Business Travel Briefing
For April 16-April 30, 2020
The briefing in brief: United Airlines says it will shrink to 10 percent of its former size and carry fewer passengers this May than any day last year. Southwest Airlines extends elite status and Companion Pass validity. U.S. lodging occupancy falls to 21 percent and Canada is down to 12 percent. Here's the blow-by-blow of the bailout funds each airline received--and the cities they want to drop. National Car extends Emerald Club elites. Alaska Airlines guarantees an empty middle seat. And more, including our daily Coronavirus update.

It's hard to have much sympathy for the carriers in general and United Airlines in specific, but that doesn't minimize the stark numbers the Coronavirus pandemic has created. In a note to employees on Wednesday (April 15), chief executive Oscar Munoz and CEO-in-waiting Scott Kirby said United's schedule in May and June will be just 10 percent of its same-months operations last year. Worse, they say, "travel demand is essentially zero and shows no sign of improving in the near term." That platitudinous claim would be suspect from proven fabulists like Munoz and Kirby--except that they produced numbers to make their case. Fewer than 200,000 people flew on United during the first two weeks in April compared to more than six million during the same two weeks in 2019. That is a 97 percent decline. The duo says United expects to carry fewer people cumulatively next month than it did on a single day in May, 2019. Worst of all, there's no hope for a short-term improvement. "We expect demand to remain suppressed for the remainder of 2020 and likely into next year." Other airlines and aviation analysts might dispute that last claim, however. They say it could be three or even five years before demand returns to 2019 levels.

I never read Stephen King's The Shining and never seen the eponymous film starring Jack Nicolson and Shelley Duvall. But I have seen "The Shinning," an iconic parody produced for a Halloween episode of The Simpsons. So I get the gist. And the gist is that The Overlook Hotel was empty. Three months into the Coronavirus pandemic, however, and it seems all hotels in the United States and Canada are virtual Overlook Hotels. For the week ended April 13, nationwide occupancy in the United States fell again. It now stands at just 21 percent. It's even lower than that (19.6 percent) in the Top 25 markets, according to STR, the lodging-industry analysts. It's even worse in Canada, STR says. Nationwide, Canadian hotel occupancy has fallen to only 12 percent. Montreal and Quebec are faring even more poorly with occupancy in the 6 percent range.

Southwest Airlines is late to the game, but today (April 16) it extended Rapid Rewards Elite benefits as well as Companion Pass perks. Elites get another year and status will now expire on December 31, 2021. Companion Pass holders get six more months so existing passes will be valid through June 30, 2021. The airline also effectively reduced the requirements for elite status and a Companion Pass this year by gifting all Southwest flyers points and segments. Full details are here.
        National Car Rental has extended the validity date of Emerald Club elite memberships through February 28, 2022. The details are here.

Graceless as they are, airlines spent days demanding the Treasury Department give them more than $25 billion in grant money with absolutely no strings. Because airlines are gonna airline, I guess. But Treasury didn't budge so the airlines decided to take the money and run. And to say they got off virtually scot free--they are required to take about 30 percent in 10-year loans and give the government stock warrants--is like saying airlines are brigands. The tiny silver lining? The money is almost totally earmarked for employee salaries rather than left to the discretion of airline C-suite types. Here's the blow-by-blow on the money we're blowing by handing it to the carriers:
        Alaska Airlines receives $992 million. Of that, $267 million is a loan. The Treasury Department will receive the right to buy 847,000 shares.
        American Airlines receives $5.8 billion. Of that, $1.7 billion is a loan.
        Delta Air Lines receives $5.4 billion, including a $1.6 billion loan. Treasury receives warrants for 1 percent of Delta stock.
        JetBlue Airways receives about $936 million with $250.7 million in the form of a loan.
        Southwest Airlines receives $3.3 billion, about $1 billion of which is a loan. Treasury receives warrants for 2.6 million shares.
        United Airlines receives $5 billion--$3.5 billion in cash and $1.5 billion in loans. Treasury gets warrants to purchase 4.6 million shares.

Now that they have their CARES bailout--there's no proof that the money was delivered in sacks with dollar signs on them--the airlines are anxious to erase dozens of airports from their route maps. Under the terms of the taxpayer-funded grants, the carriers are supposed to maintain service to all destinations that were on their respective networks before the Coronavirus hit. But they can request that the Transportation Department approve exemptions and allow them to drop certain small or marginal markets. And never let it be said that an airline won't exploit any opportunity to thumb its metaphoric nose at you after taking your money. (We covered the JetBlue Airways and Hawaiian Airlines wish lists last week. The DOT has already ruled against JetBlue's request with the exception of flights to two points--Aguadilla and Ponce--in Puerto Rico.) Here's the latest airline-by-airline hit list:
        Alaska Airlines hopes to cut three Hawaii airports (Kona, Lihue and Kahului, Maui) and Sun Valley, Idaho, off its network.
        American Airlines wants to drop service to 11 airports. Seven are seasonal, but there is also the previously announced decision to drop Duluth and the same three Hawaii destinations targeted by Alaska Air.
        Cape Air, the commuter carrier, wants to drop five airports, including Albany, New York/JFK and White Plains, New York.
        Delta Air Lines has ten cities on its wish list, including Juneau, Sitka and Ketchikan, Alaska; Martha's Vineyard and Nantucket, Massachusetts; and St. Thomas and St. Croix.
        United Airlines hopes to dump 18 airports, including Hilo, Hawaii; Green Bay, Wisconsin; Kalamazoo, Michigan; and San Juan.

Airlines will inevitably go out of business due to the Coronavirus pandemic and the subsequent recessionary economic trends. First in the barrel may be South African Airways. The carrier already has been operating in a special form of bankruptcy since December and burned through more than US$1 billion in bailout funds during the last three years. But the South African government this week refused to inject any more cash into the airline. At the moment, SAA is only flying one route--Johannesburg-Cape Town--during the country's lockdown. Stay tuned.
        Virgin Australia is also in financial distress. Its four largest shareholders have refused to recapitalize the airline, which is a distant second to Qantas in the country's market. In recent weeks, Virgin has flown only a single daily roundtrip between Sydney and Melbourne. Virgin may survive, however, since the Australian government decided this week to subsidize both carriers to fly certain domestic routes. Starting tomorrow (April 17), that means Virgin will operate 64 weekly flights.

Alaska Airlines has followed Delta Air Lines and guaranteed more social distance on its flights. Until May 31, it is guaranteeing coach flyers an empty middle seat on its larger jets (configured 3x3) and an empty aisle seat on its smaller aircraft. Alaska Airlines adds that it is capping first class occupancy at 50 percent, guaranteeing each flyer their own row. Of course, with nationwide load factors running below 20 percent, there's actually little need to guarantee anything. Everyone gets their own row--and sometimes an entire cabin.