The massive layoffs by American and United Airlines underscores the unprecedented difficulties of the airlines and the need for fleet contractions, particularly with respect to international operations. The issue for the airlines is that the Covid Event has been affecting operations for nearly six months with little revenue being generated. While revenue may be limited indirect expenses associated with operating an airline remain essentially in place with administration, finance, lease costs, maintenance, salaries need to be paid to a greater or lesser extent. Moreover, there has been additional expenditure associated with the repayment of pre-paid fares although many airlines have sought to allow revisions to tickets. The airlines traditionally make most of their money during the peak summer season. The drain on resources and lost revenue amounts to hundreds of billions of dollars. Some airlines have renegotiated lease payments and deferred lease payments for a number of months with the lessors expecting repayment in the next twelve months and also an extension to the lease. At the start of the Covid Event, when the full extent of the downturn was not fully appreciated, some aircraft were repossessed. Despite the all too apparent severity of the market in April, there has perhaps been a lag by some lessors in appreciating the desperate plight of some lessees. The strict contacts of many leases still sees the lessors able to recover any losses from the nonpayment of lease rentals by other means including forcing the lessee into bankruptcy as a way of selling other assets. Lessors have increasingly come to realize the necessity of compromise given the difficulty in disposing of the assets should the aircraft be returned.
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