Skift Take

Airlines face a myriad of challenges in 2021. But above them all is the question: when will travelers return in significant numbers? Once flyers do, the industry can exit crisis mode and look forward again.

It goes without saying that the airlines collectively are eager for travelers to return in significant numbers. Only then can they begin to build back their decimated flight schedules, return furloughed staff to work and bring their balance sheets back into the black. Not too much to ask for, right?

But when flyers will return in a notable numbers, ratcheting up the stalled travel recovery, is one of the top questions in airline C-suites. One thing everyone agrees on: travelers are eager to return. You only have to look as far as China, where domestic demand is already at 2019 levels, to see that air travel can recover quickly once Covid-19 is under control.

“It’s the demand recovery that gets us back flying our entire fleet, getting the revenue back,” American Airlines Chief Financial Officer Derek Kerr said in October. Words that remain true today.

While holiday flyer numbers in the U.S. look on track to set a pandemic record, they remain about half of what they were a year ago based Transportation Security Administration (TSA) screening data. Those numbers are expected to get worse this winter — much like Covid-19 infections — before they get better.

But there is light on the horizon even as case numbers rise. Mass vaccination campaigns are underway in the UK, U.S. and other countries. The U.S. aims to vaccinate roughly 100 million people by the end of March on its way to broad availability of the inoculations by the summer.

Vaccination, barring the unlikely prospect of herd immunity or eradication of Covid-19, is widely agreed as necessary to kick off a broad travel recovery. Airline executives and Wall Street analysts expect flyers to return with a gusto once the majority of people have the vaccines.

“We expect next summer to be a lot better than this year but not normal,” said Andrew Nocella, chief commercial officer for United Airlines, told Bloomberg earlier in December.

What is unclear is when inoculations will translate into more butts in seats. Wall Street analysts expect the U.S. vaccination campaign to translate into a notable increase in air travel somewhere between March and June — in other words, sometime in the second quarter. Leisure flyers and those visiting friends and relatives are likely to dominate this early uptick as they have the recovery to date.

A broad travel recovery, however, will take longer.

“There’s a scenario where the U.S. reaches herd immunity by fall 2021, but we believe it’s a stretch,” wrote Cowen analyst Helane Becker in a report earlier in December. Herd immunity is generally defined as 70 percent of people either having gotten the vaccine or gained natural immunity.

Business travel is not expected to pick up until the final three months of the year or in early 2022, according to analysts at Raymond James. These lucrative travelers are key to the resurrection of major carriers like American, Delta Air Lines and United that rely more on corporate bookings than their budget peers, think Allegiant Air and Spirit Airlines.

Trade group the International Air Transport Association (IATA) only forecasts a 2021 recovery in air travel to about half of 2019 levels. The organization does not expect a full recovery until at least 2024 with the resumption of much international flying lagging domestic by at least a year.

“The expectation is that we will see a significant rise in travel next year, a 50 percent rise,” IATA chief economist Brian Pearce said in November. This forecast was based on the wide availability of vaccines in the second half of the year.

The return of travelers cannot come soon enough for airlines. Few anticipate turning daily losses into positive cash flow — not to mention a profit — until demand recovers more. Additional flyers will also allow carriers to recall furloughed staff, or in the U.S. minimize potential additional furloughs once the latest round of payroll support expires on March 31.

A broad travel recovery solves much of what ails airlines. It will allow them to, finally, exit crisis mode and look forward again.

But forecasting when those flyers will return is among the industry’s biggest challenges in 2021. As Delta Air Lines senior vice president of flight operations John Laughter told the carrier’s pilots recently: “The road to recovery will be a long [and] uneven one.”


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Tags: american airlines, coronavirus, coronavirus recovery, delta air lines, iata, united airlines

Photo credit: Airlines are eager for travelers to return in 2021. Denver International Airport / Denver International Airport

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