“The stark reality of what we’re facing is dire,” Munoz said in an exclusive interview.
Thousands of workers take voluntary cuts
Airlines have signaled steep job cuts are on the way.
“Hopefully things recover and we can bring everyone back,” Munoz said, adding that this crisis is far worse than the downturn in the airline industry after 9/11.
Prior to the pandemic, the airline industry was booming — and spending more on its workforce. Wages and benefits for the nine publicly traded airlines in the United States stood at $50.9 billion in 2019, up nearly 6% from the year before.
Passenger airlines employed nearly 500,000 people in February before the pandemic erupted, according to the Bureau of Transportation Studies.
The CARES Act, which provided a $50 billion bailout designed to keep US airlines afloat, requires carriers to avoid making involuntary job cuts until October 1. But thousands of workers have already taken buyouts, early retirements or unpaid furloughs.
Munoz praised the thousands of workers who have accepted voluntary cuts so that colleagues who are “more in need” don’t face financial hardship.
“That’s just heroic stuff,” he said.
Some US airlines may not survive
“We used to make a decent amount of money for an airline just a few months ago,” Munoz said. “We tell our employees that we are going to be a smaller airline for some time and we hope to get back to the place where we were. But we think that’s quite a bit a ways out.”
Asked whether all of the non-regional US airlines will survive as independent carriers, Munoz said the answer depends on how long the crisis lasts.
“You’ve seen some airlines, in essence, fold. I suspect you may see more the longer this thing goes on,” Munoz said. “If this would stretch an inordinate amount of time, all of us would be affected to some degree.”
He added that most major airlines have enough financial resources to withstand the crisis “certainly through next year.”
The industry went through widespread bankruptcies and mergers in the two decades before the Covid-19 pandemic. Every major carrier other than Southwest made a trip through bankruptcy. The nine major carriers that existed on 9/11 have been consolidated into four major carriers, often through the bankruptcy reorganization process.
Business travel won’t recover until there’s a vaccine
One of the biggest challenges facing airlines is the implosion of business travel. Corporate conferences have been canceled. Investment bankers are doing deals virtually. And companies aren’t rewarding star performers with travel junkets.
Although domestic leisure bookings have improved to about half their year-ago levels, corporate bookings remain down nearly 90%, according to Bank of America.
“Corporate demand remains soft,” Bank of America analysts wrote in a note Monday, adding that bookings have “shown no improvement” since mid-June.
Munoz said business travel — a major moneymaker for the airline industry — likely won’t recover until there is widespread access to a coronavirus vaccine.
“The vaccine is going to be probably the most determinant piece of the beginning of the end of this,” Munoz said. “Confidence in the health aspect is going to bring back conferences, bring back corporate travel. It’s going to bring back across-the-pond travel for lawyers and bankers and consultants.”
That vast uncertainty makes it extremely challenging for airlines to plan for the future and make major decisions around how much money they need to survive and how much money to invest in innovation.
“It’s tough to pinpoint anything because we don’t know the basic determinant: When will things return to normal? When will a vaccine come?” Munoz said. “Until…that vaccine that comes in, uncertainty is going to rule the day.”
CNN Business’ Chris Isidore contributed to this report.