Airlines Request Bailout - What Can Be Done

The Coronavirus has unleashed havoc on a global level. The main problems now seem to be centered on the United States, where the economy is under the threat of being shut down on a national level. States like California, New York, and New Jersey have ordered the closure of businesses that are not providing essential services. Before these lockdowns, individual companies have reduced their operations and have ordered their employees to work from home. Grocery stores and stores like Walmart and Target are all out of toilet paper, and many food items are out of stock across the country. One industry; however, has experienced a major shock to its businesses.

Aviation is under a full-fledged economic attack with many companies' businesses being severely affected. At the center of this disaster in the United States is American Airlines, United Airlines, Delta Air Lines, and Boeing. In response to the major reduction in travel among the public, the airlines and Boeing have requested a bailout from the Federal Government.

All of the firms were not prepared for what COVID-19 has done to the global economy. Boeing; however, was already in a weak state from the fallout of flaws in the Boeing 737 MAX. American, United, and Delta are particularly susceptible to the restrictions with the virus because they serve many international destinations that have been significantly impacted. Domestic U.S. air travel has also has declined sharply.

Traffic at the airlines has declined so sharply that Delta is burning $50 million a day in cash according to its CEO, Ed Bastian. In addition, Delta has had 13,000 people take voluntary leave from the company. United is reducing its schedule by 60% in April and will likely reduce its schedule even more in May according to Oscar Munoz and Scott Kirby.

Boeing has been affected by the problems it is having with the 737 MAX and now the global drop in the demand for air travel that its customers are facing. In 2019, Boeing posted negative orders for the first time in over 30 years according to CNBC. Additionally, a Boeing spokesperson did not know when was the last time that Boeing recorded a year of negative orders. In February, the company reported an additional loss of orders for the month. Cancellations were for Boeing 737 MAX orders.

A photo of San francisco International Airport on our airline bailouts article

Above is a photo of San Francisco International Airport (KSFO) with United, American, Delta, and Boeing represented in the photo. The photo is by Daniel L. Lu on Wikimedia Commons and has been enhanced by FlyRadius. The image is released under a Creative Commons Attribution-Share Alike 4.0 International license.

With all of these problems, what can those companies do to help cushion the blow of one of the most pervasive economic shutdowns in history? Find new ways to generate revenue and end the spread of the virus.

One area that could help the airlines is to expand their cargo operations. Logistics has been a major problem with this disaster, and moving products quickly around the globe could help end the crisis. There is a major shortage of toilet paper, hand sanitizer, face masks, ventilators, and other equipment that could help to end the virus’s spread. The airlines should get in contact with companies that provide those products and work out ways to distribute their products to stores and end-users in a quick manner. American Airlines has started to perform cargo-only flights with its Boeing 777s and has started operating cargo flights from Germany to the United States.

The big three could offer their flights at cost or better to those that need to get their product to market quickly. As a result of these efforts, they would gain revenue while helping to reduce the stress that the virus has caused to the supply chain and people.

Boeing could work with its customers to help support the supply chain operations of the nation and foreign countries. The company’s facilities across the country could support the warehousing of goods that could then be easily transferred to aircraft and other modes of transportation for delivery. That idea could be a complicated one to implement; however, it may time for Boeing and other companies to look at ways that they can remain in operations while the virus is still lingering around.

Those are some ideas that could be looked at and there could be many more that the companies can explore.

Let's work together to keep the economy rolling while weathering out this major storm.


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About the Author: David Aughinbaugh II

The article that you are reading was created by David Aughinbaugh II. David serves as FlyRadius' Strategy Analyst and Research Analyst. As a long-time admirer of the commerical and general aviation industries, David looks to help spread aviation industry knowledge to visitors of FlyRadius.

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