Aviation’s recovery is gaining momentum.
A bargain for summer travel exceeds expectations, helping airlines return to profit and improving prospects for the rest of the year. It’s a welcome relief for a battered industry and a sign that the rebound that started this spring appears to be here to stay.
The economic recovery, aggressive cost cutting and a huge federal stimulus that paid off many salaries helped improve the finances of the largest carriers, which went into debt and lost billions of dollars during the pandemic.
This month, airline consumer spending briefly exceeded 2019 levels on a weekly basis for the first time since the start of the pandemic, according to Facteus, a research firm that monitors millions of online payments. Ticket prices have also rebounded: in June, fares were only down 1% compared to the same month in 2019, according to Adobe’s Digital Economy Index, which is also based on visits and trips. website transactions.
And on Sunday, the Transportation Security Administration screened more than 2.2 million travelers at its airport checkpoints, the most in a day since the start of the pandemic.
While people have been vaccinated and things have reopened, the demand is just very, very strong and I think, in general, is higher than people thought, said Helane Becker, analyst of the airlines at Cowen Investment Bank. People have money and time, and they use it to travel.
A full recovery hinges on the return of two pillars of the business, business and international travel, but executives said they expected both to improve dramatically in the coming months. And while the Delta variant of the coronavirus could still threaten the travel rebound, customers have so far not been discouraged.
We haven’t seen any impact on bookings, Scott Kirby, chief executive of United Airlines, said this week on a call to discuss quarterly financial results with analysts and reporters. The most likely outcome is that the recovery in demand will continue largely unabated.
His comments match those of executives at American Airlines and Delta Air Lines, who said on similar calls that they saw no drop in demand because of the variant. Delta and United both added that a large majority of employees and repeat customers have received coronavirus vaccines, which appear to offer protection against the variant.
Growing demand has prompted hiring across the industry. American said Wednesday it plans to hire 1,350 pilots by the end of next year, a 50% increase from previous plans. Last week, the company announced that it plans to hire hundreds of flight attendants and bring back thousands of people who have volunteered for extended time off during the pandemic.
Southwest Airlines said in June it would raise its minimum wage to $ 15 an hour to retain and attract workers, while Delta is hiring thousands of employees. United last month announced plans to buy 270 new planes in the coming years, the largest aircraft order in history and which would create thousands of jobs across the country.
Southwest on Thursday reported a profit of $ 348 million for the quarter that ended in June, its second profitable quarter since the start of the pandemic. American reported a profit of $ 19 million over the same period, while Delta reported a profit of $ 652 million last week, the first pandemic for every airline. United reported a loss this week, but forecast a return to profitability in the third quarter as their business improved faster than expected.
The financial turnaround was supported by an injection of $ 54 billion in federal aid to pay employee wages over the past year and a half. Without these payments, none of the major airlines would have been able to report profits for the quarter that ended in June. The aid prevents companies from paying dividends until September 2022.
Each airline offered optimistic prospects for the current quarter. American forecast passenger capacity to decline only 15-20% from the third quarter of 2019, while United forecast a 26% drop and Delta forecast a 28-30% drop. Southwest, which differs from the other three major carriers in that it operates few international flights, said it expected capacity on par with the third quarter of 2019.
Daily business briefing
We’re really excited about the momentum seen in the numbers, Doug Parker, chief executive of the United States, told analysts after the company released its earnings report.
Financial results and forecasts for the rest of the summer are the latest strong signs of a comeback that has been building for months. But the airlines are in heavy debt to repay American, the most indebted carrier, on Thursday announced a $ 15 billion repayment plan by the end of 2025, and the rebound has not been without setbacks.
Passenger volumes are still down nearly 20% from pre-pandemic levels, and airlines have suffered widespread delays and cancellations as passengers returned en masse last month, according to data from FlightAware, a flight tracking company. About 17% of Deltas flights were delayed for at least 15 minutes in June, with over 20% for United, over 30% for American and 40% for Southwest.
While the rapid surge in travel demand in June stabilized our financial situation, it had an impact on our operations after a prolonged period of declining demand, Southwest Managing Director Gary Kelly acknowledged on Thursday. in a press release. Therefore, we are intensely focused on improving our operations as we restore our network to meet demand.
Carriers have also struggled to put in workers to meet this demand. American suffered from a shortage of catering operators and wheelchairs last month, while ramping up pilot training to bring back more than 3,000 of their extended leave. Last week, Ed Bastian, managing director of Delta, said the airline had struggled to train new employees or sidelined employees.
It is taking a few months and the demand has returned at such a rapid rate, he said. It took us a little while to catch our breath. But be well back in the next few months.
One form of travel, travel to visit friends or family in the United States, has generally returned to 2019 levels, with Southwest saying these pleasure trips surpassed 2019 levels in June.
Surveys show that business travelers are increasingly eager to hit the road again this fall, when business travel typically picks up. Almost two-thirds of companies that have suspended business travel during the pandemic plan to bring them back in the next one to three months, according to a recent poll of the Global Business Travel Association, an industry association. If other companies follow Apple’s lead in delaying a return to the office, however, the resumption of business travel could be delayed.
Delta said it expected domestic business travel to return to around 60% of 2019 levels by September, up from 40% in June. These numbers roughly match United’s estimates.
Demand is picking up even faster than we had hoped domestically, United’s Kirby said on Wednesday.
International travel has also slowly started to recover as more countries, especially in Europe, open up to American travelers who can provide proof of vaccination or a negative coronavirus test. But airlines are pressuring the Biden administration to ease in-kind restrictions, which they say will allow the recovery to gain momentum.
I think the push is coming, and just as we’ve seen on the consumer side, we were preparing for it on the business side, Delta’s Bastian said last week. Once you open up businesses, offices, and open up international markets, I think it’s going to be a really good run for the next 12-24 months.
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