Aviation Industry Updates: April 27, 2021

Cashed-up Leisure Travelers Are Splurging on Premium Seats

KEY POINTS:

• Flush with cash and a record number of air miles after a year on the ground, leisure travelers are splurging on premium seats for their first trips back.
  The popularity of these lucrative seats -- especially among passengers who’d usually shoehorn into economy -- is an unexpected boon for airlines weathering a crisis that’s forecast to have cost them a staggering $174 billion in losses by the end of 2021.

• Carriers from Deutsche Lufthansa AG to Virgin Atlantic Airways Ltd. are now starting to question whether business travel as the world once knew it will ever return to pre-crisis levels. That means for the next few years at least, there’ll be a steady supply of premium-class seats priced to sell to the general public -- for cash, loyalty points or a mix of both.

• Fares are already way off their peak as airlines stimulate a recovery. Transatlantic business-class tickets on Delta Air Lines Inc., British Airways and American Airlines Group Inc. in late May are going for a little more than $3,000. Those seats, particularly for last-minute bookings, could have cost as much as $9,000 before Covid, said Brian Kelly, founder of travel-advice website The Points Guy.

• Leisure passengers’ desire to sit in a classy cabin is partially offsetting a stunted recovery from traditional business-class customers.

• Premium-economy cabins, which can be even more profitable than business-class sections, might play a key role in any aviation recovery, said Rob Morris, global head of consultancy at aviation data and analytics company Cirium. A quasi-blend of spartan economy and opulent business class, premium economy could capture those corporations flying on tighter budgets as well as leisure passengers wanting a little more comfort, he said.

Bloomberg

E.U. Set to Let Vaccinated U.S. Tourists Visit This Summer

KEY POINTS:

• American tourists who have been fully vaccinated against Covid-19 will be able to visit the European Union over the summer.

• The fast pace of vaccination in the United States, and advanced talks between authorities there and the European Union over how to make vaccine certificates acceptable as proof of immunity for visitors, will enable the European Commission, the executive branch of the European Union, to recommend a switch in policy that could see trans-Atlantic leisure travel restored.

• “The Americans, as far as I can see, use European Medicines Agency-approved vaccines,” “This will enable free movement and the travel to the European Union.”

• Resumption of travel would depend “on the epidemiological situation, but the situation is improving in the United States, as it is, hopefully, also improving in the European Union.”

• Technical discussions have been going on for several weeks between European Union and United States officials on how to practically and technologically make vaccine certificates from each place broadly readable so that citizens can use them to travel without restrictions.

• The European Union itself has begun the process of furnishing its own citizens with “digital green certificates,” which will state whether the traveler has been vaccinated against Covid-19; has recovered from the disease in recent months; or has tested negative for the virus in the past few days. Europeans will be able to use those to travel without added restrictions, at least in principle, within the bloc of 27 nations.

• The return of vaccinated visitors to Europe’s beaches and tourist sites would bring a desperately needed financial boost for countries in its southern rim, in particular. And for millions of would-be tourists around the world, as well as for airlines and the broader travel industry, it would herald a cautious and limited return to something that feels like normalcy.

New York Times

Gary Kelly 'Euphoric' | Southwest Boosted Flight Activity by 50%

KEY POINTS:

• CEO Gary Kelly told Yahoo Finance Live that his mood is "euphoric" as passengers return to the skies.

• While Southwest posted a $116 million profit, the airline would have had a $1 billion loss for the quarter if it had not received aid from the federal government.

• Southwest ended the quarter with $15.3 billion in liquidity and an increase in ASMs (available seat miles) or capacity, which will allow it to accommodate pandemic fatigued Americans who are ready to travel.

• "You know we had a faint last year in June, July where things were improving and we were extrapolating those trends into the fall and boosted our flight activity and it turned out to be premature," he said.

• But this time, Kelly says vaccines that prevent serious COVID-19 illness, which started becoming available in January, are making a big difference. "And so finally, January, February with the vaccines rolling out we began to see a change," Kelly added.

• As he looks to the future, Kelly believes the Boeing purchase and expansion to new markets will pay off. "It really positioned us very well for the next decade or more," he said.

Yahoo! Finance

Airlines Reevaluate Fleet Plans, Growth Projections, & Networks

KEY POINTS:

• Low-cost carriers who have always relied on leisure travel are considered to be in a strong relative position. In the U.S., this restructuring is happening without bankruptcy and all the major airlines are expected to recover.

• In Latin America, however, three of the largest airlines — LATAM, Avianca and AeroMexico — have filed for bankruptcy protection as they grapple with the travel demand reduction. This different approach to restructuring compared to the U.S. is mostly due to three major issues.

• Latin American airlines did not see the same impacts on revenue as the U.S. carriers did, and while Avianca did file for bankruptcy during this time most of the continent’s airlines did not. While adopting many of the same security features that became normal after 9/11, the Latin American airlines did not have the urgency to fix issues like fleet, labor inefficiencies, network redundancies, and real estate excesses. The U.S. carriers became more efficient after 9/11, and this led to both consolidation and a decade of profitable operations before the pandemic hit. Latin America never went though this then, so they have to now.

• Because of the relatively late start of well-structured and disciplined low-cost, low-fare airlines in Latin America, the larger airlines never developed the skills, efficiency, and strategies to compete effectively. The need to re-structure after the pandemic for these airlines is not only because of lower overall demand, but also to emerge as stronger competitors to the new breed of low-cost airlines in the region. Bankruptcy lets them address some of these cost issues head on.

• This reliance on people rather than technology and overall efficiency was common in Latin America. U.S. Airlines have worked for decades to increase labor productivity, have used outsourcing in places to help this, and developed many consumer self-help technologies and automation to reduce dependency on mostly high-cost labor. The availability of lower-cost labor made some of these developments less important for large Latin American airlines.

• This will work if they use the tools that bankruptcy provides well, and set benchmarks based on global efficiency standards, not just those in Latin America. Upon emerge from both bankruptcy and the pandemic, these carriers have the opportunity to be much more efficient, structurally sound, and provide stronger competition in global airline environment.

Forbes

Carriers Actively Hiring

Information changes regularly, what is reflected here is current as of April 27, 2021.
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