- Domestic travel rebound is expected to outpace international recovery, as barriers to cross-border trips persist
- Signs that consumers are ready to travel again are growing, with rising searches for airfares and activity on booking sites.
- Which countries will allow Americans in? Would they face a lengthy quarantine or be putting others at risk? How safe are layovers?
- People are spending more time combing through airline and hotel websites, executives say. Traffic on Spirit Airlines Inc.’s website, for example, has roughly doubled since the holidays, Chief Executive Officer Ted Christie said.
- Travel companies are trying to help in decision-making. United Airlines Holdings Inc. launched a way for customers to search for flights with an interactive map that displays fares to dozens of destinations at once. Conceived before the pandemic and launched in September, it is proving to be popular now, the airline said.
- The U.S. Centers for Disease Control and Prevention still recommends against nonessential travel. CDC Director Rochelle Walensky said rising airport passenger numbers are concerning and pleaded with people to wait.
- Some 61% out of 2,200 Americans surveyed by Vrbo’s parent Expedia Group Inc. said they were likely to make a long-distance trip in the next year, according to results released earlier this month. Many countries around the world have closed their borders to tourists or have onerous and costly quarantine requirements. More than half of international air routes have been closed or suspended, according to the International Air Transport Association.
- Places open to Americans have seen some economic benefits. Mexico, which is open to U.S. tourists, saw the number of passengers flying from the U.S. fall 42% in January from a year earlier, according to government data analyzed by industry group Airlines for America
- On both sides of the Atlantic, airlines have spent months trying to persuade governments to lift bans on U.S.-European travel, but talks have been complicated by the rise of new virus variants, slow vaccine rollout and rising infection rates in some countries.
- The European Union on Wednesday said it would introduce a vaccination “passport” that its citizens can use to travel within the bloc. Tourism-dependent Mediterranean countries pushed to have the program in place by summer.
- That means U.S. travelers, for now, have limited options to head abroad, adding to demand for domestic destinations. The strength of intra-U.S. travel has been evident during this year’s spring break, when airports logged some of their busiest days since the start of the pandemic, with 1.47 million people passing through security on Friday, according to the Transportation Security Administration.
- While the pandemic’s effects might be easing, they haven’t passed. Walt Disney Co. on Wednesday said it would reopen Disneyland and Disney California Adventure parks on April 30. The parks will operate with below-normal capacity limits, Disney said, and initially be open only to California residents.
- Consumers have largely focused their spending around the home over the past 12 months, but now travel-industry officials cheerily say they are next in line. “People already bought a new car, did a home repair,” United CEO Scott Kirby said during a conference last week. “It’s going to mean a lot more available to spend in ’22, ’23, ’24 for leisure demand.”
- With pent up demand and reduced capacity, the transatlantic seems a promising market for the big three U.S. airlines.
- But that promise is not unlimited. JetBlue will enter the market this fall, other new carriers could also enter and assuring passenger health on the long-range flights remains a challenge.
- United CEO Scott Kirby voiced Euro-optimism Monday, saying, “As soon as international borders open up, would you rather go to the Rock and Roll Hall of Fame or go to Paris? I’m betting on Paris.”
- Without mentioning names, Kirby referred to the shutdown of low-fare transatlantic carrier Norwegian Air and others that failed before the coronavirus crisis. “The business models don’t work,” he said. “They never made money. They never had a chance to make money. They’re gone.”
- “We are very bullish and optimistic about London,” Hayes said. “We have a path into more than one London airport (and) we feel even more confident than we were before.” JetBlue has not specified which UK and US airports it will serve. It has secured slots at both Gatwick and Stansted and is trying for Heathrow.
- A bigger problem for the big three carriers might be creation of more low fare carriers, replacing those that have disappeared. Already, Norwegian Air founder Bjorn Kos is talking about a new venture, Norse Atlantic Airways, that would begin flying this year.
- A problem is that so far, digital vaccine certificates barely exist. “It will take a long time to develop a standard,” Mann said. “Pent up demand for travel is out there, but border friction and the need for digital documents will take longer than anybody anticipated.”
- As the large U.S. Airlines look to get their daily cash burn to neutral and are seeing signs of optimism for summer leisure travel, the future of business travel is still highly uncertain and otherwise things should be looking up, right?
- Not exactly, if the airlines are dependent on business travel. This is because while some are not likely to fly as regularly, others are fine to get on a plane. It’s just that the plane they board will be a private jet, instead of a commercial flight.
- According to some in the industry, a rule of thumb used to be that it took about $10M in net worth to be a regular customer of this kind of travel, and significantly more if you wanted to own your own plane. Also, flights were largely business related and equipment utilization was relatively low as they would fly when the flight was needed, and wait for next use.
- Since the pandemic, however, two key trends have emerged. One is that many more leisure trips are being taken on private jets, and this has increased equipment utilization.
- The second trend is that people with lower net worth are increasingly using this way to travel. The industry is now actively courting those with $2M to $3M net worth, 70% lower than the previous perceived threshold.
- A big innovation has been the sale of pre-paid cards that offer just a few hours up to 10 or more hours of flying. This has brought more people into this market. There are travelers who are now trying private aviation because of ease of operations, significantly shorter airport processing times, overall fewer crowds and no tight seating on the plane.
- Every trip taken this way means fewer expensive seats sold by commercial airlines. This is not like losing a leisure customer who opts for a local theme park instead of flying. This is losing one of the highest-paying and highly profitable customers an airline can find.
- Losing one of these customers is economically equivalent to losing two to four, or even more, leisure customers, and significantly harder to replace also. It only takes a small percentage of business travelers to change to private flying to have a meaningful effect on airlines that depend on this kind of traffic.
- Once again this trend favors low-cost airlines who aren’t likely to lose their price-sensitive travelers to a private jet. U.S. Airlines like Delta, United, and American have the biggest investment in premium space on their aircraft, and rely on travelers for those seats to pay fares many times as much as those sitting in coach.
- It isn’t clear whether this trend will reverse itself once the pandemic is over. But just like Zoom, the more people who try private aviation, the more comfortable they will be with it and realize that it is reliable and effective. It is not for everyone and still requires significantly higher rates for even short trips. The private aviation industry recognizes this, and by increasing utilization of their fleets and offering lower-price-point ways to try the product, they are working to win this business not just for now, but for the long haul.
- FedEx expects its overnight Express unit will be flying ahead of a strong tailwind for a couple of years as passenger airlines struggle to rebound to the number of flights before the pandemic hit last year.
- At the same time, demand for air cargo is increasing, driven by international e-commerce and the vaccine rollout, helping FedEx boost prices for shipments. FedEx’s Express unit accounts for more than half of the company’s sales.
- In fact, the company expects e-commerce will grow faster than it projected just six months ago when the FedEx estimated U.S. domestic deliveries across the industry would reach 100 million packages a day in 2023 — three years earlier than it had previously estimated. Now, it forecasts the industry hitting 101 million packages per day in 2022, with 86% of that growth from e-commerce.
- In the face of a wobbly vaccine rollout, the airline has reportedly cut its transatlantic capacity by 30% for the third quarter of 2021.
- While some areas have seen an uptick in demand, be that instantaneous as German holidaymakers flock to Spain over Easter or a slow-burner rebound as in Russia, airlines are still on the fence for the summer season.
- The formerly so lucrative and congested transatlantic market has shrunk to a trickle of flights, carrying only ‘essential’ passengers and cargo.
- However, Florida-bound spring-breakers and other Easter-related travel have conspired to, in all probability, bring the airline’s cash flow for March into the green. According to Routesonline, United also expects to maintain a positive core cash flow moving forward, despite higher fuel prices.
- Transatlantic routes bring in less revenue for US carriers than domestic services. However, under normal circumstances, they are some of the more profitable ones.
- “We certainly are seeing the beginning of what feels like a very large uptick,” said American Airlines Chief Executive Doug Parker, one of several CEOs speaking at a J.P. Morgan conference.
- Executives cited data showing that U.S. COVID-19 vaccinations are accelerating and have outstripped the number of positive cases, which are on the decline.
- As a result, people are booking vacations and visits to friends and relatives, helping to slow the pace of expected revenue declines in the first quarter, though business and international travel remain depressed.
- United Airlines expects to halt its cash burn in March, CEO Scott Kirby said, the first major carrier to say it could hit the industry’s milestone. In January, United said an average daily core cash burn of $19 million in the fourth quarter would likely continue in the beginning of 2021.
- Delta Air Lines is “cautiously optimistic” that it can halt its cash burn this spring, CEO Ed Bastian said.
- Southwest Airlines estimated lower cash burn in the first quarter and a lower decline in operating revenue for March than previously forecast.
- JetBlue Airways also forecast a slowing pace in its first-quarter revenue drop, projecting a decline of between 61% and 64%, compared with the same period in 2019. It had previously forecast a fall in revenue of 65% to 70%.
- American, the most leveraged U.S. airline, said it is not looking to raise any more financing after a $10 billion debt deal last week and expects to have more than $17 billion of liquidity at the end of March.
- UPS pilots disembarking for rest in Hong Kong report they are being forced to wait in government facilities for COVID-19 test results rather than proceed to their hotel, a situation that could escalate tensions with the U.S. over restrictive COVID-19 health measures on aircrews arriving in the semiautonomous city.
- The U.S. Department of Transportation earlier this week retaliated against Hong Kong’s aggressive quarantine measures for pilots that are impacting cargo flights by FedEx Express (NYSE: FDX), but give a pass to certain flights by local carrier Cathay Pacific.
- “Crews laying over in Hong Kong are now subject to new rules requiring that crewmembers tested for COVID-19 upon arrival must wait for test results prior to being allowed to proceed to the crew hotel,” the union representing UPS (NYSE: UPS) pilots said in a communication to members obtained by American Shipper.
- Until now, crews were allowed to wait for results at their hotel and only sent to government quarantine facilities if they, or a close contact, tested positive. Under the new policy, aircrews must wait for results at designated airport holding rooms.
- Earlier this month, FedEx pilots appealed to the highest levels of FedEx to stop layovers in Hong Kong because of the conditions in Hong Kong facilities and asymptomatic pilots being kept in group settings that put them at increased risk of getting sick.
- “The manner in which Hong Kong has imposed its restrictions disproportionately impacts U.S. carriers to the exclusive benefit of Hong Kong carriers,” the DOT order said.
- “Hong Kong already has significantly harmed [FedEx’s] operations and drastically upended the competitive dynamics of the market by implementing an exception for Anchorage.”
- Most U.S. carriers have ceased overnight crew layovers in Hong Kong to avoid the risk of being sent to quarantine camps and change crews in other locations, such as Tokyo and Seoul, South Korea, to comply with hours-of-service requirements. But the extra stops add time, fuel and other costs for what are supposed to be nonstop flights.