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Federal Aid to End Soon: More Uncertainty for U.S. Airlines?
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It is no longer news that stocks in the Airline industry have hitherto suffered a severe setback from the coronavirus pandemic, which resulted in a sharp contraction in air-travel demand. This gloomy scenario can be gauged from the International Air Transport Association’s (IATA) forecast that the aviation industry will lose $84.3 billion in the current year due to the coronavirus-induced crisis. The sharp drop in passenger revenues contributes to the IATA's depressing projection.
Payroll Support to the Rescue
To keep U.S. passenger airlines like Delta Air Lines (DAL - Free Report) , United Airlines (UAL - Free Report) , JetBlue Airways (JBLU - Free Report) and Southwest Airlines (LUV - Free Report) afloat during this ongoing unprecedented crisis, the Trump administration in April allotted $25 billion payroll grants under the Coronavirus Aid, Relief and Economic Security (CARES) Act.
However, the financial assistance, which offered the much-needed relief to airlines, came with certain conditions attached. For instance, airlines which received the aid were required to maintain a minimum level of service and not lay off any employee through Sep 30.
Airlines Warn of Job Cuts Post Sep 30
With the expiration of the federal aid inching closer, the airline industry is struggling for clarity as revival in demand does not seem a near-term possibility. In fact, many airlines already warned of job cuts post Sep 30 as they face the problem of overstaffing due to depressed revenues.
Per a CNBC report, United Airlines cautioned that it may have to furlough more pilots than the original plan of 2,250. Similarly, Delta intends to lay off 1,941 of its pilots if a suitable cost-cutting agreement is not reached with the concerned labor union in October. Moreover, management at the currently Zacks Rank #3 (Hold) American Airlines (AAL - Free Report) announced that it will have to make approximately 19,000 of its employees redundant in October as air-travel demand remains suppressed. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Meanwhile, discount carrier Spirit Airlines (SAVE - Free Report) reportedly inked a deal with its pilots’ union to avoid involuntary furloughs of roughly 600 of its pilots in October.
More Federal Relief in Store?
To avoid massive job losses, airline executives and labor unions are hoping for an extra federal stimulus package. Notably, U.S. airlines are seeking a six-month extension of the payroll support program. As a matter of fact, President Donald Trump and more than a dozen republican senators already lent support to the proposal of additional $25 billion federal aid for the airline industry. If the plan materializes, it will protect jobs through Mar 31, 2021.
Moreover, the cash-strapped U.S. airlines signed letters of intent pertaining to their share of the $25-billion federal loan under the CARES Act. Although the signing of the letters of intent does not mean that airlines are obligated to borrow loans, we expect them to avail of the same to bolster their liquidity position.
Quite logically, we expect investors interested in this once thriving space to stay tuned for further updates on the proposed financial incentive as prospects of layoffs loom large post the September deadline.
Zacks’ Single Best Pick to Double
From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.
With users in 180 countries and soaring revenues, it’s set to thrive on remote working long after the pandemic ends. No wonder it recently offered a stunning $600 million stock buy-back plan.
The sky’s the limit for this emerging tech giant. And the earlier you get in, the greater your potential gain.
Image: Shutterstock
Federal Aid to End Soon: More Uncertainty for U.S. Airlines?
It is no longer news that stocks in the Airline industry have hitherto suffered a severe setback from the coronavirus pandemic, which resulted in a sharp contraction in air-travel demand. This gloomy scenario can be gauged from the International Air Transport Association’s (IATA) forecast that the aviation industry will lose $84.3 billion in the current year due to the coronavirus-induced crisis. The sharp drop in passenger revenues contributes to the IATA's depressing projection.
Payroll Support to the Rescue
To keep U.S. passenger airlines like Delta Air Lines (DAL - Free Report) , United Airlines (UAL - Free Report) , JetBlue Airways (JBLU - Free Report) and Southwest Airlines (LUV - Free Report) afloat during this ongoing unprecedented crisis, the Trump administration in April allotted $25 billion payroll grants under the Coronavirus Aid, Relief and Economic Security (CARES) Act.
However, the financial assistance, which offered the much-needed relief to airlines, came with certain conditions attached. For instance, airlines which received the aid were required to maintain a minimum level of service and not lay off any employee through Sep 30.
Airlines Warn of Job Cuts Post Sep 30
With the expiration of the federal aid inching closer, the airline industry is struggling for clarity as revival in demand does not seem a near-term possibility. In fact, many airlines already warned of job cuts post Sep 30 as they face the problem of overstaffing due to depressed revenues.
Per a CNBC report, United Airlines cautioned that it may have to furlough more pilots than the original plan of 2,250. Similarly, Delta intends to lay off 1,941 of its pilots if a suitable cost-cutting agreement is not reached with the concerned labor union in October. Moreover, management at the currently Zacks Rank #3 (Hold) American Airlines (AAL - Free Report) announced that it will have to make approximately 19,000 of its employees redundant in October as air-travel demand remains suppressed. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Meanwhile, discount carrier Spirit Airlines (SAVE - Free Report) reportedly inked a deal with its pilots’ union to avoid involuntary furloughs of roughly 600 of its pilots in October.
More Federal Relief in Store?
To avoid massive job losses, airline executives and labor unions are hoping for an extra federal stimulus package. Notably, U.S. airlines are seeking a six-month extension of the payroll support program. As a matter of fact, President Donald Trump and more than a dozen republican senators already lent support to the proposal of additional $25 billion federal aid for the airline industry. If the plan materializes, it will protect jobs through Mar 31, 2021.
Moreover, the cash-strapped U.S. airlines signed letters of intent pertaining to their share of the $25-billion federal loan under the CARES Act. Although the signing of the letters of intent does not mean that airlines are obligated to borrow loans, we expect them to avail of the same to bolster their liquidity position.
Quite logically, we expect investors interested in this once thriving space to stay tuned for further updates on the proposed financial incentive as prospects of layoffs loom large post the September deadline.
Zacks’ Single Best Pick to Double
From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.
With users in 180 countries and soaring revenues, it’s set to thrive on remote working long after the pandemic ends. No wonder it recently offered a stunning $600 million stock buy-back plan.
The sky’s the limit for this emerging tech giant. And the earlier you get in, the greater your potential gain.
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