So far, airline companies have struggled in 2020. The sector took a hard hit due to the COVID-19 pandemic. Air travel halted completely amid lockdowns. Air travel picked up slightly in June when the lockdown restrictions started easing. With the slight uptick in demand, most airline companies made their own growth strategies and plans for the coming months. Many airlines including Alaska Air (NYSE:ALK) and Delta Air Lines (NYSE:DAL) are still struggling. Meanwhile, Southwest Airlines (NYSE:LUV) and American Airlines (NASDAQ:AAL) are in a better place.
What happened in June in the US airline sector?
With lockdowns restrictions easing in the US, June saw a slight uptick in air travel demand. Business travel and leisure travel hasn’t resumed yet. However, people visiting family and friends boosted air travel demand. Challenges still remain for companies that depend on international travel. Airlines that focus more on domestic routes have seen an improvement.
Recently, American Airlines announced its plans to burn zero cash by the end of 2020. The company reduced its cash burn forecast from $50 million to $40 million. Airlines expect a better capacity schedule in July. Meanwhile, United expects to fly 25% of its domestic flight schedule in July. United wants to improve its liquidity position. The company estimates to have available liquidity of around $17 billion at the end of the third quarter of 2020. The airline plans to arrange financing from its loyalty program, MileagePlus. United Airlines has also adopted various cost-cutting measures.
Talking about cost-cutting measures, Alaska Air plans to cut 3,000 jobs next year from its existing workforce of 23,000. The airline also adopted various other strategies to conserve cash and survive the pandemic. Delta Air Lines plans to notify around 2,500 pilots about possible furloughs. The company intends to send out notices under the Worker Adjustment and Retraining Notification Act by next week. To learn more read, Delta Air Lines Warns Pilots about Possible Furloughs.
Amid the struggles, JetBlue Airways announced growth plans to better its cash position. The company intends to add 30 domestic routes between July and October. The leisure markets have seen an uptick in demand.
Southwest Airlines got a boost
Southwest Airlines got a boost on Monday. A Goldman Sachs analyst has bullish views. The analyst upgraded the stock to a “buy” from “sell.” To learn more, read Goldman Sachs Upgraded Southwest Airlines to ‘Buy.’
Southwest rose 10% on Monday and drove peer stocks higher. On Monday, shares of American, United, Delta, and Alaska rose 6.8%, 6.6%, 5.9%, and 7.8%, respectively.
How does July look?
With June ending on a positive note, investors expect the optimism to continue in July. While COVID-19 cases have been spiking in the US, travel demand has been increasing slowly. The sector probably won’t see full capacity soon, but the situation continues to improve at the business level. Many industry experts think that it will take at least two years for the airline sector to return to pre-COVID levels. Meanwhile, companies with a strong balance sheet will likely survive the crisis, recover, and plan ahead for when demand kicks in. Right now, the airline sector is still risky. Investors should be prepared for cloudy skies in the upcoming months. We’ll know more when the companies report their earnings next month.