Thursday, March 11, 2021

We’re going to continue our one-year anniversary look at the COVID-19 pandemic today, this time looking at the airline industry.

In April 2020 we noted that United Airlines ($UAL) booked a $50 million impairment charge on the value of its flight routes from the United States to China. In May 2020, we examined the first federal bailout of U.S. airlines.

So today we go back to see what happened to six major airlines:

  • Alaska Air Group ($ALK)
  • American Airlines ($AAL)
  • Delta ($DAL)
  • JetBlue ($JBLU)
  • Southwest ($LUV)
  • United Airlines ($UAL)

To state the obvious, 2020 was not a good year for any of these firms. Year-over-year revenues tumbled by roughly 60 percent; net income turned into note losses for all six. See Table 1, below.

Comparing Q3 and Q4 of 2020, however, we see a bit of lift. Revenues increased by a range of 12 percent for Southwest to 37 percent for United. With the exception of Alaska Airlines, all others saw a decrease in the net loss quarter over quarter.

On the other hand, the pandemic’s effect may be long-lasting. All six airlines took on significant amounts of debt. See Table 2, below.

Moreover, when we examine the footnotes for more information about those debt issuances, it’s clear that some of the debt is quite expensive. For example, Delta Airlines issued $1.3 billion in debt last June with an interest rate of 7.375 percent. JetBlue issued $115 million in debt last August at 8 percent.

At least some of that debt seems to have been salted away as cash, perhaps to be prepared for future challenges. See Table 3, below.

Check out the Excel spreadsheet that was used for this analysis and see what other insights you can find!


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