The jump in passenger traffic for U.S. airlines during the Thanksgiving and Christmas holidays was a mirage, not a sustainable source of revenue for overcoming the coronavirus crisis. On Thursday, Alaska Airlines said passenger volume and revenue since October has retreated again and Delta Air Lines (NYSE: DAL) sounded less optimistic about the next few months.
Ahead of a Jan. 26 earnings release, Alaska Air Group (NYSE: ALK) indicated that it will drain its pool of cash at a faster rate in the first quarter of 2021 as business slows. It reported the number of passengers dipped from 1.4 million in October to 1.25 million in December and estimated it will carry 1.1 million to 1.2 million customers this month. Passenger traffic was down 64% in October from the 2019 level, but worsened to negative 70% in December and is expected to be down by two-thirds or more again in January.
Alaska’s revenue was down 67% in December year-over-year, compared to 62% in October. The Seattle-based airline estimated revenue will be 60% to 65% below the prior year in January.
Although Alaska Airlines has gradually increased capacity, passenger load factors are falling from 49% in October to an estimated 35% to 40% in January.
Alaska Airlines generated 89 million revenue-ton-miles of cargo in 2019, according to the U.S. Bureau of Transportation Statistics. The most current figures for 2020 show cargo volume was down 25.2% through September. Alaska operates narrowbody aircraft, including three Boeing 737 freighters. It’s a key source of cargo transport for Pacific Northwest seafood and for the state of Alaska.
Domestic air travel increased in late summer from the pandemic bottom as government lockdowns eased and people took a chance on short trips while schools were closed. The winter season is normally slower, but airlines say business is still significantly worse than before the pandemic. Demand for future travel also hit pandemic-period highs in October. But demand softened in November as new travel restrictions were announced by state, local and federal authorities.
Alaska Air said cash bookings for future travel improved in December, in part due to marketing campaigns and promotional activity.
Alaska said its cash burn was about $350 million — about $3.8 million per day — in the fourth quarter, an improvement from the third-quarter cash burn of about $399 million. The company projected it will consume $125 million to $150 million in cash during January. With travel patterns likely to stay the same through March, that means cash burn for the quarter could be between $375 million and $450 million — or $4.1 million to $5 million per day. Alaska Air said it had cash and short-term investments of about $3.2 billion as of Wednesday.
Alaska’s quarterly preview came the same day Delta Air Lines reported a $2.1 billion adjusted pretax loss for the fourth quarter, with an average daily cash burn of $12 million. It estimated the cash burn rate will be $10 million to $15 million in the first quarter.
United Airlines (NASDQ: UAL) is scheduled to report its earnings on Thursday.