Industry experts stated that the Trump administration's $50 billion bailouts could help US airlines survive the immediate crisis, but it will likely not be a long-term solution to the underlying issues facing the sector. The bailout, which has been passed by the Senate, will give US airlines $25 billion in direct grants and another $25 billion in loan guarantees.
Airline consultant, Mike Boyd, pointed out that US airlines are currently flying empty planes and that will likely continue even after the health crisis is resolved. Boyd added that airlines will need to convince passengers to fly again to save the industry from total collapse.
According to Transportation Department data, US airlines are now only earning a small fraction of what they had earned over the same period last year. Passenger traffic through checkpoints is only around 8 percent of the traffic recorded last year. What is worse is that airlines have now been forced to reduce fares amid the demand slump, further lowering overall revenues.
Things are expected to get even worse in the coming months as flight bookings have all but ground to a halt. In response, airlines are reducing their flight schedules by as much as 80 percent nationally due to the ongoing epidemic. The cancellation should help airlines reduce expenses, but it will do little to resolve the much bigger issue.
Airline industry analysts at Standard and Poor's pointed out that the recovery process for the sector will be very slow and that most assumptions are likely too optimistic. The general assumption is that the second half of the year should see a rebound in the industry, but the analysts predict that it is unlikely to recover so quickly.
The senate's bailout package will give airlines a much-needed lifetime to weather the storm in the coming months. The $25 billion in direct grants will be given to the companies only on the condition that they agree not to place their workers on involuntary furloughs and that they continue to operate until the end of September.
That amount plus the additional $25 billion for loan guarantees could sustain the industry for several months, but that is still only for a limited time. As it stands, total spending on salaries and benefits alone exceeds more than $35 billion for six months. Airlines will likely have to find ways to cut costs to cover all of its employees.
The biggest concern however is whether or not traffic will recover to previous levels after the crisis is over. It is still not yet clear how long the lockdowns will last and if the public will want to travel immediately. If travel restrictions are lifted too soon, it could spark a new wave of infections. If lifted too late, it could costs airlines billions more in unnecessary losses.
