Airlines Still Don’t Know When Passengers Will Return


It was “a year of going through hell” for United Airlines. Delta Air Lines had “the toughest year” in its history. And for American Airlines it was “the most challenging year.” That’s how the executives who run those companies described 2020 in recent weeks.

The airline industry is eager to move on, but it hasn’t figured out how.

Air travel has recovered somewhat in recent months, but it remains deeply depressed compared with 2019, and no one knows when business will return to more normal levels. Two essential moneymakers for airlines — corporate and international travel — are likely to stay sidelined for another year and possibly much longer.

Now and for the next several months at least, airlines are flying whoever they can wherever they can. That often means catering to a small group of hardy leisure travelers who are undeterred by the pandemic to travel to ski slopes or beaches.

“As a quick strategy, fly where people are,” said Ben Baldanza, a former chief executive of Spirit Airlines, the low-cost carrier. “That’s been a real smart strategy, but that’s not a long-term way for those airlines to make money.”

But leisure travel offers limited comfort to an industry so thoroughly clobbered. Tourists and people visiting family and friends typically take up most of the seats on planes, but airlines rely disproportionately on revenue from corporate travelers in the front of the cabin. Before the pandemic, business travel accounted for about 30 percent of trips but 40 to 50 percent of passenger revenue, according to Airlines for America, an industry association. And those customers aren’t expected to return in great numbers any time soon.

The four largest U.S. airlines — American, Delta, United and Southwest Airlines — lost more than $31 billion last year, and the industry over all is still shedding more than $150 million each day, according to an estimate from Airlines for America.

The losses are even more stark when you consider that airlines have received $40 billion in federal grants to help pay employees and tens of billions more in low-cost government loans. The problem is airlines these days can’t fly planes with enough people at high enough fares to break even.

The industry spent much of the past year scrimping and saving, trimming older, less efficient planes from their fleets; renegotiating contracts; and encouraging tens of thousands of workers to take buyouts or early retirement packages.

Most industry experts say they expect travelers to return in greater numbers this spring or summer, as the weather improves and more people are vaccinated.

But planning for that isn’t easy. Passengers used to book flights months in advance, but now plans are often confirmed just weeks out. And trends in bookings have often been fleeting.

“Every time demand has shown signs of life, it’s taken another step backward,” said Hunter Keay, senior airline analyst at Wolfe Research. “So it’s very hard for airlines to go out there and put aircraft in markets, because if you get that wrong you just exacerbate the problem of cash burn.”

Airlines are more hopeful, perhaps because they rely heavily on corporate travel.

About 40 percent of Delta’s big corporate customers expect their own business travel to be fully recovered by 2022, and an additional 11 percent by 2023, Mr. Bastian said on a conference call in January, citing the airline’s internal research. Only 7 percent said business travel might never be fully restored, while the rest said they were unsure when things would return to normal.

American is “very optimistic” that corporate travel will return as vaccines are distributed, Vasu Raja, the airline’s chief revenue officer, told investors and reporters last month. But, he added, “the rate of that is unclear at best.”


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