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Airlines post COVID

Analysing companies' finances and value from their financial statements using ratios and formulae
sss555sss
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Airlines post COVID

#305654

Postby sss555sss » May 4th, 2020, 5:39 pm

I personally believe it's very unlikely that within 18 months large parts of European flights won't be back to normal. Perhaps my perception is skewed living in the UK because many Europeans choose/will choose to drive but I genuinely can't see many people under 50 foregoing flying. If people are given the choice, my feeling is flights will be much less affected. So it really depends on governments restrictions which cannot be draconian because (a) it's bad for the economy (b) people don't like restrictions and will have negative impact on election polls. I strongly suspect flying to be normalised towards the end of the year (unless there is a second spike). If there is a second spike, we are far more prepared so while there will be an impact it will be far less severe. Can't say the same for cruise ships although once again I think these are oversold too. Old people really don't care about coronavirus as much. It seems to me, younger people are far more scared.

What do you think?

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Re: Airlines post COVID

#305658

Postby dealtn » May 4th, 2020, 5:44 pm

sss555sss wrote:
What do you think?


I think you should read the Board's Scope and Purpose and flesh out your thoughts with some analysis.

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Re: Airlines post COVID

#305728

Postby Dod101 » May 5th, 2020, 8:32 am

This is probably on the wrong Board but I tend to think the airlines will be badly affected because for every flight by BA out of the UK there is a return flight and flying is such an international business that it needs international co operation to make it work.

I am not at all certain that you are correct in your assessment about the attitude of younger people v older ones. Do you have any evidence to support that?

Dod

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Re: Airlines post COVID

#305738

Postby airbus330 » May 5th, 2020, 9:17 am

Purely anecdotal, but I have observed a lot more fear in middle class, middle aged people than either the young or the old. Yesterday a MAMIL (middle aged man in lycra) literally leapt out of the way of a stranger exiting a lift in Wilco! It was a bit funny and a bit sad.
I'm an ex airline employee. The currently used business model needs a very high load factor to turn a profit, see O'Leary's comments re. blocking the middle seat. I'm pretty relaxed about Covid19 from a personal point of view, but being crammed into an airliner for a few hours is beyond my acceptance of risk until a vaccine is available or an effective cure. The airlines and holiday operators like J2 and TUI will contract to a level where there are enough people with a different attitude of risk to fill the aircraft. Alternatively, we return to a high cost low volume model from the 1970's.

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Re: Airlines post COVID

#305775

Postby digitaria » May 5th, 2020, 11:07 am

Something of a controversy has broken out after Aer Lingus flew a full plane from Belfast to London on Monday, with no apparent social distancing measures in place.

https://www.bbc.co.uk/news/uk-northern-ireland-52539141

It seems likely that the authorities have provided little guidance to the industry, so passengers and staff proceeded as normal. Industry observers such as Simon Calder, have commented that mass transit by air and social distancing are fundamentally incompatible.

Aviation is already trying to get back to normal and it remains to be seen whether, in a few months, things will look any different than they did prior to the Great Pandemic.

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Re: Airlines post COVID

#305778

Postby Dod101 » May 5th, 2020, 11:19 am

digitaria wrote:Something of a controversy has broken out after Aer Lingus flew a full plane from Belfast to London on Monday, with no apparent social distancing measures in place.

https://www.bbc.co.uk/news/uk-northern-ireland-52539141

It seems likely that the authorities have provided little guidance to the industry, so passengers and staff proceeded as normal. Industry observers such as Simon Calder, have commented that mass transit by air and social distancing are fundamentally incompatible.

Aviation is already trying to get back to normal and it remains to be seen whether, in a few months, things will look any different than they did prior to the Great Pandemic.


I suspect that Simon Calder is correct but it will need some sort of cross border accord to get this sorted out. At the very least facemasks and a temperature check are surely required and hand sanitiser on boarding. Not that difficult to do.

Dod

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Re: Airlines post COVID

#305897

Postby Lootman » May 5th, 2020, 6:14 pm

airbus330 wrote:The currently used business model needs a very high load factor to turn a profit, see O'Leary's comments re. blocking the middle seat. I'm pretty relaxed about Covid19 from a personal point of view, but being crammed into an airliner for a few hours is beyond my acceptance of risk until a vaccine is available or an effective cure. The airlines and holiday operators like J2 and TUI will contract to a level where there are enough people with a different attitude of risk to fill the aircraft. Alternatively, we return to a high cost low volume model from the 1970's.

I don't think we can go back to the 1970s when as I recall (took my first flight in 1972) people paid a lot for tickets and got dressed up to fly like it was a grand occasion.

People will be wary for a while, certainly. But there is a huge pent-up demand to travel both from business and also from people who either need to fly (e.g. dispersed family, weddings, funerals) or those for whom travel is a key part of their lives. I know I for one am not going to take holidays n Clacton for the rest of my life.

You can't judge the future based on the current level of paranoia. It will pass. And if the alternative is a life of never flying, never going anywhere and being petrified of human contact, then I'd rather risk getting the virus and taking my chances. No point in living to be 90 if I am bored out of my skull.

That said, I've never owned an airline share and probably never will. It is too small a sector to be important as an investor. Maybe some call options on United as a punt?

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Re: Airlines post COVID

#305908

Postby terminal7 » May 5th, 2020, 7:29 pm

Code: Select all

That said, I've never owned an airline share and probably never will. It is too small a sector to be important as an investor.


That's why Warren Buffet bought about 10% in each of the top US airlines in 2016. Really Lootman - you know better than the Sage?

T7

ps Of course he got it wrong and dumped the lot last week at a hefty loss.

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Re: Airlines post COVID

#305910

Postby Lootman » May 5th, 2020, 7:40 pm

terminal7 wrote:

Code: Select all

That said, I've never owned an airline share and probably never will. It is too small a sector to be important as an investor.

That's why Warren Buffet bought about 10% in each of the top US airlines in 2016. Really Lootman - you know better than the Sage?

T7

ps Of course he got it wrong and dumped the lot last week at a hefty loss.

Actually I think I told a fib. I think BA was one of Thatcher's privatisations and if so then I probably held that for a few months. I never turn down free money.

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Re: Airlines post COVID

#306034

Postby terminal7 » May 6th, 2020, 10:21 am

I think BA was one of Thatcher's privatisations


All part of selling off the family silver - included BAA (LHR/LGW/STN) as well.

T7

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Re: Airlines post COVID

#306150

Postby flyer61 » May 6th, 2020, 4:37 pm

This time round I expect the Government to end up with stakes in IAG, easyJet and Dart(Jet 2). I am afraid for political reasons Virgin is on it's own. As soon as Virgin is significantly neutered Willie Walsh will be along with the begging bowl but not before. These Government loans will be turned into equity in due course.

If the virus wasn't here with the oil price where it is the airlines would be booming. They have a bleak future, certainly on a 12 month view.

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Re: Airlines post COVID

#306194

Postby terminal7 » May 6th, 2020, 6:49 pm

IAG difficult one - Spanish owned and just received big hand-out from Spanish Govt.

T7

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Re: Airlines post COVID

#306216

Postby airbus330 » May 6th, 2020, 8:25 pm

In the current situation, every opinion is valid as there are simply too many known unknowns and unknown unknowns. The current situation is that the 2 highest profile airlines in the UK are planning on making a quarter of their pilots redundant. BA has already told that those who remain will have to accept reduced T&C's or face termination. VS is deleting the 747 fleet and looks to be tearing up any rule book for planned redundancies previously agreed. I could go on with other airlines, but it gets murkier when you talk about Norwegian and Ryanair due to their creative employment practices, but lets say another 1/4 or more of the pilots will go. All of this is couched as a survival plan for the next 12 months. No longer than that. No-one knows what draconian social distancing measures will be enforced by individual nations states and you can bet that there will be very little common agreement outside of the EU. It was bad enough travelling by air pre convid19, I really cannot imagine anyone doing it unless out of sheer necessity until summer 2021. BA themselves are not expecting anything resembling normality before 2023. I think unless the state steps in and takes them over, in the current situation most airlines will be insolvent by the end of the year. Even less clear is the holiday sector, J2 and TUI. They have been deathly quiet although both maintain they can ride this out until normality returns, I am not so sure. Only the cargo airlines are expanding and operating normally at this time, even loose talk of converting redundant A380 super jumbos to freighters. So, I guess if you want to put money into this sector, cargo it must be. I must put my hands up and say that I have invested in 5 airlines and lost ALL of my money in 4 of the investments. 3 of the losses were in airlines that I worked for and could see the issues, but believed the BoD when they said all will be well. In every case the cash burn killed the airline, debt for equity swap, rinse repeat. By the time I had learnt to read a balance sheet I turned a small profit on airline 5 as it bled to death to the sound of management promises of all will be well. We often discuss black swan events in flying, cv19 is the black swan for airline management and the best they can do is guess which option will give them the least casualties.

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Re: Airlines post COVID

#306308

Postby airbus330 » May 7th, 2020, 9:15 am

This appeared this morning, seems to agree with my last post!
https://uk.finance.yahoo.com/news/briti ... 48166.html

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Re: Airlines post COVID

#306367

Postby flyer61 » May 7th, 2020, 11:09 am

Airbus 330

let me help you with IAG (he said teasingly)

Iberia - Government department
BA - Government department
Aer Lingus - Government department

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Re: Airlines post COVID

#306413

Postby terminal7 » May 7th, 2020, 12:36 pm

Iberia - Government department
BA - Government department
Aer Lingus - Government department


Just reverting to where they were for decades and then all privatised from 1987 onwards starting with BA.

T7

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Re: Airlines post COVID

#306499

Postby airbus330 » May 7th, 2020, 5:25 pm

flyer61 wrote:Airbus 330

let me help you with IAG (he said teasingly)

Iberia - Government department
BA - Government department
Aer Lingus - Government department


LoL, you're quite right.
can I add Emirates, Qatar, Etihad, The myriad of Chinese airlines, whatever replaces the defunct SAA, Turkish 50%, Norwegian after the government loans kick in, Air France /KLM with a gigantic Elysee bung, Alitalia from May 2020. Basically, it leaves the US airlines and Qantas of any size. What a joke of an industry.

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Re: Airlines post COVID

#306513

Postby terminal7 » May 7th, 2020, 6:54 pm

pssst - don't tell Sid. We all made a few hundred here and there - the bankers made millions - senior execs in nationalised industries had their pay increased nth fold in the private sector - and now our children will pay up. Gred is good - remember.

T7

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Re: Airlines post COVID

#306520

Postby Lootman » May 7th, 2020, 7:26 pm

terminal7 wrote:pssst - don't tell Sid. We all made a few hundred here and there - the bankers made millions - senior execs in nationalised industries had their pay increased nth fold in the private sector - and now our children will pay up. Greed is good - remember.

Which businesses would you like to see renationised then, other than the airlines where there may be little choice?

The government acts as a backstop for those businesses that are both essential (e.g. airlines) and yet not economically viable. That is a legitimate role for government.

I have a much bigger problem with the old-school/French idea of nationalising a business so that we can maintain thousands of doomed jobs e.g. cars, steel, coal, shipbuilding . .

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Re: Airlines post COVID

#306551

Postby airbus330 » May 7th, 2020, 9:30 pm

Lootman wrote:
terminal7 wrote:pssst - don't tell Sid. We all made a few hundred here and there - the bankers made millions - senior execs in nationalised industries had their pay increased nth fold in the private sector - and now our children will pay up. Greed is good - remember.

Which businesses would you like to see renationised then, other than the airlines where there may be little choice?

The government acts as a backstop for those businesses that are both essential (e.g. airlines) and yet not economically viable. That is a legitimate role for government.

I have a much bigger problem with the old-school/French idea of nationalising a business so that we can maintain thousands of doomed jobs e.g. cars, steel, coal, shipbuilding . .


Once upon a time I would have instinctively agreed with you. I grew up in London and could never quite understand the hateful attitude towards wealth displayed by my university friends from the North in the late early 80's. Then I moved to South Wales and saw the social devastation that Maggies war with the coal miners had left. It reminded me of Iraq, we won the war but had no clue how to administer the peace. I now feel that if you are going to take down an industry, you have to have a plan to employ the victims elsewhere in proper jobs. It doesn't matter if they are state jobs if the state can run a business properly, you can't throw people on the scrap heap and allow the following generations to fester. If we do end up with a mass shrinkage of the airline industry, why not find something worthwhile and well paid for those discarded? The gap between haves and have nots has become too great, and I include myself in the haves. If something isn't done and we end up with millions more unemployed I fear that the Brixton riots in the 80's might be repeated and amplified.


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