under the aggravation of losses, the affected airlines have to take "extraordinary measures" such as laying off staff and reducing flights, and some even apply for bankruptcy.

Compared with Asia Pacific Airlines, which is gradually on the road of recovery, the U.S. aviation industry is more vulnerable and unpredictable due to the severe situation of domestic epidemic situation. Philippe Bagley, executive director of standard & Poor's, a global authoritative financial rating agency, pointed out that the financial impact of the new crown pneumonia epidemic will change the entire U.S. aviation industry and the air travel sector in the foreseeable future.

IATA predicted that "the impact of the epidemic on the air transport industry will last for several years, and the air passenger volume will not recover to the level before the epidemic at least until 2023." Facing the "black swan" of the global aviation industry, how many airlines can carry on until 2023?