The Good Times for Airlines Are Over

Let’s imagine that you are the chief executive officer of American Airlines Group Inc., it is the beginning of 2014, and you can see the future. You know that you will have a great few years. You just emerged from bankruptcy at the end of 2013, but now you will have six straight years of positive net income, totaling about $17.5 billion. The airline industry will become so lucrative that people will write papers arguing that airlines collude to keep prices high.

It will be so lucrative, in fact, that you might say “I don’t think we’re ever going to lose money again,” though I suppose in this hypothetical you wouldn’t. Because in this hypothetical you also know about the coronavirus. You know that in March 2020, air travel will more or less come to a halt for a long period of fear and uncertainty. You’ll have a bunch of planes that aren’t flying, a bunch of obligations to pay and little income with which to pay them. Let’s assume that your vision gets hazy after about March 17, 2020, but you know stuff is bad.1