September 9, 2021

Airlines File a Blizzard of Downward Q3 Guidance Notices

Today saw a flood of airlines filing updates to their Q3 guidance, and just about none of them were positive. Allegiant, American, Delta, Frontier, JetBlue, Southwest, Sun Country, and United all filed 8-Ks with the SEC laying out the carnage. Here’s the rundown:

  • Allegiant: Q3 revenue guidance lowered by 0.5 to 2.5% compared to 2019.
  • American: Q3 revenue guidance lowered by 4 to 8 points with pre-tax ex-special items margin range lowered 7 points.
  • Delta: Q3 revenue will be at the lower end of previous guidance down 30 to 35% compared to 2019 and the airline will pull down Q4 capacity an additional 3 to 5% over previous plan.
  • Frontier: Q3 revenue guidance lowered 3 to 4 points compared to 2019 with adjusted net income margin lowered 6 points.
  • JetBlue: Q3 revenue guidance at the lower end of previous expectations, now down 6 to 9% compared to 2019 with EBITDA also expected at the low end, between $75 – $125m.
  • Southwest: Q3 revenue guidance at the lower end of previous expectations, now 18 to 20% compared to 2019 and it will now be “difficult” for the company to reach profit ex-special items.
  • United: Q3 revenue will now be down 33% compared to 2019 and the airline now expects a pre-tax loss in both Q3 and Q4.

Other than that, how was the play Mrs. Lincoln?

If there was any bright spot, it was Sun Country which kept its revenue forecast unchanged and decreased the expected cost of fuel. That means it expects its operating margin to come in at the higher end of forecasts, now between 7.0 to 9.5%.

United Continues to Be Strict on Vaccines with Exemption Policy

United Airlines has been the most strict when it comes to requiring employees to be vaccinated against COVID-19, and now it’s getting even more hardline. The airline has rolled out its plan for those with medical and religious exemptions. To sum it up, the plan is “stay home.”

Anyone can apply for medical or religious exemptions from the vaccine mandate, but if United denies it, that employee will have 5 weeks to get fully vaccinated or be terminated. Those with approved exemptions, however, will all be put on temporary leave starting on October 2.

Employees with medical exemptions will go on leave per the terms of their medical leave plans which may or may not be paid, but those on religious exemptions will be put on unpaid leave. Employees who aren’t in customer-facing positions will be allowed to come back to work when there is a masking and testing safety policy in place, whenever that may be. Those in customer-facing positions can’t come back until the pandemic is over. Either way, that’s a lot of time to not have a paycheck, so we imagine most of these people will just go find other jobs… which is likely the intent of the policy.

EasyJet Turns Down Wizz Air’s Overtures

Wizz Air is flush with cash and has been looking to expand throughout the pandemic. Its most recent effort, however, has hit a brick wall. The airline’s attempt to buy fellow low-cost operator easyJet has been turned down by that airline.

To the surprise of nobody, easyJet said that the suitor — which it refused to name but sources indicate is Wizz — undervalued its business. Just once we’d like to see a negotiation where the company being acquired says it’s being overvalued by the acquirer. Whether this means the negotiations are truly done or if this will just spark a feverish bidding war remains to be seen.

The two airlines together would be a powerhouse that would compete with Ryanair for dominance on the European continent. Instead, easyJet thinks its best plan is to put forward a rights issue worth $1.7 billion so it can continue to grow and take advantage of retrenching legacy airlines in the market. (That’s you, Alitalia.)

  • Allegiant has painted an airplane to support the Raiders football team. To honor the Raiders, all passengers will be forced to dress up like members of the Black Hole and be prepared to fight. So, it’s just like any other Allegiant flight.
  • British Airways has pulled its first A380 out of long-term storage.
  • Emirates will go back into Saudi Arabia this month followed by St Petersburg next month.
  • Frontier retired its last A319 yesterday with Erma the Ermine on the tail. An ermine, in case you were wondering, is a weasel. Frontier’s smallest airplane will now be the A320.
  • ITA, the successor to Alitalia, is having problems with unions, legal issues, and so many other hiccups. In other words, it’s just another normal day for Alitalia.
  • Spirit has agreed to take another 10 A321neos from lessor Air Lease Corporation. Presumably these airplanes will be used to run the future schedule Spirit wanted to run with fewer airplanes before it melted down completely.
  • Qantas will require all passengers to be vaccinated when it restarts international operations later this year.
  • United will purchase 1.5 billion gallons of sustainable fuel from Alder over the next 20 years.
  • WestJet will require employees to be fully vaccinated against COVID-19 by October 30 or they will be fired or put on leave.

Why did Humpty Dumpty have a great fall?… To make up for his miserable summer.