There will be a 30% contraction across the board in the fall. And some airlines are likely to not even take the grants/loans from the Federal government and will likely begin furloughing and cutting before the fall. There will be more contraction in 2021 if demand doesn’t begin to show signs of returning. AA is at serious risk of declaring bankruptcy. In fact, I wouldn’t be surprised if some of their debt might not already be considered in default and they probably have people working on preliminary filings. I’m not being alarmist. I spoke with a senior hedge fund manager who knows quite a bit about the airline industry. AA is in for a very rough 5-10 years. Even if they declared and liquidated to pay debt they would be over $15B short on their obligations.

Anyone hitching their wagon to the AA Star may want to rethink that strategy. Flow is meaningless at this point. Let’s hope that they don’t come seeking pay cuts that are severely deep and other concessions that will set us all back many years. Get used to living on 75 hour (or hell maybe even 65 hour) min guarantee and at a 20-30% pay cut.

When hiring resumes it likely won’t be for at least 2-3 years and it won’t be at the legacies. If you want to sit and hope feel free. I’m preparing my exit.