The Financial Metric That Matters Most to Airlines Now
Photo Credit: Travelers at Chicago O'Hare International Airport. Flickr / Nicola since 1972
Skift Take
Unprecedented losses forced airlines to focus on cash burn as the metric to watch early on during the coronavirus pandemic. The recent surge in new infections has delayed breakeven goals but, with billions of dollars on hand, most are looking ahead and getting ready for when travelers return in droves.
The coronavirus pandemic has changed everything for the airline business.
Traveler concerns shifted to things like mask requirements and cleaning procedures from whether their upgrade will clear. And executives in C-suites around the world turned to daily losses — or cash burn — as the financial metric to guide their decision making through the crisis.
“[At] businesses where survival was at stake, it [is] the most important metric,” is how United Airlines CEO Scott Kirby described cash burn in October. At the time the carrier anticipated a $15 to $20 million daily loss in the fourth quarter, a forecast it raised last Friday to $24 to $26 million a day due to a "continued deceleration in bookings."
While every airline measures its daily loss slightly differently, cash burn is generally understood as operating revenues minus operating costs with the result divided by the number of days in a given period. Calculations sometimes include government relief, for exampl
