The CEO of Spirit Airlines is hopeful the carrier can get back to 2019 capacity levels by the end of next year. His airline focuses more on leisure customers than most, so maybe it is possible. But it still seems to be a far-fetched goal.
In typical times, the U.S. summer leisure travel season ends with Labor Day, when most students return to school. But this year, with a pandemic raging, two airlines reported September demand has been slightly better than expected.
This is not to be confused with recovery. Fares are low, and capacity remains far from planned, across all airlines. But with regular life on hold for many people — some schools are returning virtually, rather than in person — leisure travelers continue to fly, Spirit Airlines and Southwest Airlines said Wednesday.
“The post-Labor Day period has been encouraging,” Spirit CEO Ted Christie said at the Morgan Stanley Virtual 8th Annual Laguna Conference. “I think we’re starting to see the leisure traveler gain a little bit of confidence. And while we’re still operating significantly less capacity than we would have at a time like this, it’s at least encouraging to see a little bit of traction.”
For Southwest, the situation is similar, the airline said in an investor filing. Back in May, in a moment of irrational optimism, Southwest signaled it might fly its entire planned schedule by-year end. By Summer, with the United States unable to control Covid-19, that hope disappeared, and Southwest began warning about a rough final three months of the year.
But September is holding up OK, on a relative basis, the airline reported. With capacity off 40 percent, Southwest expects load factors between 45 and 50 percent this month. That’s at the high end of a range it gave earlier, of 40 to 50 percent.
In its filing, Southwest said it is experiencing “a modest improvement in leisure bookings, thus far, for the remainder of September and for October 2020.” It noted, however, that many passengers seem to be waiting until the last minute to book.
What About The Rest of The Year?
Spirit is also seeing more late bookings, Christie said, making it difficult to predict what demand will materialize for Thanksgiving and Christmas. Spirit usually books big profits during holiday periods.
By now, many passengers should be looking to make bookings for Thanksgiving and Christmas. But with so much uncertainty, many travelers are holding off, Christie said. (Interestingly, another Spirit executive said, travelers are still searching for flights on the airline’s website; they just aren’t buying them.)
“It’s too early to say for sure anything specific about Thanksgiving yet,” Christie said. “But I would say that the activity around Labor Day at least gives you some optimism that visiting friends and relatives-type traffic, people wanting to go out and see their family, which is what Thanksgiving is all about, does have some pent-up demand. And hopefully, we’ll start to see that soon, in real booking activity.”
Southwest also said little about its plans for November, though it did tell investors capacity for the month likely will decrease 35 to 40 percent, year-over-year.
Also on Wednesday, Southwest said it will continue to leave middle seats open through at least Nov. 30. The move is expensive for Southwest, but it should boost consumer confidence and may spur more bookings.
What About Normal?
Perhaps because of its focus on leisure travelers, Spirit is among the more bullish U.S. airlines about a real recovery. The airline could return to to its 2019 capacity as soon as about one year from now, Christie said.
“The way we’re looking at things right now is if things go along the current trajectory and the holiday travel season falls in line with what we might expect, then maybe by the summer of next year, the peak summer travel period, we’re starting to regain a line that looks more like it did in 2019,” he said.
By the end of 2021, he said, business could be even better.
“Our expectation is that’s where we’re going to see a more stabilized recovery into the end of next year, from the summer through,” Christie said. “That’s kind of our base case right now. Whether or not that proves to be true, we’ll learn more over the next few months.”
Have a confidential tip for Skift? Get in touch
Photo credit: Spirit Airlines said business is holding up OK. Spirit Airlines