Delta could actually emerge out of this doing really well even if they are smaller for a few years. A lot really depends on how the economy of midwest, especially around Detroit and Minneapolis, recovers coming out of a terrible recession.
AA will emerge out of this with a ton of debt and likely to shrink the most. I think they will have to be smaller by at least 1/3 by next summer vs 2019 and probably still at least 20% smaller 2 years from now. People have argued with me on this, but my position i they will be significantly smaller not only in JFK, but also LGA and LAX. With their high debt, they can't afford to maintain the same presence in their worst performing stations. A focus on DFW and CLT mean those two stations will see minimal cuts (let's 15% cuts here with mostly downgauging and lower frequencies). DCA will most likely see minimal cuts since it was their most profitable station and need to maintain those precious slots. Imo, their next most profitable hubs like ORD and PHX will have to be down around 30% in capacity. PHL and MIA, due to their reliance on international stuff, will have to be cut even more than that. JFK/LGA/LAX could see 50% cut in capacity a year from now (not necessarily 50% cut in flights, but a lot of downgauging too). Even 2 years from now, I'm not sure NYC and LAX come back as more than focus cities.
I see UA down 25 to 30% a year from now and still around 15% 2 years from now. It will probably have the least cuts at DEN and IAH. The coastal stuff will take large hits. That means reduced presence in SFO, EWR and especially IAD. I think LAX will be more of a focus city for them in short terms. They could also reduce ORD without hurting too much since AA will be a lot smaller at ORD.
I fully expect both AA and UA to lose LGA slots a year from now if FAA does not extend slot waivers past Oct.
So if Delta execs are looking at this, they have 2 giant opportunities right now at NYC and LA Basin. They could dominate both market coming out of this. You got the 4 core hubs which are clearly not going anywhere. Let's say DL needs to shrink by about the same size as UA. All the core hubs will downsize 15 to 20% through reduced frequency and downguaging. They will probably cut some smaller cities, but nothing too siginificant. They need to do this, since UA and WN will likely do minimal cuts to their middle of the country stations. For example, can they afford to cut down SLC or MSP when UA remains strong at ORD and DEN? Aside from that, they need to look at what to do with the coastal stuff.
Now, I know I'm biased toward B6, but hear me out here. The P2P stuff needs to go. CVG and RDU are going to get downsized a lot, let's say 50% cut at minimal. BOS needs to be downsized a lot, let's say 40 to 50% cut. No need to have a second TATL hub in Norhteast. SEA needs to be downsized a lot, let's say 1/3 cut. What this will allow them to do is to keep their presence up in NYC and LAX. In order to keep all its slots and grow again when AA is shrinking in NYC, it can't cut too much capacity. NYC's top dollars will be between UA and DL. Downgauging is necessary, but it needs to hold on to all its LGA slots and not cut many flights from JFK. I fully expect JFK to lose slot constraints after this. DL can come out of this completely dominating NYC even more than it does right now. By 2022, it could be back to the same size as 2019. I don't think UA will be back to 2019 size at EWR by then.
LA is where their opportunity really opens up. As I said, both AA/UA are going to shrink at LAX. DL's plan so far has been maintaining both LAX and SEA (both seeing about 50+ flights for May). What's point of that? If you have a chance to dominate LA, why wasting time and money on SEA? AS isn't going to collapse in PNW. This is a once in a decade opportunity to dominate LA Basin. WN is unlikely to shrink at LAX, but WN isn't going to capture the people that want to do a lot of international flying.
Based on it's current financial condition, I think AA is the weakest of the Big 3, and DL is the strongest. Of the 3, AA is the most likely to face Ch. 11 again, but depending on how long this goes on for, DL and UA may face it also. Let's hope all 3 can avoid it.
What eventually happens though will depend on the answers to these questions:
- What domestic industries will emerge stronger and which ones will fall away?
- What regions of the country will recover first vs. last, and at what rate?
- How soon will people get back to work and have enough confidence to want to travel, and with enough discretionary income to do it?
- What will the domestic airline industry look like competitively? Who might fail, merge (non-cash) and who stands to gain/lose the most as a result?
- What will the overseas economy look like, specifically, what regions will recover quicker? (Asia first, then Europe, Latin America largely unchanged)
- What will the international airline industry look like; specifically, who will fail, merge, etc? Impact on pre-virus alliances like Star, Sky Team, etc? Could some alliances fail and lead to new ones?
- How will the traveling experience change itself, both at the airport, on board, but also on cruise ships?
I guess it's fun to speculate, but there are so many variables at play here. How any one of these domestic airlines adapts to these factors will really determine their fate.