US Airlines Warn of Recovery Slowdown
Rising COVID-19 case numbers are putting a damper on bookings, lowering carriers’ third quarter outlook
US airlines are warning of a slowdown in their bookings because of the rise in COVID-19 cases related to the highly contagious delta variant.
After air travel in July approached pre-pandemic levels, the current surge in coronavirus cases caused demand for airlines tickets to drop in August, a downward trend the airlines expect to continue through September.
American Airlines told investors that the slowdown that started last month has continued, prompting the airline lowered its third-quarter outlook. The airline said it expects revenue to drop 24 to 28 percent.
United Airlines forecasts a 33 percent decline in revenue from the third quarter of 2019. The carrier said both passenger demand and revenue have weakened, and will make cuts to the schedule later this year in response to the lower demand.
Southwest said it expects an 8 to 20 percent revenue drop, which attributes to weakness in leisure travel too has weakened, with a rise in cancellations and a decline in bookings for September and October.
However, the carrier said demand over the Labor Day weekend was firm, other than cancellations in aftermath of Hurricane Ida, and the booking outlook for the winter holidays looks normal.
Although Delta Air Lines still projects an adjusted pretax profit for the third quarter, revenue will down 30 to 35 percent, on the lower end of its previous forecast.
Delta CEO Ed Bastian told investors the COVID-19 surge will delay the anticipated recovery in travel by 90 to 120 days, but is unlikely to stop it. He noted business and international travel, which are both critical to network carriers in the US, have been most affected by the variant.
Travel industry leaders had anticipated that as companies accelerated their return to offices following Labor Day, a pickup in business travel would follow. However the delta variant and the resulting spike in COVID-19 cases have caused major corporations to rethink the return to offices, once again delaying any rebound in their travel plans.
A Deloitte survey last month found that although business leaders expect steady increases, corporate travel is unlikely to make a full recovery within the next year. Just over half (54 percent) of survey respondents expect their companies to reach 2019 levels by Q4 2022.
A continued lag in corporate travel recovery can spell trouble for the aviation industry’s bottom line, as those tickets can account for as much as three-quarters of an airline’s profit.
However in the latest tracking poll from The Global Business Travel Association, over half of the travel buyers surveyed said that, despite the spread of the COVID-19 delta variant, they expect their companies to see a significant (8 percent) or moderate (47 percent) increase in business travel from September to November 2021.
“Business travel continues to make progress and show small gains on the road to recovery,” said GBTA CEO Suzanne Neufang. Calling the delta variant “a bit of a detour, at least for the near term,” Neufang added, “The industry continues to be resilient, adaptable and committed to moving forward.”
