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The number of people screened by the Transportation Security Administration (TSA) at U.S. airports is plateauing at around 600,000 per day. Although this is up from the nadir of under 100,000 people per day in April, it’s still a fraction of the roughly 2 million people the agency screened in October last year.

The TSA’s so-called throughput numbers are widely watched by the airline and travel industries as a proxy for travel demand. The last day of normal this year was in early March, when the numbers tracked with 2019’s. By mid-March, the numbers began to slowly decline — as news about the coronavirus in Asia and Europe began to affect travel patterns in the U.S. — and plunged in April to under 100,000 passengers per day. Since then, throughput has steadily risen, especially over the summer.

On October 18, the numbers topped 1 million for the first time since March, which many took to be a sign that the travel had turned a corner. Not so fast, analysts say. “The day traffic hit 1 million was a holiday — Columbus Day,” said Helane Becker, an airline-industry analyst for Cowen & Co. “Since then, there have been two events, Halloween and Election Day, that actively discourage traffic,” she said, explaining that in normal years, travel falls off in the period between those two events.

October always has been an off-peak period for U.S. airlines, as schools are back in session and leisure travel falls off. But in normal years, business travel usually makes up the difference. That isn’t happening this year. Business travel is 85 percent down from last year, Becker pointed out. There is no clear sign when business travel will return, although the International Air Transport Association (IATA) forecasts business travel to return to its 2019 levels in 2024.

U.S. carriers have shifted their networks to chase as much of that leisure demand as they can. For carriers like Delta, American, and United, that has meant retooling route maps optimized for business travelers to offer more flights to places like Florida, the Caribbean, and Colorado and Utah to capture as much of that beach and ski demand as they can.

Becker said her firm is closely watching the upcoming Thanksgiving and year-end holiday period to see if demand starts to return. “That’s when we think traffic will top 1 million again,” she said.

The benefit of a large domestic market

Although U.S. airlines are staggering from the effects of the pandemic, it could be a lot worse. The U.S., like China, Brazil, and Russia, has an enormous domestic market, both in terms of population and geographical expanse. Unlike in most of Europe, which has a robust network of high-speed trains, there are no feasible ways to get from, say, California to New York quickly except by air. This is why the U.S. domestic market U.S. market is down by about 65 percent from last year, compared with 76 percent for Europe, IATA data show.

The picture is even better in Brazil, where domestic traffic is down 55 percent compared to last year, according to IATA. Local low-cost carrier Gol expects to operate 78 percent of its pre-pandemic schedule by year’s end. In China, passenger traffic is down only 3 percent from last year. And in Russia, it actually grew, by 3 percent, the only region in the world where air travel showed meaningful growth this year. It’s important to keep in mind that the pandemic is essentially raging unchecked in Brazil and the U.S., and Russia is entering a second wave of infections. Leisure demand appears to be tracking back up despite the disease, — a “steady state,” United CEO Scott Kirby said recently.

Travel restrictions are holding the recovery back

The airline industry is putting its faith in rapid-response testing as a way to restore consumer confidence and eliminate the need for mandatory quarantines, a “blunt force” tool IATA says hampers demand. Several airlines in the U.S. are trialing rapid-response testing for flights to Hawaii, which is waiving the 14-day quarantine for incoming visitors if they can prove they had a test from an approved lab within 72 hours of departure.

In an interview with Airline WeeklySouthwest Chief Commercial Officer Andrew Watterson said the airline’s booking trends show significant pent-up demand for Hawaii travel. Whenever the state has announced a date for the quarantine-policy to end, Southwest sees bookings for Hawaii spike. Every time the state has pushed back its re-opening date, bookings move to the new date. “As long as it’s safe for people to go to Hawaii, for the people of Hawaii, we see substantial demand,” he said.

American is adding several Caribbean destinations to its pre-departure testing program. But these testing programs have not been widely replicated elsewhere in the world, which has made recovery difficult for carries, like Lufthansa, British Airways, and Singapore Airlines, that staked their businesses on premium international business travel. These carriers, without large domestic markets (or none, in the case of Singapore Airlines) are particularly exposed to the fall in international demand caused by quarantines and travel restrictions.

“A resurgence in Covid-19 outbreaks — particularly in Europe and the U.S. —combined with governments’ reliance on the blunt instrument of quarantine in the absence of globally aligned testing regimes, has halted momentum toward re-opening borders to travel,” IATA Director General Alexandre de Juniac said. IATA reported that September traffic numbers have fallen worldwide. Airlines had hoped that the green shoots they saw in June and July augured well for the rest of the year, but these hopes have been quashed, IATA said. In fact, international airline traffic is down 89 percent from last year, the IATA data show.

Lufthansa CEO Carsten Spohr captured the glum sentiment among many airline CEOs during the company’s third-quarter earnings call. “We were confident that our business would gradually recover in the second half of the year, and indeed, performance in July and early August was even better than we initially expected,” he said.

“Since then, however, the recovery has stopped: leisure travel has come to an end due to new limitations; mew infections…started rising, causing travel restrictions to increase further and further; and our corporate customers have not yet returned.”

Photo Credit: The rest of the year could be rough for airlines. Faisal Mahmood