Airlines Buckle Their Seat Belts for a Bumpy 2021
Airlines are betting that coronavirus vaccines will reignite demand for travel this year. The question is when.
Delta Air Lines Inc. Chief Executive Ed Bastian expects improvement starting this spring. Alaska Airlines President Ben Minicucci said he hopes to get back to 80% of pre-pandemic capacity by summer. United CEO Scott Kirby, however, said travel may not start getting back to normal until vaccines are widely distributed—in late 2021.
“I recognize a lot of people are saying it’s going to happen faster, and I hope they’re right,” he said in a December interview. “This is one of those strange situations where I think we’re probably better at forecasting what’s going to happen a year from now than we are what’s going to happen next quarter.”
Their strategies for coping with the uncertainty are just as diverse. Airlines are shutting down some international markets and running reduced schedules while also buying new planes and adding new cities in an attempt to capture demand where it exists. United is returning to New York’s John F. Kennedy International Airport in February after a five-year absence, while rival Southwest Airlines Co.plans to fly from Chicago’s O’Hare International Airport for the first time ever in 2021. JetBlue AirwaysCorp. is also adding flights this year at Miami International Airport—the busiest U.S. airport it didn’t yet serve.
American Airlines recently said it would shutter operations in Prague, Manchester and Reykjavik, and said it would hold off on resuming flights to Venice—all routes that were scheduled to return this summer. A spokeswoman for American said the airline was adding flights to match demand in Latin America and the Caribbean, but planning a more muted trans-Atlantic schedule due to weak demand.
“Normally we would see bookings for these destinations, and we’re not seeing demand largely because of country restrictions that remain in place,” she said.
Some airlines are returning to strategies they put in motion before the pandemic. JetBlue aims to start flying to London in 2021, betting that it will be successful flying narrow-body jets with fewer seats to fill than the wide-bodies bigger competitors fly, according to airline President Joanna Geraghty.
Because New York-based JetBlue has strongholds in the Northeast, where the virus spread aggressively last spring, it learned to open new routes and cities more quickly and with less expense, she added. JetBlue has added dozens of new routes and recently announced service to new cities, including Miami and Key West.
“Everybody’s trying to look for where demand is,” she said.
Southwest is also being opportunistic by adding a dozen new cities as it looks to expand its reach. It is targeting airports such as Chicago’s O’Hare that were once too crowded with other carriers. It also recently announced new service to Fresno and Santa Barbara, Calif.—part of an effort to find untapped demand to put underutilized planes and staff to work bringing in revenue.
Another major carrier, Alaska, is pushing ahead with an order to replace most of its Airbusplanes in the coming years with Boeing 737 MAX jets—a move that it says will make the airline more efficient. Doing the deal now helped the airline get the most favorable terms from Boeing, Mr. Minicucci said. “Even though there’s a huge cloud over everything, now is the time to make a deal like this,” Mr. Minicucci said.
China’s recovery from the coronavirus pandemic could give some indication of how things will play out in the U.S. if vaccination becomes widespread. Domestic air traffic there is nearly back to pre-pandemic levels—down just 1.4% in October from the year-earlier period—as the economy improved and airlines offered deals, according to the International Air Transport Association. In the U.S., airline executives and industry observers say pent up demand for travel could be unleashed in a fury next summer when more people are expected to be inoculated.
“The surge in demand for air travel could be like nothing we have ever before experienced,” Deutsche Bank analyst Michael Linenberg wrote in December.
One potential development that could lift the industry is if younger people jump at the chance to visit elderly parents and grandparents once they have been inoculated, said Raymond James analyst Savanthi Syth. A federal advisory panel has recommended that people over 75, who are among the most vulnerable, be next in line for the vaccine.
“January is going to look terrible,” Ms. Syth said. But “you can start to see some trips coming back even sooner than you would expect.”
Analysts expect business travel will lag behind leisure in the recovery. That is bad news for big carriers that rely on business customers for large chunks of revenue but potentially less troubling for smaller carriers such as Allegiant Travel Co. , which mostly flies from smaller cities to sunny vacation destinations.
Many of Allegiant’s passengers still want to fly, according to the carrier’s research. In weekly surveys the airline has conducted since the start of the pandemic, 60% of Allegiant’s customers say they intend to travel by spring, and 70% say they’ll travel by summer. The airline typically publishes flight schedules six months into the future, but is considering extending its offerings through the rest of the year.
“Customers are already thinking about holiday travel in ’21,” said Greg Anderson, chief financial officer of Allegiant. “Leisure is the segment of the traveling public that’s going to come back the fastest,” he added. “We think all the other airlines will be vying for that segment.”
This article originally appeared on The Wall Street Journal