Airways See a Surge in Home Flights, Beating Forecasts

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The aviation recovery is picking up speed.

A summer travel bonanza beats expectations, helps airlines return to profits, and improves prospects for the remainder of the year. It’s a welcome relief to a troubled industry and a sign that the rebound that began this spring appears to be continuing.

The economic boom, aggressive cost cuts, and a huge federal boost that paid lots of salaries have helped improve the finances of the largest airlines, which took on huge debts and lost billions of dollars during the pandemic.

According to Facteus, a research firm that monitors millions of online payments, consumer spending on airlines this month briefly exceeded 2019 levels for the first time since the pandemic began. Ticket prices have also recovered: According to the Adobe Digital Economy Index, which is also based on website visits and transactions, fares in June were only 1 percent lower than in the same month last year.

And on Sunday, the Transportation Security Administration screened more than 2.2 million travelers at their airport checkpoints, most in one day since the pandemic began.

“Since people got vaccinated and things got reopened, the demand is just very, very strong – and I think, in general, it’s stronger than people thought,” said Helane Becker, airline analyst at investment bank Cowen. “People have money and time, and they use it to travel.”

A full recovery relies on the return of two pillars of business, business and international travel, but executives said they expected both to improve significantly in the months ahead. And while the delta variant of the corona virus could still threaten travel recovery, customers have not been deterred so far.

“We saw no impact on bookings at all,” said Scott Kirby, United Airlines chief executive officer, on a call this week to discuss quarterly financial results with analysts and reporters. “The most likely outcome is that the recovery in demand continues largely unabated.”

His comments were in line with those of executives at American Airlines and Delta Air Lines, who on similar calls said they had not seen a drop in demand due to the variant. Both Delta and United added that the vast majority of employees and regular customers have received coronavirus vaccines, which appear to offer protection from the variant.

Increasing demand has led to new hires across the industry. American said Wednesday that it plans to hire 1,350 pilots by the end of next year, a 50 percent increase over previous plans. Last week, the company announced it would hire hundreds of flight attendants and bring back thousands who volunteered for extended vacations during the pandemic.

Southwest Airlines announced in June that it would raise its minimum wage to $ 15 an hour to retain and attract workers while Delta is in the process of hiring thousands of employees. United last month announced plans to purchase 270 new aircraft in the coming years, the largest aircraft order in its history and one that would create thousands of jobs nationwide.

Southwest on Thursday reported $ 348 million in profits for the quarter ended June, the second profitable quarter since the pandemic began. American reported $ 19 million in profit over the same period, while Delta reported $ 652 million in profit last week, a pandemic first for any airline. United reported a loss this week but forecast a return to profitability in the third quarter as business improved faster than forecast.

The financial turnaround was supported over the past year and a half by an infusion of US $ 54 billion in federal aid to pay employee salaries. Without these payments, none of the major airlines would have posted profits for the quarter ended June. The aid prevents companies from paying dividends until September 2022.

Every airline offered a hopeful outlook for the current quarter. American forecast passenger capacity would only decrease 15 to 20 percent from the third quarter of 2019, while United forecast a 26 percent decrease and Delta forecast a 28-30 percent decrease. Southwest, which differs from the other three major airlines in that it operates few international flights, was expecting capacity comparable to the third quarter of 2019.

Daily business briefing

Updated

July 22, 2021, 4:05 p.m. ET

“We’re really excited about the momentum we’re seeing in the numbers,” American CEO Doug Parker told analysts after the company released its earnings report.

The financial results and forecast for the remainder of the summer are the latest sign of the strength of a month-long comeback. But airlines have huge debts to repay – American, the most heavily indebted airline, announced a plan on Thursday to repay $ 15 billion by the end of 2025 – and the recovery has not been free of setbacks.

Passenger numbers are still down nearly 20 percent from pre-pandemic levels, and airlines suffered widespread delays and cancellations as passengers returned in droves over the past month, according to data from FlightAware, a flight tracking company. About 17 percent of Delta flights were delayed at least 15 minutes in June, along with more than 20 percent for United, more than 30 percent for American, and 40 percent for Southwest.

“While the rapid surge in travel demand in June made our financial position stable, it has impacted our operations after a prolonged period of weak demand,” said Southwest CEO Gary Kelly in a statement Thursday. “So we are very focused on improving our operations while we restore our network to meet demand.”

Freight forwarders have also struggled to find workers to meet this demand. Americans suffered from a catering and wheelchair shortage last month while also speeding up pilot training to bring back more than 3,000 from extended vacations. Last week, Ed Bastian, Delta’s chief executive officer, said the airline had been struggling to train new or long-retired employees.

“It takes a few months and the demand has come back so quickly,” he said. “We all needed a little time to catch our breath. But we will be completely back in the next few months. “

One form of travel, traveling to friends or family within the United States, has generally rebounded to 2019 levels, with Southwest saying that such leisure travel exceeded 2019 levels in June.

Surveys show that this fall, when business travel tends to pick up, business travelers are increasingly anxious to get back on the road. Almost two-thirds of companies that suspended business travel during the pandemic expect to reintroduce it in the next one to three months, according to a recent survey by the global business travel association. If other companies follow Apple’s lead and delay getting back to the office, the rebound from business travel could be held back.

Delta said it expects domestic business travel to recover to about 60 percent of 2019 levels by September, up from 40 percent in June. These numbers are roughly in line with United’s estimates.

“Demand is recovering even faster than we hoped domestically,” United’s Kirby said on Wednesday.

International travel has also slowly recovered as more and more countries, particularly in Europe, open up to American travelers who can provide proof of vaccination or a negative coronavirus test. But the airlines are campaigning for the Biden government to relax the restrictions in kind, which they believe will allow the recovery to accelerate.

“I think the surge is coming, and as we’ve seen it on the consumer side, we’re preparing for it on the business side,” said Delta’s Bastian last week. “Once you open stores and offices and enter international markets, I think it’s going to be a very good run in the next 12 to 24 months.”