Coronavirus Pandemic could force a major U.S. airline out of Business
May 12, 2020
By: Lucy Bayly
The airline industry is having an "apocalyptic" moment that could force a major U.S. carrier out of business, said David Calhoun, president and CEO of Boeing, in an interview with Savannah Guthrie on NBC's "TODAY" show that aired on Tuesday morning.
"The threat to the airline industry is grave. There's no question about it. And apocalyptic does actually accurately describe the moment," Calhoun said of the impact of the coronavirus.
The airline industry raked in record profits for a decade, due to lower jet fuel prices and consolidation through a series of mergers. That ended with the coronavirus pandemic, which has devastated the industry and has led to a 95 percent drop in air travel demand. American Airlines, United, Southwest and Delta all reported huge quarterly losses, their first in years. Airline executives have said the pandemic is the industry’s worst crisis, and have compared its impact to the events of September 11.
Despite billions of dollars in emergency funding as part of the government's CARES Act, the future for the industry remains uncertain, with many airline executives forecasting traffic will not return to prior levels for three to five years, leading to questions about the survival of some major carriers.
"I don't want to get too predictive on that subject. But yes, most likely," Calhoun said when asked if he thought a major U.S. carrier would have to go out of business.
"Something will happen when September comes around. Traffic levels will not be back to 100 percent. They won't even be back to 25 percent. So there will definitely be adjustments that have to be made on the part of the airlines," Calhoun said.
The air travel experience will be very different, he acknowledged. While he recommended that regulators require face masks, he said the interior of a plane's cabin was nonetheless "designed to prevent transmission of exactly this kind of airborne carrier."
"The cabin itself replaces its air every two to three minutes," he said. "By the time you layer those protections, and you consider the responsible actions of the public themselves, I believe you do gradually get back to the same level of confidence that we've had before."
Calhoun told the "TODAY" show he does not share the same view on the future of airlines as does billionaire investor Warren Buffet, who recently sold his entire $4 billion stake in U.S. airlines. Buffett said at the time he did not think people would fly as many passenger miles as they did last year.
“The world has changed for the airlines," Buffett said earlier this month at the annual shareholder meeting for his investment firm, Berkshire Hathaway. "I don’t know if Americans have now changed their habits or will change their habits because of the extended period.”
"I don't happen to share the view," Calhoun told Guthrie. "I share the near-term turmoil. Near-term for me doesn't mean a few months. I believe it's three full years before we return to the traffic levels that we had just in 2019, and then probably another two before we begin to return to the growth rates that we used to have. And I'm hopeful that somewhere between here and there, there's a vaccine, and that the moment of high anxiety begins to really subside. But I still believe in the future of the industry."
Guthrie also questioned Calhoun about the future of Boeing itself. The company's troubled 737 Max jet fleet remains grounded worldwide, after two crashes led to hundreds of fatalities.
"In remembrance of the two accidents, which were as real as can be, our heartfelt sorrows to everybody who was touched by those accidents," Calhoun said.
"We made a bad assumption, with respect to the design envelope for that airplane, at that moment in time, under that condition. Our assumption about how a pilot would react in a very tense, difficult moment was wrong. Simple as that. But I do believe that has been fixed. I also believe in the culture at Boeing. I believe — actually, all of our employees believe — deeply in safety. And have we taken a magnifying glass to everything we do, everything, so that we don't ever allow for something like that to happen in the future."
"I am confident in the Max," Calhoun said. "The certification work, the FAA's work, has been as thorough as anything I've ever seen. We've worked every scenario we can possibly work into the testing programs. And it does exceedingly well."
Calhoun also spoke proudly of how "magical" it was for Boeing to be helping out during the pandemic, delivering front-line emergency supplies.
"The pilots who fly these airplanes around the world, to deliver these supplies, it's our front line helping the health care front line," Calhoun said. "It's pretty magical when it happens, and it is wildly motivating for me, of course, but mostly for our people. And they need that kind of motivation."