First it may have been Warren Buffett casting dark clouds through the airline industry after his comments about selling all his airline shares, but now we have seen more notices of approval for smaller airlines to begin shutting off air services to and from certain cities entirely. Some of the services will be cut off straight away, and it appears as though these exceptions from the U.S. Department of Transportation will be effective almost immediately.
Many of the nation’s airplanes are flying passengers on nearly empty flights, and many of the nation’s airlines are effectively toast without government financial aid. Several carriers already have made drastic cuts to their number of flights per day. Some routes may now only have one flight per day to certain cities, but at least two airlines have been successful in cutting entire city routes.
The Transportation Department has allowed certain smaller airline carriers to suspend services to some cities. The department has now extended some of those approvals for city-level service suspensions from JetBlue Airways Corp (NASDAQ: JBLU) and from Spirit Airlines Inc. (NYSE: SAVE).
JetBlue had signaled to the Transportation Department that 16 cities represented a significant burden to the carrier, citing low demand from those cities and that at each point air passengers would still receive service from other airliners.
JetBlue has requested that the department approve the temporary suspension of service through September 30, 2020, from its Service Obligation agreements. JetBlue stated that it intends to gradually resume air services to these cities as circumstances warrant. Those 16 cities were listed as follows:
(1) Atlanta, GA (ATL)
(2) Charlotte, NC (CLT)
(3) Chicago, IL (ORD)
(4) Dallas/Ft. Worth, TX (DFW)
(5) Denver, CO (DEN)
(6) Detroit, MI (DTW)
(7) Houston, TX (IAH)
(8) Las Vegas, NV (LAS)
(9) Minneapolis, MN (MSP)
(10) Nashville, TN (BNA)
(11) Philadelphia, PA (PHL)
(12) Phoenix, NV (PHX)
(13) Portland, OR (PDX)
(14) San Diego, CA (SAN)
(15) Seattle, WA (SEA)
(16) Tampa, FL (TPA)
The Transportation Department’s approval from May 5 said:
Our action granting JetBlue this exemption does not relieve the applicant from its obligation to provide service to any other covered point in its Service Obligation. Pursuant to this action, no covered points will lose access to the national air transportation system… Finally, we grant JetBlue’s request for a waiver of the 10-business day advance filing requirement for exemptions under Order 2020-4-2 so that its proposed schedule changes can be implemented promptly… We may amend, modify, or revoke this exemption at any time without hearing at our discretion.
Spirit Air had requested to suspend service at three airports back on April 8, but its latest request was to suspend service at six cities. The six cities now allowed to have suspension through September 30, 2020, were as follows:
(1) Charlotte, NC
(2) Denver, CO
(3) Minneapolis/St. Paul, MN
(4) Phoenix, AZ
(5) Portland, OR
(6) Seattle, WA
The department approval said:
Our action granting Spirit this exemption does not relieve the applicant from its obligation to provide service to any other covered point in its Service Obligation. Pursuant to this action, no covered points will lose access to the national air transportation system… Finally, we grant Spirit’s request for a waiver of the 10-business day advance filing requirement for exemptions under Order 2020-4-2, so that its proposed scheduled changes can be implemented promptly.
While the broader market indexes were trading higher, both carriers saw their shares drift lower.
JetBlue Airways stock traded down 1.8% to $8.46 on Tuesday, down from a 52-week high of $21.65.
Spirit Airlines was trading down 3% at $12.51, compared with a 52-week high of $55.21.