Airlines' Coronavirus Cash Crunch Deepens With DOT Refund Ruling
The rapid spread of COVID-19 throughout the U.S. over the past month has decimated air travel demand, as public health authorities have urged Americans to avoid all nonessential travel. Most people appear to be heeding the warnings. In recent days, passenger throughput at TSA checkpoints has been down 94% to 95% year over year.
Airlines have responded by implementing drastic capacity cuts. Nevertheless, the sudden evaporation of demand is causing airlines to burn cash at an incredible rate. As a result, airlines including United Airlines (NASDAQ: UAL) and JetBlue Airways (NASDAQ: JBLU) implemented restrictive new rules over the past month, limiting customers' ability to obtain refunds for canceled flights.
Late last week, the U.S. Department of Transportation cracked down on this practice, issuing a notice clarifying that if airlines cancel flights, they must offer refunds to customers. This ruling is likely to accelerate the airlines' cash burn, highlighting how those with stronger balance sheets are better positioned to navigate the COVID-19 pandemic.
Source Fool.com
