Instant Karma Newsletter 7.13.20
  • Airlines start reporting second-quarter earnings this week and we will get a look at just how bad things are for the industry, crippled by the pandemic and the struggling economy, and a sense of whether they are going to get worse. Delta reports on Tuesday. 

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We know things are bad for airlines.

Between COVID-19 lockdowns, mandated quarantines and an economic downturn that puts family vacations out of reach for millions, domestic air travel in the U.S. was down 71% for the week ending July 5 compared to last year and international travel was down 93%, according to Airlines for America.

This week, we get a sense of just how bad, as major airlines begin reporting their second-quarter earnings, starting with Delta on Tuesday. The Wall Street analyst consensus is that Delta will lose $4.06 a share, according to Zacks Equity Research, nosediving from the $2.35 per share earned in the same period in 2019. 

Though United Airlines won’t announce its second-quarter earnings until July 21, it has already disclosed it would book a $300 million charge for workforce reductions. The airline officially notified 36,000 of its employees last week that they may be furloughed in October.

Helane Becker, a Cowen managing director and senior research analyst covering airlines, predicts the industry will shed 150,000 to 200,000 jobs this year. 

Delta and United, as well as eight other airlines, including American, have notified the U.S. Department of the Treasury that they plan to seek part of the government’s $25 billion in loans guaranteed as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. 

Airlines hope these drops in usage are temporary, linked to the spread of the coronavirus. However, worries are increasing that the change in behavior — the idea that in-person business meetings can often be replaced by a Zoom call — may be permanent, something environmentalists want considered. (Remember when teenage activist Greta Thunberg sailed from her home in Sweden to the U.N. Climate Summit in New York to save on the carbon emissions?)

Earlier this year, Delta announced a plan to be the first carbon-neutral airline in the world by 2030, pledging $1 billion to the effort. That goal, ironically, will be easier to reach if people decide they don’t need to fly as much.

Here’s what else we’ll be watching in the week ahead:

FORD BRONCO RETURNS (Monday): Analysts think the time is right for Ford to challenge Jeep with a big, off-road SUV since people will likely be taking more driving vacations instead of flying. While a hybrid version of the Bronco is planned, we’ll have to wait for the official announcement to learn the availability details and pricing. 

TAX DAY (Wednesday): No more extensions. After a three-month, pandemic-related delay, federal income taxes are really due on July 15. One bright side: If you get a refund this year, the IRS will pay you interest — about 5% compounded daily between April 15 and July 1 and 3% compounded daily from July 1 until your return is processed and paid. Of course, those interest payments are taxable next year. 

IMMIGRANT CHILDREN RELEASE DEADLINE (Friday): In June, U.S. District Judge Dolly Gee ordered that all children held at immigration detention centers for more than 20 days must be released by July 17. Some of the children held in centers in Pennsylvania and Texas have been there since 2019.

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