The messaging about the U.S. airline recovery includes some, shall we say, irrational exuberance. Sure, some people will always want or need to fly. But many more want to manage their risk, and that's hard to do when the United States can't control a raging pandemic.
America is built on optimism, but it is not immune to the laws of science.
It’s a lesson some U.S. airlines have learned the past two weeks, as Covid-19 cases continue to increase in many regions. As cases go up, some state and city governments have instituted new quarantines that limit what travelers can do for two weeks after they fly.
Perhaps not surprisingly, some Americans are deciding they no longer need to take that summer vacation, while businesses are rethinking plans to resume travel.
Just this week, several U.S. carriers, including United Airlines and Delta Air Lines, warned that they may pause adding new flights, as they see how the situation unfolds. In a letter Thursday to employees, Delta CEO Ed Bastian said the airline had “renewed caution” about growing its schedule later this summer. Meanwhile, United signaled August probably would be its high-water mark for flight resumptions.
It probably should not come as a surprise. Starting in May, U.S. airlines spent considerable effort to coax the industry into recovery, but it was always a tenuous enterprise. The United States was never close taming this virus, so airlines essentially were hoping customers would ignore science and continue to fly. Some of those customers have returned, but many more may be taking a wait-and-see approach.
“The recovery is falling apart completely,” said Jay Shabat, senior analyst at Skift Airline Weekly. “We had a lot of momentum through mid-June, but it has turned a lot more pessimistic just in the past couple of weeks.”
To be sure, U.S. passenger traffic remains far from lows reached in March and April, when demand was close to zero. On Wednesday, the Transportation Security Administration screened 632,498 passengers, up from about 93,000 on the second Wednesday in April. But on a typical mid-week day in July, the TSA usually screens more than 2.5 million passengers.
Few airlines bet bigger on recovery than Allegiant Air, one of four ultra-low-cost U.S. airlines. It has a large presence in Florida, and capitalized when the state was among the first to reopen parts of its tourism economy. By May, visitors flocked to beaches, particularly on the Gulf Coast.
Comparatively speaking, Allegiant had a huge Memorial Day Weekend, taking about eight percent market share, nationwide. Allegiant normally is among the smaller U.S. airlines, and during the holiday weekend last year, it had about 2 percent share.
The momentum continued through June, as Las Vegas reopened, Allegiant told investors on Thursday, with the airline generating about $4 million per day in gross bookings, a number that exceeded the expectations, according to a release. Since, though, business has tapered.
“Within the last two weeks, several states have reported increases in the number of people with the virus, which has negatively impacted bookings and tempered expectations into the third quarter,” the airline said in a statement.
Allegiant warned demand could worsen, especially if cases continue to increase in tourist hotspots like Florida, Arizona and Las Vegas.
“We recognize the situation is fluid, and that demand could be impacted by additional shutdowns and required quarantines in our markets,” it said.
Another discount carrier, Sun Country Airlines, also is seeing a slowdown, spokeswoman Jessica Wheeler said. She said it is “not a precipitous dip, but definitely a plateau that is below last year and below where it needs to be.”
For Sun Country, she said, the third week in June was the high-water mark for post-Covid demand.
Not Just Discounters
At least three more mainstream airlines also are feeling the squeeze.
United, which this week announced plans to lay off and furlough as many 36,000 workers by fall, said in a filing Tuesday that new bookings from the airline’s Newark hub have fallen considerably since reaching a recovery highpoint in mid-June.
On June 24, governors from Connecticut, New Jersey and New York announced travelers coming from states with high infection rates would have to quarantine for 14 days. Nineteen states are now on the quarantine list, including California, Florida, Nevada and Arizona.
Before the policy was enacted, United reported its Newark domestic net bookings, for flights within 30 days, were down about 65 percent, a considerable improvement from recent lows. By July 1, however, it said Newark net bookings under the same metric were down about 84 percent.
Elsewhere in the airline’s network, net bookings also fell, but not by as much.
To compensate, United said it may walk back some of the new flights for August it had recently announced. In a filing on Tuesday, United express concern about “reduced demand to destinations experiencing increases in COVID-19 cases and/or new quarantine requirements or other restrictions on travel.”
Delta is facing similar woes, its CEO told employees Thursday in a letter. The airline recently made a splash by adding 1,000 new flights this month, but CEO Bastian cautioned workers against getting too excited. He asked more employees consider leaving the company so it can cut costs.
“The continued growth of the virus through the Sun Belt, coupled with quarantine restrictions being implemented in large markets in the northern part of the country, give us renewed caution about further schedule additions at this time,” Bastian said.
In an interview Thursday, Scott Laurence, JetBlue Airways’ head of revenue and planning, also said he has seen a dip in demand. But he said he remains optimistic, saying JetBlue can at least cover the costs with it current schedule — something it could not always do a couple of months ago.
“We have certainly have seen things slow, particularly in the quarantine-impacted East Coast markets,” he said. “But it’s not like we saw earlier in this crisis.”
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Photo credit: Several U.S. airlines report the recovery has slowed. Pictured is the United Airlines terminal lobby in Boston. United Airlines