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Aviation Industry Updates: January 18, 2022

By January 17, 2022January 24th, 2022Industry News

Southwest Achieving The Unthinkable With Seemingly Irrelevant Strategy

  • Southwest has seen tremendous growth over 2021, with expansion into 18 new markets and turning a profit for Q4. Despite the hard-hitting impact of the pandemic on the travel industry, staff shortages, events going virtual, and the rise of staycations, the airline carried on and did what no one thought an airline could: It grew.

  • And now Southwest is beginning to do what no one thought the budget airline would: attract corporate travelers.
  • But in an oddly genius move, Southwest is making the so-called pipe dream a reality by making route map expansion a core recovery strategy. And though the airline may be seen as tone-deaf for using this time to expand its routes and reach new markets, that’s only to those who are blind to its long-term plan: market expansion.
  • What Southwest is doing is expanding into smaller, more vacation-friendly destinations that people want to go to, such as Telluride, Palm Springs, and Southern Maine. But it’s not just heading off to hit the slopes or to relax on a warm beach that is attracting Southwest passengers.
  • As more businesses shift to fully remote work and the Great Resignation (or better yet, the Great Reshuffle) continues, where we work isn’t the only thing that’s changing. But where we live is changing too.
  • What this means for the airline industry is that people are becoming more dispersed, and business travelers are no longer tethered to cities like New York, Chicago, or San Francisco. Now, as more people are moving out of big cities, business travelers are everywhere–like Southwest.
  • Southwest has a history of resilience that is born out of a holistic approach to strategy and a deep understanding of human psychology. It knows that corporate travelers do not simply choose airlines by which offers the best buffet in the airport lounge, the most points, or the biggest first-class cabins, but also by its value.
  • And when people value their time, they also value the convenience of an airport in their local area and the time it affords them back with their families, their friends–their lives. Because no matter how many bells and whistles an airline comes up with to dampen air travel, people don’t fly for fun. They fly to get to where they are going. And to get them there, Southwest is strategically positioning itself to meet people where they are.

Inc.

Delta Foresees Return to Profitability By March

KEY POINTS:

  • Over the past week, Delta’s operations have stabilized, with cancellations related to the omicron variant of Covid-19 affecting only about 1 percent of flights, with only two on Wednesday, said Delta CEO Ed Bastian.
  • “While the new variant is not done, it appears the worst may be behind us,” Bastian said. “Given the high transmissibility and lower severity of omicron, this variant is likely to mark the shift in Covid-19 from being a pandemic to a manageable and ordinary seasonal virus, which should accelerate our path to a normalized environment. While the first 60 days of the year will be impacted, we are confident that the pace of travel recovery will resume its December trajectory as we move into President’s Day weekend, and a strong spring and summer travel season are ahead of us.”
  • For those first few months, however, the omicron case surge will affect business travel and international recovery the most as meetings are canceled, office reopenings are postponed and countries put restrictions back in place, Bastian added. He said he anticipates pretax losses for the carrier in January and February.
  • The company’s business travel segment reported domestic passenger volume approaching 60 percent of 2019 levels during the fourth quarter of 2021, according to Delta. That figure included both the managed corporate and small and medium enterprise sectors.
  • Bastian, further noting a correlation between companies reopening and an increase in business travel, said that the best way to characterize the segment was to “wait and see.” Companies were “trying to understand what is going on with omicron, when to reopen offices, and they were making those decisions.” He added that case counts cresting and peaking in parts of the U.S. where the omicron variant first appeared was “giving them encouragement” to realize they can get back and have people in offices sooner than they were thinking when omicron first appeared. “When offices open starting in spring, we think it will pick up where it left off in December and grow from there,” he said.
  • Delta reported fourth-quarter adjusted pre-tax income of $170 million, about $30 million shy of the $200 million projected just prior to the schedule disruptions experienced at the end of 2021. Adjusted operating revenue was $8.4 billion, which was a 2 percent improvement over Q3 2021 revenue. The company also reported a full-year 2021 adjusted pre-tax loss of $3.4 billion on adjusted operating revenue of $26.7 billion. Capacity was restored to 79 percent of 2019 levels as of the fourth quarter.
  • Guidance for 2022’s first quarter includes capacity at a range of 83 percent to 85 percent of first-quarter 2019 levels, and total revenue in a range of 72 percent to 76 percent, which compares with 74 percent during Q4 2021. Full-year 2022 capacity is expected to be 90 percent recovered versus 2019, weighted to the back half of the year.

Business Travel News

The Return Of Air Travel | Reflecting On 2021

KEY POINTS:

  • Early 2021 offered a very limited view into the recovery. As air travel started to come back, the airline industry responded in different ways. Leisure travel led the way, but business travel also started to come back.
  • Early 2021 seemed to be a continuation of 2020. Airlines kept their schedules relatively light, though every airline kept their eye on March, with spring break serving as a kind of bellwether for what leisure travel would look like.
  • Things significantly improved in March of 2021. With vaccinations continuing to roll out and travelers more confident to book, traveler numbers grew significantly.
  • Not too long after that, coastal demand started to make a comeback. These primarily business-oriented markets had traditionally lagged behind other markets, though started to make big comebacks.
  • Business travel relies not just on the corporation looking to send employees on the road, but on customers or operations willing to receive those employees, and that was part of the delay that Delta saw in the coastal markets, even if leisure travel started to make a return quicker than business.
  • While the return of domestic travel was a huge boost to US airlines, the return of international travel was something that airlines needed to boost their financial fortunes and start to truly come out of the crisis. Over the summer, things started to reopen abroad, particularly in Europe.
  • While Europe reopened for Americans, the United States did not reopen to Europeans until November. As a result, planes were relatively full going to Europe, but coming back, planes were relatively empty as carriers could only fly US citizens, permanent residents, and some international travelers who met exemptions.
  • Overall, 2021 was a year of recovery, as many airlines recognized and publicly discussed. However, it was filled with its own challenges. Airlines started to recognize the disruptions associated with trying to get crews and planes back in place, ramp up hiring, and fly enough to meet demand.
  • There were plenty highlights. American Airlines returned to Israel. Delta Air Lines bet big on Boston. Spirit added many new routes and cities. Frontier ordered new planes and entered new destinations. Sun Country came off a successful IPO and expanded significantly. Overall, the world looks different in 2022 than it did in 2019, but with plenty of lessons learned from 2021, the industry is looking ahead and ready to see what comes next.

Simple Flying

FAA Releases 1,500 Notams To Address 5G Disruptions

KEY POINTS:

  • The FAA today released a virtual avalanche of notams in the face of potential disruptions in the function of radar altimeters ahead of the January 19 launch of AT&T and Verizon’s new 5G networks. According to HAI, the agency has published 1,500 notams primarily for public-use airports within the 46 Partial Economic Areas in the U.S. that will see 5G service using the C-band, including the 50 airports recently identified by the FAA. The notams address the unreliability of enhanced flight vision systems (EFVS), autoland, and helicopter hover autopilot modes, among others, and prohibits their use.
  • “This obviously continues to be a rapidly-evolving situation, and it is imperative that business aviation operators be aware of all notams affecting their flights and what they may entail,” said Heidi Williams, NBAA’s director for air traffic services and infrastructure. “Guidance included in these notams may range from simple advisories about 5G network operations in the area to prohibitions of some instrument approach procedures due to potential interference affecting radar altimeters.”
  • Williams also noted that airframers and avionics manufacturers are “aggressively working” on alternative means of compliance (AMOC) that could allow operators to supersede the notam directives, and that they expect the FAA to approve an initial series of AMOCs soon. She cautioned that any such alternative means would apply only to the specific aircraft, avionics, and airports listed in the operator’s approved AMOC.

AIN Online

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