What happened
Shares of major American airlines got pummeled on Wednesday after Reuters detailed how the industry as a whole is burning through $10 billion a month as its most of its airplanes remain grounded due to a combination of stay-at-home orders and travelers' reluctance to sit in a confined space for hours surrounded by strangers.
In Wednesday's trading, shares of American Airlines (AAL 0.64%) and Delta Air Lines (DAL -0.58%) got off relatively easy, down only 2.7% and 3.3%, respectively. But United Airlines (UAL -0.08%) lost 5%, and Southwest Airlines (LUV 1.10%) was down 5.6%.
Image source: Getty Images.
So what
According to Reuters, nearly 50% of the more than 6,000 airplanes in the airlines' fleets are currently grounded due to government restrictions, customer apathy, or a combination of both. Those planes that are still flying are carrying an average of just 17 passengers per domestic flight, says the news agency, and only 29 passengers on international flights.
No matter how many seats are filled, however, each flight still requires a fully paid crew, and a tank of gas. Mechanics must still keep the planes properly maintained.
All of this costs money -- apparently in excess of $10 billion a month. Meanwhile, net bookings of paying passengers have fallen by nearly 100% year on year, Reuters says, and actual passenger traffic is down 95%.
Now what
And a lot of passengers are asking for refunds on their flights, 80% or more of which have been canceled through June. In prepared statements before the U.S. Senate today, airline executives were lining up to warn Congress that, if legislators require them to pay out refunds in cash instead of awarding credits toward future travel (as the airlines would prefer), it will lead to bankruptcy.
The prospect of that, it seems, was enough to scare investors out of airline stocks today.
