US Airlines Can Soon Drop Service To More Airports

WHAT MARKETS ARE BEING DROPPED BY AA?

@myline @Mike Nottinger: My read on the overall situation is that it's reasonably likely that at most one or two of the US non-regional airlines will not file for bankruptcy in 2020. I don't think any of the first several that file will be able to get DIP financing from the private sector: absent substantial consolidation for attrition (probably down to 3 mainline airlines with at least 1000 scheduled domestic flights), none of the US airlines are investable. So those first airlines to file will either disappear completely or become wards of the federal government (e.g. the feds provide a DIP loan at a rate acceptable to the creditors or buy assets at higher-than-current-market prices). Whether an airline becomes a federal ward or disappears depends on the political fallout. Spirit, Frontier, and Sun Country aren't likely to be missed, and it's not at all clear that the ULCC model of packing planes will be viable. Sun Country might just turn into a freight operator, but I wouldn't expect Spirit or Frontier to fly in 2021 (there's a chance that the creditors could be convinced that aircraft lease termination and a DIP sufficient to do the bare minimum required to keep the operator's certificate for many years maximizes their recovery, so this wouldn't necessarily be a liquidation). Allegiant differs from Sun Country in the number of airports they serve where they're the biggest airline flying to the most destinations: each of those airports potentially means interest from Congress in keeping them flying: this might be through a facilitated merger (or shotgun wedding) with another airline. JetBlue's likely fate IMO is a shotgun wedding with Southwest (perhaps with the feds agreeing to buy B6's Airbuses). Alaska and Hawaiian can command 4 senators and provide a fair amount of borderline-EAS service, which makes them essentially too important to fail. I'd anticipate a federally directed merger here (and that Allegiant might be merged in): the resulting airline would probably be required to be the EAS bidder of last resort until federal loans are repaid. Southwest is likely to either survive or be one of the last 2 to fall. Their bailout is likely to be getting B6 for free or nearly so. American is very politically sensitive if they file before November. Arizona, Florida, North Carolina, and Pennsylvania are swing states, and Texas is a state that the incumbent likely needs to hold: jobs and AAdvantage elites (who almost certainly have a GOP lean, especially among the largely domestic flyers) are in those states. So they'll become a ward of the federal government: I wouldn't be surprised if the DIP rate is reduced in exchange for selling international assets like slots (e.g. at LHR) to the federal government at something like their 2015 value and the feds buying any non-leased 777/787s. I'd further anticipate that American's domestic network gets merged into Alaska/Hawaiian/Allegiant, effectively creating an airline counterpart to Amtrak (the Amtrak long distance network could even get folded into AlAlAmHa). For United and Delta, I think the airline which survives longer will get federal financing (or if DL lasts longer, AmEx funds DL's purchase of UA with federal blessing as a means to make Chase a non-entity for high-end travelers) to buy the other one out of bankruptcy and likely end up with the international assets of AA: a rebirth of PanAm as the USA's national champion airline. UA's infrastructure at DL hubs and DL's infrastructure at UA hubs would be transferred to AA/WN. 3 mainline carriers in 2022 DL/UA: premium domestic and international service AA: able to get you from anywhere in the US to anywhere else in the US; dependent on OW partners for international service WN: the national LCC to keep AA and DL/UA honest An earthquake in the alliances: if UA outlasts DL, that's the end of ST and *A owns North America; if DL outlasts UA, ST becomes the dominant alliance and *A mostly serves the US via Canada. OW is pretty badly hurt. Disclaimer: pure speculation.

I know this "makes sense", but this really irritates me. IMO, the "maintain service to all cities" rule in the CARES Act was pushed by the big boys to stick to the likes of Allegiant, Frontier and Spirit (who would be hurt more with the "keep all cities" approach since they would most likely just drop markets in cases like this). Now, since they got what they wanted, as we see, the big boys want "exemptions". Frontier and Spirit were denied exemptions and have been doing all sorts of weird route adjustments just to keep in line with the CARES act (i.e. - triangular routes). If the DOT ends up granting exemptions, I hope all airlines get a piece of the pie and not just the big boys.

The current crisis could push some airlines, especially smaller ones, into bankruptcy or make them takeover targets. Consumer fears about catching the virus on crowded planes could lead to reconfigured seating.

I thought America worshipped free enterprise and left socialism to the Europeans. Or maybe not lol. This makes sense though - the way CARES forces airlines to fly non-viable routes is a massive waste of taxpayer money. I’m sure current demand to a number of cities can barely fill a small aircraft once or twice a week. In order to protect taxpayers, airlines and their employees the airlines should be allowed to trim such services.