Southwest, United Airlines say recovery is in the air

Two top US airlines and Air Canada said on Tuesday ticket cancellations were slowing and demand was showing signs of improvement since the coronavirus pandemic brought global travel to a virtual standstill last month.

Shares in Southwest Airlines and United Airlines Holdings rose on the news.

Southwest, focused on the US domestic market, said it was adding some flights in June, which will bring that month’s overall annual capacity decline to between 45 percent and 55 percent, less severe than May’s decline of 60 percent to 70 percent in May.

Chicago-based United, which has greater international exposure, said its June capacity would still be down by about 90 percent year-on-year, and 75 percent in July. Overseas travel is expected to be slower to recover.

“We might have hit the bottom in the short-term. But is it getting better soon? Until immunization, travel trends are not going back to normal anytime soon,” said Burton Hollifield, professor of financial economics at Carnegie Mellon University’s Tepper School of Business.

All airlines remain focused on reducing costs.

Southwest said its daily cash burn rate was slowing to the low-$20 million range in June from $30 million to $35 million in the overall second quarter.

Speaking at an industry conference, Air Canada CFO Mike Rousseau said he could not predict when his airline’s cash burn would go to zero, noting it will depend on revenue performance in the coming months.

United said its total adjusted capital expenditure for 2021 would be close to $2 billion versus around $4.5 billion this year, falling to below $500 million in 2022 when it does not expect to take delivery of any new aircraft. It is taking fully financed jet deliveries this year and next.

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