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Another huge round of airline losses is coming

October 12, 2020. Summarized by summa-bot.

The second quarter was the worst financial hit in the history of the airline industry. The third-quarter results won't be much better.

New York (CNN Business)The second quarter was the worst financial hit in the history of the airline industry.

US airlines reported combined losses of $12 billion in the second quarter, excluding special items, as revenue plunged 86% from the prior year.

And analysts are forecasting that losses will come to about $10 billion in the just-completed third quarter.

Airlines did manage to shave losses by trimming costs -- including labor, as employees took buyouts and early retirement packages and agreed to unpaid furloughs.

Yet it's not much better than the previous disastrous quarter: Wall Street analysts forecast industry sales will be down 75% in the third quarter.

Meanwhile, many, though not all, of the airlines have recently implemented involuntary job cuts and furloughs that had not been allowed through the end of September under terms of the Congress-approved financial relief for the industry earlier this year.

US airlines received $25 billion in direct help to keep workers on payroll through the end of September, along with an additional $25 billion in no-strings loans that did not come with the promise to avoid layoffs.

As soon as the prohibition on involuntary job cuts ended on October 1, American Airlines (AAL) cut 19,000 jobs and United (UAL) cut an additional 13,000.

There was bipartisan support for a second package of federal help to prevent those cuts, but hopes for that assistance died when Congress and the Trump administration failed to agree on another Covid stimulus package.

Every US airline lost money in the second quarter.

When will the losses end for the industry?

"We don't expect six months from now that demand will return to where it was pre-pandemic," said American Airlines CEO Doug Parker in a CNN interview at the end of last month.

It's also a matter of the state of the economy keeping both leisure and business travelers at home.

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