Last Monday, US President Donald Trump announced that the government would give 100 percent support to airline companies operating in the United States and recommended the allocation of 50 billion USD plus aid package from the country's industry trade group. Since the announcement, investors have been flocking airline stocks.
During a press conference, US President Donald Trump announced that his administration would back airline companies because it's not their fault that the industry is falling. Airlines for America earlier requested for funding of about 25 billion USD to passenger airlines and four billion USD to cargo carriers before the announcement. Airlines for America also sought 25 billion in loans and guarantees to passenger airlines and a total of four billion for the same services for cargo carriers. Lastly, it also sought tax relief from the industry.
Airlines for America previously warned the economy that the airline industry would be significantly hit by the travel lockdowns around the world. In its request, the organization revealed that the current economic environment is not sustainable and that there appears to be no immediate solution to the demise.
The group shared that its net bookings for the following moths have yielded a 100 percent cancellation outpace while new bookings only generated at least two to one for some airlines. Delta, a member of the group, revealed that they are completely aligned with Airlines for America's proposal. The proposal was said to be inspired by the total available liquidity projection of its members for 2020.
After the public health crisis caused air travel crisis, Southwest Airlines withdrew its financial forecast due to significant declines in its bookings an in increase in close-in trip cancellations. The carrier also reduced flight capacity by 20 percent between April 11, 2020, until June 5, 2020, marking the company's last effort in dealing with financial losses.
In other news, airline stocks have also declined significantly after humungous flight cancellations were incurred in recent weeks. Business events were also postponed or canceled disrupting flight plans and reduced flight coverage due to flight lockdowns. Airlines also cut its coverage to cope with the dropping demand.
Last Sunday, United announced that it would impose a 50 percent cut on its overall flight capacity by April and May. It also shared that the cuts might extend during the summer travel period. United revealed that it has started communicating with its union leadership on reducing payroll expenses to weigh the adverse effects of the public health crisis on the economy.
