As we approach the traditionally busy summer travel season, now is the time to give some thought as to what we might expect. Anything would be an improvement over 2020 when US passenger airlines incurred $35 billion in net losses while their operating revenues fell more than 66 per cent as compared with 2019. With the elimination of change fees, increased vaccination rates and the pent-up demand for travel, domestic bookings are sharply on the rise. In fact, a recent survey from the research company Toluna indicates that Americans are gaining confidence to travel with each passing month, with 27% of respondents indicating they’re comfortable traveling this month and 42% by July.
Data from the mobile booking app Hopper also showed a strong uptick in summer travel planning, with searches for mid-summer travel increasing 100% in early February. All that pent-up demand and resultant planning has paid off for the airlines. US domestic flight bookings for summer travel rose sharply early last month, according to research from the data identity company Adara. Leisure travel, particularly for families (which is outpacing bookings by singles and couples), is driving the growth, according to Adara’s report. And the most popular destinations for summer leisure flights? Look to Honolulu, Denver, Chicago, Miami and Orlando. Bookings are soon likely to increase even further. Yesterday, the CDC revised their guidelines for Americans who are fully vaccinated, announcing they can now travel at "low risk to themselves" both within the US as well as internationally.
As flights fill, so will terminals, including private ones like PS at LAX, which caters to Los Angeles area celebrities and other wealthy flyers. The private terminal, which costs $4,500 per year for membership (plus user fees), reached capacity several times last month and often has a waitlist. “We are cautiously optimistic that this summer will be one of revenge travel,” said co-CEO Josh Gausman. “Travelers will spend more on upgrades, luxury services and unique experiences.” Many charter jet companies are expecting a banner summer as well. “The pandemic has also exposed many people to private aviation who might never have considered or tried it under normal circumstances,” said Megan Wolf, COO of Flexjet. “This has allowed the private jet travel industry to better weather the storm.” Sentient Jet, which sells “jet cards” for 25 flying hours, is predicting it will fly 30 to 50 per cent more volume than in pre-pandemic summers, owing to new customers acquired during the pandemic. Between April and September of 2020, two out of three card purchases came from new clients, a ratio that was reversed prior to the pandemic, said CEO Andrew Collins. “We’re forecasting that this will be our highest volume summer on record in the history of the company,” Collins told CNBC Global Traveler.
Since most of us don’t have the luxury of traveling by private jet, we’ll be sharing terminals with the rest of the flying public. Those terminals are going to be more crowded. US airports have recently recorded the largest increase in the number of travelers since the start of the pandemic, signaling a resumption in travel. Keep in mind though, these higher numbers are just half of what they were for most days in 2019, according to the Transportation Security Administration. In any case, travel is set to play a pivotal role in the widely predicted 2021 economic boom that has some experts predicting GDP growth of 4.6 per cent for America for this year. With all this in mind, let’s take a look at how the largest US passenger airlines are reacting.
American Airlines is feeling bullish. The carrier recently reported internally its online sales volumes were nearly back to 2019 levels which, at the time, were record setting. They’re enjoying the strongest revenue performance they’ve had since before the pandemic. At the same time, they've filled nearly 80 per cent of their seats systemwide which, for an airline, means they’re almost sold out. The Company expects this strength in bookings to continue into the second quarter. That’s why American will pull all its planes out of storage and into service by the May schedule. However, American will be significantly smaller than it used to be, even once all the planes come back. That's because they've already retired nearly 100 aircraft types, including 15 Airbus A330-200s, 9 Airbus A330-300s, 34 Boeing 757-200s, 16 Boeing 767-300s and 20 Embraer 190s. These retirements have been largely centered around their long-haul aircraft. So for the foreseeable future, American's long-haul fleet will consist exclusively of B777s and B787s until they take delivery of the A321XLRs in 2023.
Delta Air Lines CEO Ed Bastion reported very encouraging signs of recovery at the J.P. Morgan Industrials Conference held on March 15. Among the positive signs, he indicated there had been steady improvement in year-over-year net cash sales. As the public expresses increased confidence in air travel, Delta intends to pay down debt and accelerate voluntary contributions to its pension plans, including a $1 billion payment to pensions during the second quarter. They anticipate reducing their annual interest payments by about $110 million and pension expense by about $90 million. The carrier also plans to begin paying cash for aircraft it takes delivery of in the second quarter. Delta’s average daily cash burn in the first quarter is expected to be $10-14 million, near the mid-point of what was initially forecast and they were said to end the quarter with cash burn for the month of March that was close to break-even. The CEO was confident Delta is on a path to reach neutral cash burn in the spring with a sustained recovery in the second half of 2021 and a return to profitability in September. Reflecting these sentiments, the airline is adding nine new routes to target the impending summer leisure travel boom. Their new lineup encompasses a wide variety of vacation destinations, from the US mountains to its beaches. According to Delta, this was done in response to the “renewed optimism and growing customer confidence in upcoming travel.”
Southwest Airlines is also feeling very confident as travel bookings increase. Early this week, the airline agreed to purchase 100 Boeing 737 Max 7 aircraft as it plans to retire older jets, sticking with the manufacturer that has been the backbone of its fleet for fifty years. The Dallas-based discount carrier said under the agreement it would also convert 70 of its firm orders for Max 8 planes to the smaller, slower-selling Max 7 jetliners. It also added 155 options for 737 Max 7 or Max 8 airplanes through 2029. Southwest, which operates an all-737 fleet said its order, the largest Max sale since two crashes caused a worldwide grounding in March 2019, is a vote of confidence in the planes. US regulators lifted the 20-month grounding of the Max in November and many other countries have followed suit since that time. Southwest had indicated that it was weighing wether to add Airbus A220 jets to its fleet to replace older 737s but, in October, COO Mike Van de Ven said having two types of planes would be a “big undertaking for us,” citing issues with pilot training and maintenance. In a statement, the carrier said,” This cost-effective order book with Boeing allows the Company to maintain the operational efficiencies of an all-Boeing 737 fleet to support its low-cost, point-to-point route network.” Southwest also announced 36 new routes for spring and summer service to popular vacation destinations. The move comes as air travel hits pandemic-era highs and US airlines are looking to capitalize on the surge.
For its part, United Airlines is adding more than two dozen nonstop routes from the Midwest to coastal cities popular with vacationers for the summer season, making a bet that travelers will continue to gravitate towards the outdoors. The Chicago-based airline said on Thursday that its schedule for May has been increased. In terms of comparisons, last May it flew only 14 per cent of its May 2019 capacity while this year’s schedule will be 58 per cent of its May 2019 capacity. Their route additions showcase United’s focus on domestic vacationers for the summer season which is generally the most lucrative for airlines. The carrier has seen increased numbers of passengers as more people have been vaccinated in recent months. But business travel and international travel are still down sharply compared with domestic vacation spots. “We wanted to point our assets to where the demand is,” said Ankit Gupta, United’s vice president of network and schedule planning. He indicated that the carrier’s capacity to Florida is almost back to the same level of 2019. CEO Scott Kirby also expressed his optimism at the recent J.P. Morgan Industrials Conference and just this week, United announced plans to hire 300 pilots, another sign they're feeling very confident.
After the worst airline downturn on record, it’s encouraging to see positive signs of recovery. We can only hope this continues unabated, helping travel return to some semblance of normalcy.
Until next time…stay safe.
Great news for the airlines, and for the US tourist destinations, and all the linked service industries - long live the revenge traveller!!!