Airbus reports a EBIT €1.6 billion loss in the second quarter

Airbus issued this second quarter financial report:

Industrial system adjusted to new production levels, cash containment and business resizing on track
H1 financials reflect COVID-19 impact mitigated by adaptation measures
Revenues € 18.9 billion; EBIT Adjusted € -0.9 billion, including € -0.9 billion COVID-19 related charges
EBIT (reported) € -1.6 billion; loss per share (reported) € -2.45
Free cash flow before M&A and customer financing € -12.4 billion, € -4.4 billion in Q2
Strong liquidity underpins business resilience and flexibility

Airbus SE reported consolidated financial results for the Half-Year (H1) ended June 30, 2020.

“The impact of the COVID-19 pandemic on our financials is now very visible in the second quarter, with H1 commercial aircraft deliveries halving compared to a year ago,” said Airbus Chief Executive Officer Guillaume Faury. “We have calibrated the business to face the new market environment on an industrial basis and the supply chain is now working in line with the new plan. It is our ambition to not consume cash before M&A and customer financing in H2 2020. We face a difficult situation with uncertainty ahead, but with the decisions we have taken, we believe we are adequately positioned to navigate these challenging times in our industry.”

Net commercial aircraft orders totalled 298 (H1 2019: 88 aircraft), including 8 aircraft in Q2, with the order backlog comprising 7,584 commercial aircraft as of 30 June 2020. Airbus Helicopters booked 75 net orders (H1 2019: 123 units), including 3 H145s, 1 Super Puma and 1 H160 during the second quarter alone. Airbus Defence and Space’s order intake increased to € 5.6 billion.

Consolidated revenues decreased to € 18.9 billion (H1 2019: € 30.9 billion), driven by the difficult market environment impacting the commercial aircraft business with around 50% fewer deliveries year-on-year. This was partly offset by more favourable foreign exchange rates. A total of 196 commercial aircraft were delivered (H1 2019: 389 aircraft), comprising 11 A220s, 157 A320 Family, 5 A330s and 23 A350s. Airbus Helicopters reported stable revenues, reflecting lower deliveries of 104 units (H1 2019: 143 units) partially compensated by higher services. Revenues at Airbus Defence and Space were impacted by lower volume and mix, in particular at Space Systems, as well as delays in some programmes caused by the COVID-19 situation.

Consolidated EBIT Adjusted – an alternative performance measure and key indicator capturing the underlying business margin by excluding material charges or profits caused by movements in provisions related to programmes, restructuring or foreign exchange impacts as well as capital gains/losses from the disposal and acquisition of businesses – totalled € -945 million (H1 2019: € 2,529 million).

Airbus’ EBIT Adjusted of € -1,307 million (H1 2019: € 2,193 million(1)) mainly reflected the reduced commercial aircraft deliveries and lower cost efficiency. Steps have been taken to adapt the cost structure to the new levels of production, the benefits of which are materialising as the plan is executed. Also included in the EBIT Adjusted is € -0.9 billion of COVID-19 related charges.

Commercial aircraft are now being produced at rates in accordance with the new production plan announced in April 2020, in response to the COVID-19 situation. The current market situation has led to a slight adjustment in the A350 rate from 6 to 5 aircraft a month for now. On the A220, the Final Assembly Line (FAL) in Mirabel, Canada, is expected to progressively return to pre-COVID levels at rate 4 while the new FAL in Mobile, US, opened as planned in May. At the end of June, around 145 commercial aircraft could not be delivered due to COVID-19.

Airbus Helicopters’ EBIT Adjusted increased to € 152 million (H1 2019: € 125 million), reflecting a favourable mix, mainly in military, and higher services partially offset by the lower deliveries. The five-bladed H145 and H160 helicopters were recently certified by the European Union Aviation Safety Agency.

EBIT Adjusted at Airbus Defence and Space decreased to € 186 million (H1 2019: € 233 million), reflecting the COVID-19 impact, mainly in Space Systems, partly offset by cost reduction measures. The Division’s restructuring plan was updated to also reflect the impact of the coronavirus pandemic.

Three A400M transport aircraft were delivered in H1 2020. The certification of automatic low-level flight capability and simultaneous paratrooper dispatch were achieved in H1 2020, marking major milestones towards the aircraft’s full development. A400M retrofit activities are progressing in close alignment with customers.

Consolidated self-financed R&D expenses totalled € 1,396 million (H1 2019: € 1,423 million).

Consolidated EBIT (reported) was € -1,559 million (H1 2019: € 2,093 million), including Adjustments totalling a net € -614 million. These Adjustments comprised:

€ -332 million related to A380 programme cost, of which € -299 million was in Q2;
€ -165 million related to the dollar pre-delivery payment mismatch and balance sheet valuation, of which € -31 million was in Q2;
€ -117 million of other costs, including compliance, of which € -82 million was in Q2.

The consolidated reported loss per share of € -2.45 (H1 2019 earnings per share: € 1.54) includes the financial result of € -429 million (H1 2019: € -215 million). The financial result reflects a net € -212 million related to Dassault Aviation as well as the impairment of a loan to OneWeb, recorded in Q1 2020 for an amount of € -136 million. The consolidated net loss(2) was € -1,919 million (H1 2019 net income: € 1,197 million).

Consolidated free cash flow before M&A and customer financing amounted to € -12,440 million (H1 2019: € -3,981 million) of which € -4.4 billion was in Q2. The corresponding figure for Q1 2020 excluding the penalty payments – related to January’s compliance settlement with the authorities – was also at € -4.4 billion, demonstrating that cash containment measures including the adjustment of incoming supply started to become effective. These measures partially compensated for the reduced cash inflow from the low number of commercial aircraft deliveries in Q2.

Capital expenditure in H1 was stable year-on-year at around € 0.9 billion with Full-Year 2020 capex still expected to be around € 1.9 billion. Consolidated free cash flowwas € -12,876 million (H1 2019: € -4,116 million). The consolidated net debt position was € -586 million on 30 June 2020 (year-end 2019 net cash position: € 12.5 billion) with a gross cash position of € 17.5 billion (year-end 2019: € 22.7 billion).

The Company’s Full-Year 2020 guidance was withdrawn in March. The impact of COVID-19 on the business continues to be assessed and given the limited visibility, in particular with respect to the delivery situation, no new guidance is issued.

Key post-closing events
In the frame of COVID-19, discussions are progressing with social partners. A restructuring provision is expected to be recognised once the necessary conditions are fulfilled. The amount is expected to be between € 1.2 billion and € 1.6 billion.

The UK Serious Fraud Office (SFO) has requisitioned GPT Special Project Management Ltd (GPT) to appear in court for prosecution on a single corruption-related charge. GPT is a UK company that operated in Saudi Arabia which was acquired by Airbus in 2007 and ceased operations in April 2020. The SFO’s investigation related to contractual arrangements originating prior to GPT’s acquisition and continuing thereafter. A resolution of GPT, whatever its form, will not affect the 31 January 2020 UK Deferred Prosecution Agreement and a value has been provisioned in the Airbus accounts(3).

On 24 July 2020, the Company announced it had agreed with the governments of France and Spain to make amendments to the A350 Repayable Launch Investment (RLI) contracts to end the long-standing World Trade Organisation (WTO) dispute and remove any justification for US tariffs. After 16 years of litigation at the WTO, this final step removes the last contentious point by amending the French and Spanish contracts to what the WTO considers the appropriate interest rate and risk assessment benchmarks(3).

Note to editors: Live Webcast of the Analyst Conference Call
At 08:15 CEST on 30 July 2020, you can listen to the H1 2020 Results Analyst Conference Call with Chief Executive Officer Guillaume Faury and Chief Financial Officer Dominik Asam via the Airbus website. The analyst call presentation can also be found on the company website. A recording will be made available in due course. For a reconciliation of Airbus’ KPIs to “reported IFRS” please refer to the analyst presentation.

Airbus Consolidated – Half-Year (H1) Results 2020

(Amounts in Euro)

Consolidated Airbus	H1 2020	H1 2019	Change
Revenues, in millions thereof defence, in millions	18,948 4,092	30,866 4,085	-39% 0%
EBIT Adjusted, in millions	-945	2,529	–
EBIT (reported), in millions	-1,559	2,093	–
Research & Development expenses, in millions	1,396	1,423	-2%
Net Income/Loss(2), in millions	-1,919	1,197	–
Earnings/Loss Per Share	-2.45	1.54	–
Free Cash Flow (FCF), in millions	-12,876	-4,116	–
Free Cash Flow before M&A, in millions	-12,373	-3,998	–
Free Cash Flow before M&A and Customer Financing, in millions	-12,440	-3,981	–

Consolidated Airbus	30 June 2020	31 Dec 2019	Change
Net Cash/Debt position, in millions	-586	12,534	–
Employees	135,154	134,931	0%

By Business Segment	Revenues			EBIT (reported)
(Amounts in millions of Euro)	H1 2020	H1 2019 (1)	Change	H1 2020	H1 2019 (1)	Change
Airbus	12,533	24,043	-48%	-1,808	2,006	–
Airbus Helicopters	2,333	2,371	-2%	152	124	+23%
Airbus Defence and Space	4,551	5,015	-9%	73	-15	–
Eliminations	-469	-563	–	24	-22	–
Total	18,948	30,866	-39%	-1,559	2,093	–

By Business Segment	EBIT Adjusted
(Amounts in millions of Euro)	H1 2020	H1 2019 (1)	Change
Airbus	-1,307	2,193	–
Airbus Helicopters	152	125	+22%
Airbus Defence and Space	186	233	-20%
Eliminations	24	-22	–
Total	-945	2,529	–

By Business Segment	Order Intake (net)			Order Book
	H1 2020	H1 2019	Change	30 June 2020	30 June 2019	Change
Airbus, in units	298	88	+239%	7,584	7,276	+4%
Airbus Helicopters, in units	75	123	-39%	666	697	-4%
Airbus Defence and Space, in millions of Euro	5,588	4,220	+32%	N/A	N/A	N/A

Airbus Consolidated – Second Quarter (Q2) Results 2020

(Amounts in Euro)

Consolidated Airbus	Q2 2020	Q2 2019	Change
Revenues, in millions	8,317	18,317	-55%
EBIT Adjusted, in millions	-1,226	1,980	–
EBIT (reported), in millions	-1,638	1,912	–
Net Income/Loss(2), in millions	-1,438	1,157	–
Earnings/Loss Per Share (EPS)	-1.84	1.49	–

By Business Segment	Revenues			EBIT (reported)
(Amounts in millions of Euro)	Q2 2020	Q2 2019 (1)	Change	Q2 2020	Q2 2019 (1)	Change
Airbus	4,964	14,346	-65%	-1,865	1,687	–
Airbus Helicopters	1,131	1,364	-17%	99	115	-14%
Airbus Defence and Space	2,440	2,903	-16%	126	102	+24%
Eliminations	-218	-296	–	2	8	-75%
Total	8,317	18,317	-55%	-1,638	1,912	–

By Business Segment	EBIT Adjusted
(Amounts in millions of Euro)	Q2 2020	Q2 2019 (1)	Change
Airbus	-1,498	1,730	–
Airbus Helicopters	99	110	-10%
Airbus Defence and Space	171	132	+30%
Eliminations	2	8	-75%
Total	-1,226	1,980	–

Q2 2020 revenues decreased by 55%, mainly driven by lower deliveries at Airbus and Airbus Helicopters, and lower revenues at Airbus Defence and Space.

Q2 2020 EBIT Adjusted of € -1,226 million reflected low commercial aircraft deliveries and COVID-19 related charges.

Q2 2020 EBIT (reported) of € -1,638 million included net Adjustments of € -412 million. Net Adjustments in the second quarter of 2019 amounted to € -68 million.

Q2 2020 Net Loss of € -1,438 million mainly reflected EBIT (reported) and the low effective tax rate.

EBIT (reported) / EBIT Adjusted Reconciliation

The table below reconciles EBIT (reported) with EBIT Adjusted.

Consolidated Airbus (Amounts in millions of Euro)	H1 2020
EBIT (reported)	-1,559
thereof:
A380 programme cost	-332
$ PDP mismatch/balance sheet revaluation	-165
Others	-117
EBIT Adjusted	-945

Boeing CEO updates employees on quarterly results and market realities

Boeing President and CEO Dave Calhoun issued the following letter to employees today addressing aerospace market realities:

Team,

These past few months have been unlike anything we’ve seen. The pandemic’s effect on our communities and industry is ongoing. And the challenges we face as a company are still unfolding.

As cases continue to rise in areas around the globe, health and safety remain a top priority. My thanks go to everyone who is supporting our safety efforts, wearing face coverings and upholding our shared accountability for keeping one another safe. All those affected directly by COVID-19 also have my sympathies.

The reality is the pandemic’s impact on the aviation sector continues to be severe. Though some fliers are returning slowly to the air, their numbers remain far lower than 2019, with airline revenues likewise reduced. This pressure on our commercial customers means they are delaying jet purchases, slowing deliveries, deferring elective maintenance, retiring older aircraft and reducing spend — all of which affects our business and, ultimately, our bottom line. While there have been some encouraging signs, we estimate it will take around three years to return to 2019 passenger levels.

That’s why we’ve been taking decisive actions. To bolster our near-term liquidity, we suspended our dividend, terminated our share repurchasing program, reduced discretionary spending and overhead costs, and issued $25 billion in new debt.

While these steps help us navigate the pandemic, they don’t change the fact that the commercial marketplace is different, and we must change with it. To align to a smaller market, we lowered commercial production rates and took tough workforce actions throughout the quarter.

Unfortunately, it’s become clear that we need to make further adjustments based on the prolonged impact of COVID-19.

The changes include further lowering our commercial airplane production rates:

– We will have a slower ramp-up in 737 production than previously planned, with a gradual increase to 31 per month by the beginning of 2022.

– We will reduce the combined 777/777X production rate to two per month in 2021, which is one unit lower per month than we announced last quarter.

– We will further reduce 787 production to six per month in 2021. This is an adjustment down from the reduction we announced last quarter to 10 per month currently and seven per month by 2022. With this lower rate profile, we will also need to evaluate the most efficient way to produce the 787, including studying the feasibility of consolidating production in one location. We will share more with you following our study.

– While our 767 and 747 rates remain unchanged, in light of the current market dynamics and outlook, we’ll complete production of the iconic 747 in 2022. Our customer commitment does not end at delivery, and we’ll continue to support 747 operations and sustainment well into the future.

The work you’ve done on these programs has been tremendous. I have been impressed during every visit to our production facilities. These production rate changes are not a reflection on your work or our capability. The market simply won’t support higher output levels at this time, and we need to adapt accordingly.

As you know, we previously announced a net 10% workforce reduction in 2020 through a combination of voluntary layoffs, attrition and involuntary layoffs (ILOs) to align to a smaller market. The first wave of associates affected by ILOs received notification in May, and we continue to conduct smaller, phased workforce reductions to reach this target. Managers are communicating the latest wave of those reductions beginning today.

Regretfully, the prolonged impact of COVID-19 causing further reductions in our production rates and lower demand for commercial services means we’ll have to further assess the size of our workforce. This is difficult news, and I know it adds uncertainty during an already challenging time. We will try to limit the impact on our people as much as possible going forward. And as always, we will communicate openly, honestly and transparently with you.

The diversity of our portfolio and our government services, defense and space programs provide some stability in the near term as we take these tough but necessary steps. And we’ll continue working to meet our commitments and deliver on our priorities.

As we look to the future, we also are focused on not just adapting and recovering but also emerging stronger and more resilient. That includes proactively reviewing every aspect of our company to identify opportunities to improve, align to our new market and strengthen our culture. We are looking holistically at our infrastructure footprint, our overhead and organizational structure, our portfolio and investments, our supply chain health and stability, and our ability to drive operational excellence and a keen focus on safety in everything we do.

And while we’re facing challenges, it’s important to remember the good work and innovation underway across our company. This is absolutely necessary for our future. Aerospace has always proven to be resilient — and so has Boeing.

Thank you for facing these challenges with me. I could not ask for a better team.

Dave

Boeing reports a large second quarter loss

Boeing released this second quarter statement:

Financial results continue to be significantly impacted by COVID-19 and the 737 MAX grounding
Revenue of $11.8 billion, GAAP loss per share of ($4.20) and core (non-GAAP)* loss per share of ($4.79)
Operating cash flow of ($5.3) billion; cash and marketable securities of $32.4 billion
Total backlog of $409 billion, including more than 4,500 commercial airplanes

Table 1. Summary Financial Results	Second Quarter			First Half
(Dollars in Millions, except per share data)	2020	2019	Change	2020	2019	Change

Revenues	$11,807	$15,751	(25)%	$28,715	$38,668	(26)%

GAAP
Loss From Operations	($2,964)	($3,380)	NM	($4,317)	($1,030)	NM
Operating Margin	(25.1)%	(21.5)%	NM	(15.0)%	(2.7)%	NM
Net Loss	($2,395)	($2,942)	NM	($3,036)	($793)	NM
Loss Per Share	($4.20)	($5.21)	NM	($5.31)	($1.40)	NM
Operating Cash Flow	($5,280)	($590)	NM	($9,582)	$2,198	NM
Non-GAAP*
Core Operating Loss	($3,319)	($3,745)	NM	($5,019)	($1,759)	NM
Core Operating Margin	(28.1)%	(23.8)%	NM	(17.5)%	(4.5)%	NM
Core Loss Per Share	($4.79)	($5.82)	NM	($6.49)	($2.60)	NM

*Non-GAAP measure; complete definitions of Boeing’s non-GAAP measures are on page 6, “Non-GAAP Measures Disclosures.”

The Boeing Company reported second-quarter revenue of $11.8 billion, GAAP loss per share of ($4.20) and core loss per share (non-GAAP)* of ($4.79), primarily reflecting the impacts of COVID-19 and the 737 MAX grounding (Table 1). Boeing recorded operating cash flow of ($5.3) billion.

“We remained focused on the health of our employees and communities while proactively taking action to navigate the unprecedented commercial market impacts from the COVID-19 pandemic,” said Boeing President and Chief Executive Officer Dave Calhoun. “We’re working closely with our customers, suppliers and global partners to manage the challenges to our industry, bridge to recovery and rebuild to be stronger on the other side.”

In the second quarter, Boeing restarted production operations across key sites following temporary pauses to protect its workforce and introduce rigorous new health and safety procedures. Despite the challenges, Boeing continued to deliver across key commercial, defense, space and services programs. The company also resumed early stages of production on the 737 program with a focus on safety, quality and operational excellence. Following the lead of global regulators, Boeing made steady progress toward the safe return to service of the 737, including completion of FAA certification flight tests.

To align to the sharp reduction in commercial market demand in light of COVID-19, the company is taking several actions including further adjusting commercial airplane production rates and reducing employment levels.

“The diversity of our balanced portfolio and our government services, defense and space programs provide some critical stability for us in the near-term as we take tough but necessary steps to adapt for new market realities,” Calhoun said. “We are taking the right action to ensure we’re well positioned for the future by strengthening our culture, improving transparency, rebuilding trust and transforming our business to become a better, more sustainable Boeing. Air travel has always proven to be resilient – and so has Boeing.”

Table 2. Cash Flow	Second Quarter		First Half
(Millions)	2020	2019	2020	2019
Operating Cash Flow	($5,280)	($590)	($9,582)	$2,198
Less Additions to Property, Plant & Equipment	($348)	($421)	($776)	($922)
Free Cash Flow*	($5,628)	($1,011)	($10,358)	$1,276

*Non-GAAP measure; complete definitions of Boeing’s non-GAAP measures are on page 6, “Non-GAAP Measures Disclosures.”

Operating cash flow was ($5.3) billion in the quarter, primarily reflecting lower commercial deliveries and services volume due to COVID-19 and the 737 MAX grounding, as well as timing of receipts and expenditures (Table 2).

Table 3. Cash, Marketable Securities and Debt Balances	Quarter-End
(Billions)	Q2 20	Q1 20
Cash	$20.0	$15.0
Marketable Securities¹	$12.4	$0.5
Total	$32.4	$15.5
Debt Balances:
The Boeing Company, net of intercompany loans to BCC	$59.5	$36.9
Boeing Capital, including intercompany loans	$1.9	$2.0
Total Consolidated Debt	$61.4	$38.9

¹ Marketable securities consists primarily of time deposits due within one year classified as “short-term investments.”

Cash and investments in marketable securities increased to $32.4 billion, compared to $15.5 billion at the beginning of the quarter, driven by the issuance of new debt (Table 3). Debt was $61.4 billion, up from $38.9 billion at the beginning of the quarter due to the issuance of new debt, partially offset by repayment of maturing debt.

Total company backlog at quarter-end was $409 billion.

Segment Results

Commercial Airplanes

Table 4. Commercial Airplanes	Second Quarter			First Half
(Dollars in Millions)	2020	2019	Change	2020	2019	Change

Commercial Airplanes Deliveries	20	90	(78)%	70	239	(71)%

Revenues	$1,633	$4,722	(65)%	$7,838	$16,544	(53)%
Loss from Operations	($2,762)	($4,946)	NM	($4,830)	($3,773)	NM
Operating Margin	(169.1)%	(104.7)%	NM	(61.6)%	(22.8)%	NM

Commercial Airplanes second-quarter revenue and operating margin decreased reflecting lower delivery volume, partially offset by a lower 737 MAX customer consideration charge of $551 million in the quarter compared to a $5.6 billion charge in the same period last year. Second-quarter operating margin was also negatively impacted by $712 million of abnormal production costs related to the 737 program, $468 million of severance expense and $133 million of abnormal production costs from the temporary suspension of operations in response to COVID-19.

The 737 program resumed early stages of production in May and expects to continue to produce at low rates for the remainder of 2020. The COVID-19 pandemic has significantly impacted air travel and reduced near-term demand, resulting in lower production and delivery rate assumptions. Commercial Airplanes expects to gradually increase the 737 production rate to 31 per month by the beginning of 2022, with further gradual increases to correspond with market demand. Estimated potential concessions and other considerations to customers related to the 737 MAX grounding increased by $551 million in the quarter. There was no material change to estimated abnormal production costs.

Commercial Airplanes has further updated its production rate assumptions this quarter to reflect impacts of COVID-19 on its demand outlook, and will continue to assess them on an ongoing basis. The 787 production rate will be reduced to 6 per month in 2021. The 777/777X combined production rate will be gradually reduced to 2 per month in 2021, with 777X first delivery targeted for 2022. At this time, production rate assumptions have not changed on the 767 and 747 programs.

Commercial Airplanes delivered 20 airplanes during the quarter, and backlog included over 4,500 airplanes valued at $326 billion.

Defense, Space & Security

Table 5. Defense, Space & Security	Second Quarter			First Half
(Dollars in Millions)	2020	2019	Change	2020	2019	Change

Revenues	$6,588	$6,579	—	$12,630	$13,166	(4)%
Earnings from Operations	$600	$975	(38)%	$409	$1,827	(78)%
Operating Margin	9.1%	14.8%	(5.7) Pts	3.2%	13.9%	(10.7) Pts

Defense, Space & Security second-quarter revenue was $6.6 billion, reflecting COVID-19 impact on derivative aircraft programs, partially offset by higher volume across the remainder of the portfolio (Table 5). Second-quarter operating margin decreased to 9.1 percent primarily due to a gain on sale of property in the second quarter of 2019 and a $151 million KC-46A Tanker charge primarily driven by additional fixed cost allocation resulting from lower commercial airplane production volume due to COVID-19.

During the quarter, Defense, Space & Security received an award for three additional MQ-25 unmanned aerial refueling aircraft for the U.S. Navy, as well as contracts for Cruise Missile Systems for the U.S. Navy and a contract for 24 AH-64E Apache helicopters for the Kingdom of Morocco. Defense, Space & Security completed Critical Design Review for the T-7A advanced trainer, achieved first flight and delivery of the F/A-18 U.S. Navy Block III Super Hornet, and achieved first flight of the F-15 Qatar Advanced aircraft. Defense, Space & Security also delivered the 100^thU.S. Navy P-8A Poseidon, the 400^th V-22 Osprey, and the 2,500^th AH-64 Apache.

Backlog at Defense, Space & Security was $64 billion, of which 31 percent represents orders from customers outside the U.S.

Global Services

Table 6. Global Services	Second Quarter			First Half
(Dollars in Millions)	2020	2019	Change	2020	2019	Change

Revenues	$3,488	$4,543	(23)%	$8,116	$9,162	(11)%
(Loss)/Earnings from Operations	($672)	$687	NM	$36	$1,340	NM
Operating Margin	(19.3)%	15.1%	NM	0.4%	14.6%	NM

Global Services second-quarter revenue decreased to $3.5 billion, driven by lower commercial services volume due to COVID-19, partially offset by higher government services volume (Table 6). Second-quarter operating margin decreased to (19.3) percent primarily due to lower commercial services volume, less favorable mix of products and services, and $923 million of charges related to asset impairments and severance costs as a result of the COVID-19 market environment.

During the quarter, Global Services was awarded a contract modification for P-8A integrated logistics support for the U.S. Navy. Global Services captured an order for four 767-300 freighter conversions for DHL and was awarded a contract for F-15 pre-delivery training support for the Qatar Emiri Air Force. Global Services also delivered the first F/A-18 Super Hornet test aircraft modified for the U.S. Navy Blue Angels.

Additional Financial Information

Table 7. Additional Financial Information	Second Quarter		First Half
(Dollars in Millions)	2020	2019	2020	2019
Revenues
Boeing Capital	$69	$75	$134	$141
Unallocated items, eliminations and other	$29	($168)	($3)	($345)
Earnings from Operations
Boeing Capital	($7)	$37	$17	$57
FAS/CAS service cost adjustment	$355	$365	$702	$729
Other unallocated items and eliminations	($478)	($498)	($651)	($1,210)
Other income, net	$94	$107	$206	$213
Interest and debt expense	($553)	($154)	($815)	($277)
Effective tax rate	30.0%	14.2%	38.4%	27.5%

At quarter-end, Boeing Capital’s net portfolio balance was $2.1 billion. Revenue from other unallocated items and eliminations increased primarily due to reserves related to cost accounting litigation recorded in the second quarter of 2019. Interest and debt expense increased due to higher debt balances. The second quarter effective tax rate reflects tax benefits related to the 5 year net operating loss carryback provision in the Coronavirus Aid, Relief, and Economic Security (CARES) Act as well as the impact of pre-tax losses.

JetBlue deploys Honeywell’s ultraviolet cleaning system for aircraft interiors

Honeywell’s new UV Cabin System has been put in service as part of a pilot by JetBlue Airways, marking the first time a U.S. airline has implemented the Honeywell technology. In clinical studies, ultraviolet light has been found to be capable of significantly reducing certain viruses and bacteria when properly applied at prescribed levels. The Honeywell UV Cabin System can traverse an aircraft cabin in less than 10 minutes, and JetBlue will be gauging the system’s place in its operation, while continuing other cleaning methods.

“With the safety of our crewmembers and customers our first priority, JetBlue’s Safety from the Ground Up initiative is maintaining a layered approach to safety by ensuring healthy crewmembers, providing flexibility, adding space, reducing touchpoints, and keeping surfaces clean and sanitized,” said Joanna Geraghty, JetBlue’s president and chief operating officer. “As we look to add additional layers of protection by utilizing cutting-edge technology, we have identified the Honeywell UV Cabin System as a potential game changer when it comes to efficiently assisting in our efforts to sanitize surfaces onboard.”

Honeywell has delivered eight of the devices to JetBlue, and the devices are now being put into service as part of JetBlue’s Safety from the Ground Up program at two of the airline’s focus cities, John F. Kennedy International Airport in New York and Fort Lauderdale-Hollywood International Airport. These two locations kicked off a 90-day pilot program for JetBlue to evaluate the Honeywell solution.

“JetBlue took an immediate interest in this new product when we demonstrated it for them just a few weeks ago, and now JetBlue is receiving our first systems,” said Mike Madsen, Honeywell Aerospace president and CEO. “We’ve ramped up production quickly on the UV Cabin System, and our company is working on a range of solutions to help make passengers more comfortable about flying.”

The Honeywell UV Cabin System is roughly the size of an aircraft beverage cart and has UV-C light arms that extend over the top of seats and sweep the cabin to treat aircraft surfaces. Properly applied, UV-C lights can deliver doses that clinical studies have found to be capable of reducing various viruses and bacteria, including SARS-CoV and MERS-CoV. Results vary based on UV dosage and application.*

For SARS-CoV-2, the virus that causes COVID-19, there are multiple medical studies underway involving UV-C light. Preliminary results from studies performed by Boston University and a consortium of Italian medical and academic professionals report that UV-C light can inactivate the virus at prescribed dosages in the lab. Additional studies are underway for other environments.*

Allegiant reports a $93.1 million net loss in the second quarter

Allegiant Travel Company reported the following financial results for the second quarter 2020, as well as comparisons to the prior year:

“The second quarter proved to be the most turbulent quarter in the history of the industry,” stated Maurice J. Gallagher, Jr., chairman and CEO of Allegiant Travel Company. “As the virus spread throughout the country in March and April, the industry saw an unprecedented plummet in demand, followed by significant capacity cuts, upwards of 80 to 90 percent. As cases subsided, demand began trickling back in, only to begin recessing again with the uptick in cases beginning late June. It appears demand will continue to ebb and flow along with fluctuations in reported cases for the foreseeable future. We have built a unique way to operate our company as compared to the rest of the industry, which will continue to sustain us throughout the duration of these uncertain times.

“We are experts when it comes to managing capacity to meet demand. Our model was built around flexing capacity up and down to meet differing seasonal demand levels. This quarter proved to be the ultimate test of the model, and I believe our second quarter results highlight its inherent strength. Throughout the quarter, we maintained a very broad network and selling presence, cutting capacity when it made sense, but also capturing demand when it returned. We completed the quarter with roughly 50 percent reductions in capacity, maintaining the broadest schedule of any domestic carrier. Load factors were just over 50 percent, a significant step in the right direction from April lows. During the second quarter, Allegiant passengers accounted for more than five percent of all TSA screenings conducted. That is astonishing given our market share. These results are a testament to our ability to not only manage capacity, but also our ability to manage cost, further highlighting we are best equipped to react to these fluctuations in market conditions.

“Although we were able to manage through the chaos of the quarter, arguably better than most, this environment is unsustainable long-term. It continues to be of utmost importance to strengthen liquidity positions. We completed the quarter with an average daily cash burn of $900 thousand, a 57 percent reduction from our initial forecasts. June bookings were a significant contributor to this reduction, with several days in June exceeding prior year booking levels. In fact, June bookings resulted in cash breakeven for the month of June. We continued to remain disciplined in regard to cost savings and successfully cut more than 38 percent of operating expenses from the quarter. These efforts coupled with funds received related to the CARES Act as well as executed financing arrangements enabled us to grow our liquidity position by nearly $200 million to end the quarter with total liquidity of $663.1 million. Unfortunately, the strength seen in June has since weakened as case numbers have risen. I am comfortable the strides made in building liquidity throughout the quarter will act as a safety net as we continue to manage the ever-changing demand environment.

“In conclusion, I would like to thank our 4,000 team members for their continued hard work. These are difficult times, yet our employees continue to go the extra mile to prioritize the health and safety of our passengers by performing additional cleaning procedures on board our aircraft, encouraging social distancing practices, and exemplifying the principles of our Going the Distance for Health and Safety program. Although I believe the effects of this pandemic will linger well into 2021 and possibly beyond, I firmly believe Allegiant’s flexible model and financial strength will not only sustain us during these uncertain times, but will ultimately uniquely position us to recover quickly upon a normalized return of demand.”

Covid-19 Responses – Update

Maintain a comprehensive cleaning program for all aircraft that includes a regular schedule of standard and deep-clean procedures that exceed both CDC and Airbus guidance
Utilize VOC (volatile organic compound) filters on board every aircraft, which remove additional organic compounds and ensure that cabin air is changed on average, every three minutes, exceeding HEPA standards
Continue to encourage social distancing at check-in, while waiting at gates, and throughout the boarding process as well as offer complimentary health and safety kits to each passenger upon boarding the aircraft
Treat hard surfaces in all office areas, including airport station offices, maintenance facilities, headquarters/administrative offices, with antimicrobial disinfectant/protectant, and utilize wall-mounted and handheld thermometers for employee and crew member temperature checks
Partner with Quest Diagnostics to provide at-home self-collection COVID-19 test kits to employees in the event local testing is not immediately available
Effective July 2, require customers and crew members to wear face coverings through all phases of travel, including at the ticket counter, in the gate area, and during flight
Offer opt-in option in the booking path for customers to receive notification that their flight has reached 65 percent capacity with option to re-book on another flight with no fee or receive a refund
Continue to waive change and cancellation fees for all customers for future travel as well as extend expiry on credit vouchers to two years
- $80.7 million in cash refunds have been provided year to date
Reduced management and support teams by 220 positions, a 20 percent reduction of those work groups
- Employees will be paid through September 30, 2020, in compliance with the CARES Act

Second Quarter 2020 Results

Reported adjusted loss per share of $5.96, which excludes one-time, non-recurring charges, as detailed in the section below titled “COVID-19 Related Special Charges”, the benefit from the CARES Act payroll support program, and a portion of the tax benefit attributable to the CARES Act
Completed the quarter with load factor in the month of June of 56.8 percent, up 38 points from April
Total revenue for the quarter was $133.3 million, down 72.9 percent year over year
- Progressive improvement in revenue throughout the quarter with April, May, and June decreases of 95 percent, 75 percent, and 52 percent, respectively
- Despite yield pressure, average air ancillary revenue per passenger for the quarter was $51.57, remaining consistent with prior year
Total operating expense was $246.6 million, down 35.7 percent year over year on reduced capacity of 50.1 percent
- Total operating expense, excluding one-time, non-recurring charges noted below and excluding the benefit related to CARES Act payroll support, was $240.0 million, down 37.5 percent

Network

Reduced second quarter capacity by 50.1 percent
- Anticipate third quarter capacity reductions to be 25 percent of planned capacity but will adjust in accordance with demand trends
Conducted minimal close-in cancellations for the months of June and July to date

COVID-19 Related Special Charges

Recognized total special charges related to COVID-19 of $101 million during the second quarter
- $81.2 million included as an operating expense and $19.8 million included as other non-operating expense
$59 million adjustment resulting from the accelerated retirements of seven aircraft, loss on sale leaseback transaction of four A320 series aircraft, and write-off of other aircraft related assets
$10 million adjustment for additional salary and benefits expense in relation to the elimination of 220 positions as well as other non-recurring compensation expense associated with the acceleration of certain existing awards
- Total cash outlay is expected to be only $1.5 million of the $10 million adjustment
$5 million impairment loss related to an investment interest held by the company since 2018
$2 million write-down on various non-aircraft assets
$20 million accrual on the expectation to terminate the loan agreement with Sixth Street Partners (formerly TSSP) intended to finance the development of Sunseeker Resorts Charlotte Harbor
- Expected to be paid throughout the remainder of the year
$5 million related to suspension of construction at Sunseeker

CARES Act

Received $154.7 million of the $171.9 million Payroll Support Program grant in the quarter
- Remaining $17.2 million to be received in July
- Received $17.4 million in loan funds (recorded as debt and warrants) related to the $154.7 millionreceived
  - Expense offset recognized during the second quarter related to the grant was $74.5 million
  - Remaining $62.8 million recorded as an accrued liability to be relieved during the third quarter
- Future expense offset of roughly $75 million to be recognized during the third quarter
$45.6 million of federal income tax refunds related to net operating losses from 2018 and 2019were received in May
- Additional $48.7 million received during July
Expect a federal income tax refund in excess of $125 million related to 2020 net operating losses to be received during the first half of 2021
Eligible to receive up to $276 million loan under the CARES Act

Balance Sheet, Cash and Liquidity

Total cash and investments at June 30^th was $663.1 million
Entered into a sale leaseback transaction on June 23, which included the sale of four A320-series aircraft, generating $48 million
Further sources of liquidity received during the third quarter around $65.9 million, including:
- Federal income tax refund of $48.7 million related to net operating losses from 2018
- Additional payroll support related to the CARES Act of $17.2 million
Federal excise tax refund of $21 million related to net refunds issued during 2020 is expected during the second half of the year
Evaluating option to access up to a $276 million loan available through the CARES Act as well as other secured financing options available
2Q20 daily cash burn averaged $900 thousand per day ⁽¹⁾
- 57 percent reduction from initial expectations of $2.1 million as reported in our first quarter earnings release
- Gross bookings averaged more than $2.5 million per day during the quarter
3Q20 daily cash burn is expected to be slightly above $1 million assuming gross bookings average roughly $2 million per day
- Includes a portion of the $20 million accrual related to expectation to terminate the loan agreement with Sixth Street Partners
24 unencumbered aircraft and 10 unencumbered spare engines with approximate market values of $387 million
Air traffic liability at June 30^th was $355 million
- Balance related to future scheduled flights is $139 million
- Balance related to travel vouchers issued for future use is $216 million

(1) Daily cash burn defined as cash from operations less debt and rent payments and capital expenditure outflows excluding aircraft and engine acquisitions as they are expected to be financed. Excludes impact of CARES Act Payroll Support Program funding.

Capital Expenditures

Remaining 2020 spend related to capital expenditures is roughly $165 million
- Includes five previously executed purchase commitments for aircraft during 2020, all of which are intended to be financed
Reduced Sunseeker capital expenditures by $300 million for the year
Reduced full year heavy maintenance spend by roughly $70 million, compared to initial guidance of $120 million
- Six planned aircraft retirements within the next ten months and one additional retirement within the next three years
- Five planned CFM-engine retirements

Allegiant Travel Company will host a conference call with analysts at 4:30 p.m. ET Wednesday, July 29 to discuss its second quarter 2020 financial results. A live broadcast of the conference call will be available via the Company’s Investor Relations website homepage at http://ir.allegiantair.com. The webcast will also be archived in the “Events & Presentations” section of the website.

As a result of the COVID-19 pandemic, we will hold this year’s annual stockholders meeting on Tuesday, August 4, 2020.

Allegiant Air aircraft photo gallery:

Allegiant Air aircraft slide show:

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TAP Air Portugal resumes 65 routes in August and 76 in September

TAP Air Portugal has made this announcement:

In September, the Portuguese carrier replenishes about 40 percent of its normal pre-Covid operation.

About 500 round-trip flights per week in August.
In September, TAP will have close to 700 round-trip flights per week, which is equivalent to about 40 percent of its normal pre-Covid operation.

TAP is gradually restoring its operation and has approximately 500 weekly round-trip flights scheduled for August, for a total of 65 routes.

In September, the Company expects to operate close to 700 flights per week, in a total of 76 routes.

TAP increases its offer in the month of August, when it starts offering 18 weekly flights to Brazil, 20 flights to six destinations in North America, 44 flights to 9 destinations in Africa, 329 flights to 30 cities in Europe and 126 flights to six domestic airports.

It is in September, however, that TAP will restore its operation in a more significant way, recovering about 40 percent of what was its normal offer in the pre-Covid period. This month, the national airline will have 22 flights a week to Brazil, 30 flights on eight routes in North America, 59 flights to 13 cities in Africa and the Middle East, 498 flights to 35 European cities and 159 flights between six cities in Portugal.

The list of routes and flights may be adjusted whenever circumstances require, in view of the dynamics of the evolution of taxes and restrictions in the various countries, due to the evolution of the pandemic, as well as the evolution of demand. This list can be found here.

Even knowing that the environment on board is one of the most sterile and safe from the point of view of the contagion of infectious diseases, given the air quality and the cabin configuration, TAP adjusted the routines and implemented new and reinforced procedures, guaranteeing all passengers a Clean & Safe environment at all stages of their journey. Everyone’s health and safety are TAP’s priority.

TAP Air Portugal aircraft photo gallery:

TAP Air Portugal aircraft slide show:

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Emirates to resume flights to Clark from August 1, further expanding its Far East network

Emirates has made this announcement:

Emirates announces the resumption of passenger services to Clark with six weekly flights from 1 August, boosting its global network to 68 destinations in August and connecting customers to Europe, the Middle East, Asia Pacific and Africa.

With the resumption of flights to Clark, Emirates will now operate with scheduled services to two gateways in the Philippines, with services to Manila being in operation since 11 June. Furthermore, the network of destinations that it now serves in South East and East Asia has reached 13, across ten countries and territories.

All flights to Clark will be operated with a Boeing 777-300ER and are scheduled at two convenient timings per week to meet customers’ travel needs.

Flights between Clark and Dubai will operate on Mondays, Wednesdays and Saturdays as EK2520, which departs Dubai at 02:55 and arrives at Clark International Airport at 15:45, while EK338 will depart Clark at 17:15 and is scheduled to arrive in Dubai at 21:40. Flights to Clark on Tuesdays, Thursdays and Fridays will operate as EK2572 and will depart Dubai at 04:50 and arrive in Clark at 17:40. On the same days, the return flights to Dubai, operating as EK338, will depart Clark at 19:10 to arrive in Dubai at 23:35.

Dubai is open: Customers from across Emirates’ network can now to travel to Dubai as the city has re-opened for business and leisure visitors with new air travel protocols that safeguard the health and safety of visitors and communities. For more information on entry requirements for international visitors to Dubai, visit: www.emirates.com/flytoDubai

Free, global cover for COVID-19 related costs: Customers can now travel with confidence, as Emirates has committed to cover all COVID-19 related medical expenses, free of cost, should they be diagnosed with COVID-19 during their travel.

This cover is offered by Emirates free of cost to its customers regardless of class of travel or destination. It is immediately effective for customers flying on Emirates until 31 October 2020 (first flight to be completed on or before 31 October 2020), and is valid for 31 days from the moment they fly the first sector of their journey. This means Emirates customers can continue to benefit from the added assurance of this cover, even if they travel onwards to another city after arriving at their Emirates destination.

Customers do not need to register or fill in any forms before they travel, and they are not obligated to utilise this cover provided by Emirates.

Any impacted customer who has been diagnosed with COVID-19 during their travel simply has to contact a dedicated hotline to avail of assistance and cover.

The hotline number, and details of what COVID-19 related expenses are covered, is available on www.emirates.com/COVID19assistance.

Flexibility and assurance: With the gradual re-opening of borders over the summer, Emirates has revised its booking policies to offer customers more flexibility and confidence to plan their travel. Customers whose travel plans are disrupted by COVID-19 related flight or travel restrictions, can simply hold on to their ticket which will be valid for 24 months and rebook to fly at a later time; request travel vouchers to offset against future Emirates purchases, or request refunds via an online form on Emirates’ website or via their travel booking agent.

Health and safety first: Emirates has implemented a comprehensive set of measures at every step of the customer journey to ensure the safety of its customers and employees on the ground and in the air, including the distribution of complimentary hygiene kits containing masks, gloves, hand sanitiser and antibacterial wipes to all customers. For more information on these measures and the services available on each flight, visit: www.emirates.com/yoursafety

Travel restrictions: Customers are reminded that travel restrictions remain in place, and travellers will only be accepted on flights if they comply with the eligibility and entry criteria requirements of their destination countries. Visit: www.emirates.com/travelrestrictions

Dubai residents can check the latest travel requirements at: www.emirates.com/returntoDubai

IATA: Recovery delayed as international travel remains locked down

IATA has made this announcement:

The International Air Transport Association (IATA) released an updated global passenger forecast showing that the recovery in traffic has been slower than had been expected.

In the base case scenario:

Global passenger traffic (revenue passenger kilometers or RPKs) will not return to pre-COVID-19 levels until 2024, a year later than previously projected.
The recovery in short haul travel is still expected to happen faster than for long haul travel. As a result, passenger numbers will recover faster than traffic measured in RPKs. Recovery to pre-COVID-19 levels, however, will also slide by a year from 2022 to 2023. For 2020, global passenger numbers (enplanements) are expected to decline by 55% compared to 2019, worsened from the April forecast of 46%.

June 2020 passenger traffic foreshadowed the slower-than-expected recovery. Traffic, measures in RPK, fell 86.5% compared to the year-ago period. That is only slightly improved from a 91.0% contraction in May. This was driven by rising demand in domestic markets, particularly China. The June load factor set an all-time low for the month at 57.6%.

The more pessimistic recovery outlook is based on a number of recent trends:

Slow virus containment in the US and developing economies: Although developed economies outside of the US have been largely successful in containing the spread of the virus, renewed outbreaks have occurred in these economies, and in China. Furthermore there is little sign of virus containment in many important emerging economies, which in combination with the US, represent around 40% of global air travel markets. Their continued closure, particularly to international travel, is a significant drag on recovery.
Reduced corporate travel: Corporate travel budgets are expected to be very constrained as companies continue to be under financial pressure even as the economy improves. In addition, while historically GDP growth and air travel have been highly correlated, surveys suggest this link has weakened, particularly with regard to business travel, as video conferencing appears to have made significant inroads as a substitute for in-person meetings.
Weak consumer confidence: While pent-up demand exists for VFR (visiting friends and relatives) and leisure travel, consumer confidence is weak in the face of concerns over job security and rising unemployment, as well as risks of catching COVID-19. Some 55% of respondents to IATA’s June passenger survey don’t plan to travel in 2020.

Owing to these factors, IATA’s revised baseline forecast is for global enplanements to fall 55% in 2020 compared to 2019 (the April forecast was for a 46% decline). Passenger numbers are expected to rise 62% in 2021 off the depressed 2020 base, but still will be down almost 30% compared to 2019. A full recovery to 2019 levels is not expected until 2023, one year later than previously forecast.

Meanwhile, since domestic markets are opening ahead of international markets, and because passengers appear to prefer short haul travel in the current environment, RPKs will recover more slowly, with passenger traffic expected to return to 2019 levels in 2024, one year later than previously forecast. Scientific advances in fighting COVID-19 including development of a successful vaccine, could allow a faster recovery. However, at present there appears to be more downside risk than upside to the baseline forecast.

“Passenger traffic hit bottom in April, but the strength of the upturn has been very weak. What improvement we have seen has been domestic flying. International markets remain largely closed. Consumer confidence is depressed and not helped by the UK’s weekend decision to impose a blanket quarantine on all travelers returning from Spain. And in many parts of the world infections are still rising. All of this points to a longer recovery period and more pain for the industry and the global economy,” said Alexandre de Juniac, IATA’s Director General and CEO.

“For airlines, this is bad news that points to the need for governments to continue with relief measures—financial and otherwise. A full Northern Winter season waiver on the 80-20 use-it-or-lose it slot rule, for example, would provide critical relief to airlines in planning schedules amid unpredictable demand patterns. Airlines are planning their schedules. They need to keep sharply focused on meeting demand and not meeting slot rules that were never meant to accommodate the sharp fluctuations of a crisis. The earlier we know the slot rules the better, but we are still waiting for governments in key markets to confirm a waiver,” said de Juniac.

June 2020 Performance

JUNE 2020 (% YEAR-ON-YEAR)	WORLD SHARE1	RPK	ASK	PLF (%-PT)²	PLF (LEVEL)³
Total Market	100.0%	-86.5%	-80.1%	-26.8%	57.6%
Africa	2.1%	-96.5%	-84.5%	-54.9%	16.2%
Asia Pacific	34.6%	-74.4%	-69.6%	-18.5%	63.8%
Europe	26.8%	-93.7%	-90.0%	-31.9%	55.5%
Latin America	5.1%	-91.2%	-89.0%	-16.7%	66.6%
Middle East	9.1%	-95.5%	-90.4%	-40.7%	35.7%
North America	22.3%	-86.3%	-76.9%	-36.5%	52.4%

1) % of industry RPKs in 2019 2) Year-on-year change in load factor 3) Load Factor Level

International Passenger Markets

June international traffic shrank by 96.8% compared to June 2019, only slightly improved over a 98.3% decline in May, year-over-year. Capacity fell 93.2% and load factor contracted 44.7 percentage points to 38.9%.

Asia-Pacific airlines’ June traffic plummeted 97.1% compared to the year-ago period, little improved from the 98.1% decline in May. Capacity fell 93.4% and load factor shrank 45.8 percentage points to 35.6%.

European carriers saw demand topple 96.7% in June versus a year ago, compared to a 98.7% decline in May. Capacity dropped 94.4% and load factor lessened 35.7 percentage points to 52.0%.

Middle Eastern airlines traffic collapsed 96.1% for June against June 2019, compared with a 97.7% demand drop in May. Capacity contracted 91.1%, and load factor crumbled to 33.3%, down 43.1% percentage points compared to a year ago.

North American carriers had a 97.2% traffic decline in June, barely improved from a 98.3% decline in May. Capacity fell 92.8%, and load factor dropped 53.8 percentage points to 34.1%.

Latin American airlines suffered a 96.6% demand drop in June compared to the same month last year, from a 98.1% drop in May. Capacity fell 95.7% and load factor sagged 17.7 percentage points to 66.2%, which was the highest among the regions.

African airlines’ traffic sank 98.1% in June, little changed from a 98.6% demand drop in May. Capacity contracted 84.5%, and load factor dived 62.1 percentage points to just 8.9% of seats filled, lowest among regions.

Domestic Passenger Markets

Domestic traffic demand fell 67.6% in June, improved from a 78.4% decline in May. Capacity fell 55.9% and load factor dropped 22.8 percentage points to 62.9%.

JUNE 2020 (% YEAR-ON-YEAR)	WORLD SHARE1	RPK	ASK	PLF (%-PT)²	PLF (LEVEL)³
Domestic	36.2%	-67.6%	-55.9%	-22.8%	62.9%
Australia	0.8%	-93.8%	-89.1%	-33.8%	44.4%
Brazil	1.1%	-84.7%	-83.3%	-7.1%	74.7%
China P.R.	9.8%	-35.5%	-21.3%	-15.2%	69.5%
Japan	1.1%	-74.9%	-63.4%	-22.4%	48.8%
Russian Fed.	1.5%	-58.0%	-36.4%	-28.9%	56.4%
US	14.0%	-80.1%	-67.4%	-34.9%	54.7%

1) % of industry RPKs in 2019 2) Year-on-year change in load factor 3) Load Factor Level

China’s carriers continued to lead the recovery, with traffic down 35.5% in June compared to the year-ago period, raised from a 46.3% decline in May.

Japan’s airlines saw improved domestic demand after the state of COVID-19 emergency was lifted in late May. Domestic RPKs fell by 74.9% year-on-year in June, compared with around 90% annual declines in the previous two months.

The Bottom Line

“Domestic traffic improvements notwithstanding, international traffic, which in normal times accounts for close to two-thirds of global air travel, remains virtually non-existent. Most countries are still closed to international arrivals or have imposed quarantines, that have the same effect as an outright lockdown. Summer — our industry’s busiest season — is passing by rapidly; with little chance for an upswing in international air travel unless governments move quickly and decisively to find alternatives to border closures, confidence-destroying stop-start re-openings and demand-killing quarantine,” said de Juniac.

IATA urges governments to implement a layer of measures including the International Civil Aviation Organization’s (ICAO’s) global guidelines for restoring air connectivity contained in ICAO’s Takeoff: Guidance for Air Travel through the COVID-19 Public Health Crisis. IATA also sees potential for accurate, fast, scalable and affordable testing measures and comprehensive contact tracing to play a role in managing the risk of virus spread while re-connecting economies and re-starting travel and tourism. “We need to learn to manage the risks of living with COVID-19 with targeted and predictable measures that will safely re-build traveler confidence and shattered economies,” said de Juniac.

Hawaiian loses $106.9 million in the second quarter

Hawaiian Airlines reported its financial results for the second quarter of 2020.

Second Quarter 2020 – Key Financial Metrics
	GAAP	YoY Change	Adjusted	YoY Change
Net Income	($106.9M)	($164.7M)	($174.7M)	($233.6M)
Diluted EPS	($2.33)	($3.54)	($3.81)	($5.04)
Pre-tax Margin	(254.2)%	(265.4) pts.	(383.9)%	(395.3) pts.

“Our second quarter results reflect the continued impact of COVID-19 and State of Hawai’i quarantines on our business,” said Peter Ingram, Hawaiian Airlines President and CEO. “In the face of these unprecedented challenges, we have taken action to preserve and raise cash and are crafting plans to position us for the future even as we address the immediate adversity. With our leisure business model and relentless focus on the needs of the Hawai’i traveler, we are positioned to emerge from this crisis poised for success. I am grateful, as always, for the efforts of my extraordinary colleagues, as they take care of our guests and adapt to this ever-changing environment with passion and dedication.”

Liquidity and Capital Resources

As of June 30, 2020, the Company had:

Unrestricted cash, cash equivalents and short-term investments of $761 million
Outstanding debt and finance lease obligations of $1,006 million
Air traffic liability of $554 million

Second Quarter 2020

The State of Hawai’i was under the mandatory 14-day self-quarantine for both neighbor island and all incoming travelers for most of the second quarter of 2020, and as a consequence, the Company operated an extremely limited schedule. The mandatory 14-day self-quarantine restriction was lifted on June 16, 2020 for neighbor island travel only. Following this announcement, the Company increased neighbor island flight activity, but continued with its reduced schedule for longer haul flights.

In addition to service suspension and schedule reduction, the Company has taken, and will continue to take, actions to minimize cash outflow in an effort to mitigate the effects of reduced demand, including, but not limited to:

Suspended dividend payments on, and the repurchase of, its common stock
Instituted a hiring freeze across the Company, except for operationally critical and essential positions
Deferred non-critical capital expenditures
Instituted voluntary unpaid leave programs and exploring involuntary headcount reduction
Reduced executive pay by 10% – 50%
Reduced other discretionary spending, including contractor and vendor spend
Negotiated payment deferrals with key vendors

As of June 30, 2020, the Company has received $214.2 million in grants and $49.0 millionin loans pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) Payroll Support Program (“PSP”). The Company expects to receive an additional $29.2 million in July 2020.

Third Quarter 2020

Due to the uncertain timing of the relaxation of travel and quarantine restrictions, the Company is unable to provide detailed guidance related to capacity expectations for the quarter ending September 30, 2020. July 2020 capacity, in terms of available seat miles (ASMs), is expected to be approximately 86% below the capacity flown in July 2019, and the Company expects August 2020 capacity to decrease 85% compared to August 2019. As a significant portion of the Company’s costs are fixed, operating expenses are not expected to decline in proportion to the capacity decline.

To further increase liquidity, the Company has entered into additional financing transactions in July 2020. This includes the following:

Raised $114 million through the sale and leaseback of two Airbus A321neo aircraft
Signed a non-binding letter of intent with the U.S. Department of Treasury pursuant to which the Company is eligible to receive up to $364 million in Economic Relief Program (“ERP”) loans offered under the CARES Act; the Company has until March 2021 to determine how much of the available ERP funds to borrow.

COVID-19 Response – Guest Experience and Community Relations

In response to the COVID-19 pandemic, the Company has enhanced cleaning procedures and revised guest-facing procedures in an effort to minimize the risk of transmission of COVID-19. These procedures are in line with current recommendations from leading public health authorities and include:

Performing enhanced aircraft cleaning between flights and overnight, including recurring electrostatic spraying of all aircraft
Frequent cleaning and disinfecting of counters and self-service check-in kiosks in our airports
Ensuring hand sanitizers are readily available for guests statewide and at our mainland airports
Requiring guests and guest-facing employees to wear face masks or coverings, with guests required to keep them on from check-in to deplaning
Modifying boarding and deplaning processes and limiting the capacity of available seats on all aircraft to no higher than 70% to provide physical distancing
Changing in-flight service to reduce close interactions between crew members and guests

The Company, along with its employees, has also taken measures to support the community through the COVID-19 pandemic, which include:

Donating Main Cabin and Business Class pillowcases, blankets, mattress pads, amenity kits, and Business Class slippers to 12 local organizations serving the community during the pandemic
Offering complimentary neighbor island transportation for medical professionals in April and May
Providing complimentary transportation of food and household items from O’ahu to both Moloka’i and Lana’i in April and May
Volunteering to support local non-profit organizations addressing the COVID-19 pandemic, from company-wide efforts to individual employee initiatives

Hawaiian Airlines aircraft photo gallery:

Hawaiian Airlines aircraft slide show:

https://airlinersgallery.smugmug.com/frame/slideshow?key=6fcqqg&speed=3&transition=fade&autoStart=1&captions=0&navigation=0&playButton=0&randomize=0&transitionSpeed=2

Alitalia will operate more flights to international destinations in September and October

Alitalia will operate more flights to foreign destinations in September and October when the medium and long-haul international sector will grow by 7% in September and 29% in October, compared to August.

The Alitalia flight schedule will see in September the resume of direct services from Rome to Buenos Aires and to Japan, Israel and Algeria which were postponed from mid-August to early September, following the extension of the restrictions to travels to those Countries. Alitalia will also resume domestic services from Rome Fiumicino to Verona. From Milan, in September Alitalia will resume Milan Linate–Frankfurt services, as well as flights from Milan Malpensa to New York, another service rescheduled from mid-August to the beginning of the following month. In September, Alitalia will also increase number of frequencies on several international and domestic routes.

In October, Alitalia plans to resume flights from Milan Linate to Düsseldorf and Paris Orly, as well as further increasing number of frequencies on national and international routes served from Rome and Milan.

The airline will operate in October almost 1,630 services per week to 45 airports, including 19 domestic, thus increasing its activity at 46% of what was planned for this month before the beginning of the COVID-19 pandemic.

In detail, from the beginning of September Alitalia will activate air services from Rome Fiumicino to Buenos Aires (4 weekly flights which will be increased to 6 in October), Tokyo Haneda, Algiers (6 flights per week for each airport), Tel Aviv (4 weekly services) and, on the domestic network, the Airline will resume services from Rome to Verona (4 daily flights).

The airline will also increase from September 1 the number of frequencies from Rome to Geneva, Brussels, Nice, Tunis (from 14 to 20 flights per week for each airport), Zurich (from 10 to 14 weekly services) and Cairo (from 6 to 10 weekly flights). Other increases of frequencies are expected in September on domestic routes, such as Rome Fiumicino-Milan Linate, which will grow from 10 to 22 flights per day (14 on weekends), and from Rome Fiumicino to Genoa, Bari and Reggio Calabria, which will double from 2 to 4 daily services on each airport.

Beginning from October 1, Alitalia will increase the number of flights from Rome to Tel Aviv (from 4 to 10 weekly services), Amsterdam (from 14 to 24 weekly flights), Tirana (from 14 to 20 weekly services) and Geneva (from 20 to 28 flights per week). Other increases in number of air services are expected on domestic routes from Rome to Naples and Florence (from 2 to 4 daily services for both airports). In October Alitalia will operate overall 1,100 weekly flights between its hub in Rome Fiumicino airport and 42 domestic and international destinations.

From Milan Linate airport, beginning in September, Alitalia will resume international flights to Frankfurt (14 weekly services) and will increase number of services on the routes from Milan Linate to London Heathrow, Paris Charles De Gaulle (from 2 to 4 flights per day on both airports) and Brussels (from 12 to 24 weekly services). In September the Airline will also restart flights between Milan Malpensa and New York (6 services per week).

Beginning in October, Alitalia plans to resume international services to Düsseldorf (24 flights per week) and Paris Orly (14 weekly services). The Airline has also planned an increase of frequencies from 1 October from Milan Linate airport to Amsterdam and Frankfurt (from 14 to 24 weekly flights on both airports). On the domestic network, Alitalia will increase services from Linate airport to Bari and Naples (from 4 to 6 flights per day on both airports). In October, Alitalia will operate around 670 weekly flights between Milan and 19 destinations.

In compliance with the current laws, all Alitalia aircraft are sanitised with high-powered sanitizing products every day and, thanks to HEPA filters and vertical circulation, the air on board is not only renewed every three minutes, but it is also 99.7% pure, just like in a sterile medical room. All passengers are also required to complete a self-certification form before boarding, which certifies that they have not had close contact with people diagnosed with Covid-19. In addition, passengers must bring protective masks to be worn from their arrival at the airport and during the flight, taking into account that they have to bring an adequate number of protective masks according to the duration of the flight, since it is necessary to replace the mask with a new one every 4 hours.

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