President Donald Trump supports the release of another $25 billion in federal aid for the airline industry, which has been severely hit by the coronavirus pandemic.
There is bipartisan support for issuing additional funds for one of the worst hit sectors during the pandemic. US. airlines previously said that the jobs of over 70,000 of their workers would be at risk when the current round of aid ends in the fall.
Over a dozen Republican senators earlier Wednesday said they supported the extension of financial assistance for American carriers to support payrolls while travel demand is still limited due to the virus, leading to growing financial losses.
The proposal for the new funds, which comes as Congress tackles how to design another national coronavirus relief package, has been receiving support from the majority of the House.
“I think it’s very important that we keep the airlines going,” Trump said in a White House press briefing when asked about the extension of the aid. “We don’t want to lose our airlines. If they’re looking at that, whether they’re Republican or Democrat, I’d be certainly in favor. We can’t lose our transportation system.”
Meanwhile, Congress allocated $25 billion to US passenger carriers in the $2.2 trillion CARES Act in March as long as they would not slash jobs through September 30. With the new proposal, the protections will be extended through the end of March 2021.
Airline shares rose in postmarket trading after Trump’s statements with American Airlines near 6% while United Airlines and Delta Air Lines each trading more than 3% higher.
Airline industry survival
In June, the International Air Transport Association (IATA) said the airline industry may lose $84 billion in 2020.
Air travel dropped by 98% in April from last year. The agency previously predicted 8.2 billion air travelers in 2037. However, the efforts made to curb the spread of the coronavirus badly hit air travel.
“We think airlines are going to probably lose an unprecedented $84 billion in 2020,” Brian Pearce, chief economist for IATA, told CNBC.
“We’re really only just starting to see countries negotiating bilateral openings of markets. For example, the Trans-Tasma bubble between Australia and New Zealand, China and Singapore, as well as China and Korea.”
Despite the situation, Pearce believes a recovery can happen in the second half of 2020.
Domestic air travel
Domestic air travel has resumed in the US, China, and Indonesia, but international travel remains volatile for now.
“It will be enough to kickstart the airline industry in some countries,” Pearce said. “For many airlines, they do depend on international air travel.”
According to Keith Mason, head of the Centre for Air Transport Management at Cranfield University, government assistance will be critical in ensuring the sustainability of the airline industry.
“We’re going to see a consolidation in the market where airlines that are fully independent are struggling to survive, are going to go out of business,” he told CNBC.
American Airlines
In July, American Airlines announced that it will furlough about 25,000 front-line employees this fall as surges in coronavirus cases continue to paralyze travel demand.
According to American Airlines, the furlough notices for their employees, who make up 29% of its US mainline workforce, will be sent soon as the company aims to slash the workforce by October.
The airline asked its employees to apply for new extended leaves that can last up to two years or early retirement packages. This way, they will get more people off payroll as possible before being forced to involuntarily strike out their jobs.
The revenue of American Airlines in June was declined by over 80% than a year ago, CEO Doug Parker and President Robert Isom said in a note to staff.
“And with infection rates increasing and several states reestablishing quarantine restrictions, demand for air travel is slowing again,” they wrote.
