Friday, January 01, 2021

Airlines Buckle Their Seat Belts for a Bumpy 2021

Some are cutting back schedules; others are buying planes and adding cities to their routes. When travel will fully recover is still anyone’s guess.


The Wall Street Journal 
By Alison Sider
January 1, 2021 9:00 am ET

Airlines are betting that coronavirus vaccines will reignite demand for travel this year. The question is when.

Delta Air Lines Inc. Chief Executive Ed Bastian expects improvement starting this spring. Alaska Airlines President Ben Minicucci said he hopes to get back to 80% of pre-pandemic capacity by summer. United CEO Scott Kirby, however, said travel may not start getting back to normal until vaccines are widely distributed—in late 2021.

“I recognize a lot of people are saying it’s going to happen faster, and I hope they’re right,” he said in a December interview. “This is one of those strange situations where I think we’re probably better at forecasting what’s going to happen a year from now than we are what’s going to happen next quarter.”

Their strategies for coping with the uncertainty are just as diverse. Airlines are shutting down some international markets and running reduced schedules while also buying new planes and adding new cities in an attempt to capture demand where it exists. United is returning to New York’s John F. Kennedy International Airport in February after a five-year absence, while rival Southwest Airlines Co. plans to fly from Chicago’s O’Hare International Airport for the first time ever in 2021. JetBlue Airways Corp. is also adding flights this year at Miami International Airport—the busiest U.S. airport it didn’t yet serve.

The coronavirus pandemic brought a travel boom to a crashing halt last spring as people stopped traveling for work and everything from weddings to funerals were held over Zoom. It wiped out over two-decades worth of growth in a matter of months, according to aviation data provider Cirium, sending global air traffic plummeting to levels last seen in 1999.

The fragility of any rebound became evident last month when a new, more infectious strain of the coronavirus emerged in the U.K., prompting a new wave of travel restrictions. That followed other such setbacks in the U.S. But the days just before and after Christmas were among the busiest in months, with airport security screenings nearing 1.3 million on Dec. 27—the highest level since March, according to the Transportation Security Administration.

“It’s a little bit of an emotional roller coaster,” said Mr. Minicucci, Alaska’s president.

Competition among airlines will likely be fierce in 2021 as they duke it out for shares of a smaller pie. International travel—a mainstay for legacy airlines like United, Delta, and American Airlines Group Inc. —could be slow to come back as international borders remain closed and travelers fear new lockdowns.

American Airlines recently said it would shutter operations in Prague, Manchester and Reykjavik, and said it would hold off on resuming flights to Venice—all routes that were scheduled to return this summer. A spokeswoman for American said the airline was adding flights to match demand in Latin America and the Caribbean, but planning a more muted trans-Atlantic schedule due to weak demand.

“Normally we would see bookings for these destinations, and we’re not seeing demand largely because of country restrictions that remain in place,” she said.

Some airlines are returning to strategies they put in motion before the pandemic. JetBlue aims to start flying to London in 2021, betting that it will be successful flying narrow-body jets with fewer seats to fill than the wide-bodies bigger competitors fly, according to airline President Joanna Geraghty.

Because New York-based JetBlue has strongholds in the Northeast, where the virus spread aggressively last spring, it learned to open new routes and cities more quickly and with less expense, she added. JetBlue has added dozens of new routes and recently announced service to new cities, including Miami and Key West.

“Everybody’s trying to look for where demand is,” she said.

Southwest is also being opportunistic by adding a dozen new cities as it looks to expand its reach. It is targeting airports such as Chicago’s O’Hare that were once too crowded with other carriers. It also recently announced new service to Fresno and Santa Barbara, Calif.—part of an effort to find untapped demand to put underutilized planes and staff to work bringing in revenue.

Another major carrier, Alaska, is pushing ahead with an order to replace most of its Airbus planes in the coming years with Boeing 737 MAX jets—a move that it says will make the airline more efficient. Doing the deal now helped the airline get the most favorable terms from Boeing, Mr. Minicucci said. “Even though there’s a huge cloud over everything, now is the time to make a deal like this,” Mr. Minicucci said.

China’s recovery from the coronavirus pandemic could give some indication of how things will play out in the U.S. if vaccination becomes widespread. Domestic air traffic there is nearly back to pre-pandemic levels—down just 1.4% in October from the year-earlier period—as the economy improved and airlines offered deals, according to the International Air Transport Association. In the U.S., airline executives and industry observers say pent up demand for travel could be unleashed in a fury next summer when more people are expected to be inoculated.

“The surge in demand for air travel could be like nothing we have ever before experienced,” Deutsche Bank analyst Michael Linenberg wrote in December.

One potential development that could lift the industry is if younger people jump at the chance to visit elderly parents and grandparents once they have been inoculated, said Raymond James analyst Savanthi Syth. A federal advisory panel has recommended that people over 75, who are among the most vulnerable, be next in line for the vaccine.

“January is going to look terrible,” Ms. Syth said. But “you can start to see some trips coming back even sooner than you would expect.”

Analysts expect business travel will lag behind leisure in the recovery. That is bad news for big carriers that rely on business customers for large chunks of revenue but potentially less troubling for smaller carriers such as Allegiant Travel Co. , which mostly flies from smaller cities to sunny vacation destinations.

Many of Allegiant’s passengers still want to fly, according to the carrier’s research. In weekly surveys the airline has conducted since the start of the pandemic, 60% of Allegiant’s customers say they intend to travel by spring, and 70% say they’ll travel by summer. The airline typically publishes flight schedules six months into the future, but is considering extending its offerings through the rest of the year.

“Customers are already thinking about holiday travel in ’21,” said Greg Anderson, chief financial officer of Allegiant. “Leisure is the segment of the traveling public that’s going to come back the fastest,” he added. “We think all the other airlines will be vying for that segment.”

7 comments:

  1. In 2020 airlines became major carriers and super spreaders of the Coronavirus 2 from China to Italy and the west coast of the USA and from there to rest of Europe and rest of N. America. Only if airlines had done what China did after Coronavirus 1 and at least checked temperature and oxygen pressure of every passenger they carried and disembarked, the pandemic could have been contained like Wuhan in Hubei province of China. Of course, if the late whistle blower Dr. Li WenLiang of Wuhan been taken seriously and the world alerted to the imminent pandemic the likes of which has not been felt as deadly as the Spanish flu pandemic 101 years ago.

    For Americans itching to travel, my recommendation is drive across our beautiful vast land from sea to shining sea. There is so much to see in the good old USA. I just got a call from Orlando, FL from a friend from Louisville and he said sunny FL is crowded at tourist places. I can understand why everyone wants to visit FL, open for business.

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    1. The real problem is that a recovery for the airlines is predicated on a return of business travel. Sure, people flying for "fun" drive some revenue, but the vast majority of the "high dollar" (read: profitable) tickets on most carriers come from business travel. Without them, the price of tickets has to go up a lot, and you also need a LOT less seats on the plane. To have a recovery in the sector, the business people need to get back in the seats. As a multi-year 100K+ flyer, I'm hoping that doesn't happen and I don't see much drive for it to happen. Companies have dispersed so much; I used to fly to somewhere to meet with everyone who worked in that location, problem is, that location is gone now, all those employees are now "WFH forever". So, where am I flying and why?

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    2. I have family in Orlando and you are correct. It is open for business as usual. During Thanksgiving week we went to Cheesecake Factory and it was packed to the tune of a 1.5 hour wait. We also visited the Orlando Science Center and saw the last day of a Pompeii exhibit (fascinating what the Romans came up with that far back like an odometer on a wheel to measure land for sale).

      For Christmas week, we went to several places including Top Golf and bowling as well as several restaurants. Except for masks required when walking inside the businesses (you can remove mask when seated), it was business as usual and the service staff was earning money. Far cry from Democrat shut down cities and states in California and New York (while said Democrats eat out lavishly telling everyone else to stay at home and not even have Thanksgiving or Christmas with family). Isn't that right Gavin Newsome and Fredo Cuomo? Say no to bailing out Democrat run states - let them sleep in the beds they made!

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  2. I agree, "I can understand why everyone wants to visit FL, open for business."

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  3. Even with increased demand the 'skip seat' arrangement won't allow a profit. One of two things will happen. The airlines will require a Certificate Of Vaccination ID (COVID)or airline prices and fee's will increase dramatically.

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    1. The "Your papers please" route just won't fly with me. We've bought and paid for OUR freedoms.

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  4. Airlines and other businesses who hope to return to full capacity will just be the first to impose vaccine card requirements, heading off lawsuits that will come if they don't do their duty to protect passengers.

    Look ahead and consider the advantage to be gained for every business that can say "all of our employees have up to date vaccination cards". After that, the logical next step is to protect employees by not providing service to anyone who lacks proof of current vaccination.

    Proof of vaccination will become mandatory everywhere as the inevitable by product of competitive commerce.

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