Airlines See Increase in Domestic Flights, Beats Forecasts

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The recovery in aviation is gaining momentum.

A summer travel bonanza exceeds expectations, helps airlines re-profit and brightens the outlook for the rest of the year. It’s a welcome relief for a battered industry and a sign that the recovery that started this spring is here to stay.

Economic recovery, aggressive cost-cutting, and a massive federal stimulus that pays many wages have helped improve the finances of the largest carriers, which have borrowed heavily and lost billions of dollars during the pandemic.

Consumer spending on airlines this month briefly exceeded 2019 levels on a weekly basis for the first time since the start of the pandemic, according to Facteus, a research firm that tracks millions of online payments. Ticket prices have also rebounded: fares fell just 1 percent in June compared to the same month of 2019, according to the Adobe Digital Economy Index, which is based on website visits and transactions.

And on Sunday, the Transportation Security Administration screened more than 2.2 million passengers at airport security checkpoints, the most in one day since the start of the pandemic.

“As people get vaccinated and things reopen, demand is very, very strong, and I think it’s stronger than people generally think,” said Helene Becker, airline analyst at Cowen investment bank. “People have money and time and they use it to travel.”

A full recovery depends on the return of two pillars of business, corporate and international travel, but executives said they expect both to improve significantly in the coming months. And while the Delta variant of the coronavirus may still threaten the recovery in travel, customers have not been discouraged so far.

“We haven’t seen any impact on bookings,” said Scott Kirby, CEO of United Airlines, 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.”

Their comments are in line with those of American Airlines and Delta Air Lines executives, who said they did not see a drop in demand due to the variant on similar calls. Both Delta and United added that the vast majority of employees and regular customers have received coronavirus vaccines that appear to protect against the variant.

Rising demand has spurred hiring across the industry. American said on Wednesday 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. planned to hire hundreds of flight attendants and bring back the thousands of people who volunteered for extended leave during the pandemic.

Southwest Airlines said in June raise the minimum wage to $15 an hour Retaining and attracting workers as Delta is in the midst of hiring thousands of employees. United announced last month that it plans to buy 270 new aircraft in the coming years, largest aircraft order in history and a business that will create thousands of jobs across the country.

Southwest reported a profit of $348 million for the quarter ended June, its second profitable quarter since the start of the pandemic. American reported a profit of $19 million in the same period Delta reported a profit of $652 million last week, a pandemic first for every airline. United reported a loss this week, but forecast a return to profitability in the third quarter as its business is growing faster than anticipated.

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

Each airline offered a promising outlook for the current quarter. American predicts passenger capacity will decline by only 15 to 20 percent compared to the third quarter of 2019, while United predicts a decrease of 26 percent and Delta 28 to 30 percent. Separated from the other three major carriers by operating several international flights, Southwest said it expects its capacity to be comparable to the third quarter of 2019.

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

Financial results and forecasts for the remainder of the summer are the latest strong sign of a reversal that has been building for months. But airlines have a huge amount of debt to repay—the most indebted airline, American, announced on Thursday it plans to pay off $15 billion by the end of 2025—and the backlash hasn’t been a rebound.

According to data from FlightAware, a flight tracking company, passenger volumes are still down nearly 20 percent from pre-pandemic levels, and airlines have experienced widespread delays and cancellations as passengers returned in droves last month. About 17 percent of Delta’s flights were delayed by at least 15 minutes in June, more than 20 percent for United, more than 30 percent for the Americas, and 40 percent for the Southwest.

“While the rapid increase in travel demand in June stabilized our financial situation, it impacted our operations after a long period of depressed demand,” Southwest CEO Gary Kelly said on Thursday. “Therefore, we are focusing heavily on improving our operations while renewing our network to meet demand.”

The carriers also struggled to accommodate workers to meet this demand. The American stepped up pilot training last month to bring back more than 3,000 from extended permits, while suffering a shortage of food and wheelchair operators. Last week, Delta CEO Ed Bastian said the airline was struggling to train new or long-term employees.

“It takes a few months and the demand has come back very quickly,” he said. “It took us a while to catch our breath. But we’ll be fully back in the next few months.”

One-of-a-kind trips to visit friends or family in the United States rose to 2019 levels overall, and Southwest said such recreational travel exceeded 2019 levels in June.

Surveys show corporate travelers are increasingly eager to get back on track this fall, when business travel typically speeds up. Nearly two-thirds of companies that have suspended business travel during the pandemic expect to bring business travel back in the next one to three months. According to a recent survey by the Global Business Travel Association, an industry association. If other companies follow Apple’s leadership in delaying the return to officeStill, corporate travel recovery can be held back.

Delta said it expects domestic business travel to rise to about 60 percent of 2019 levels by September, up from 40 percent in June. These figures are roughly in line with United’s estimates. “Demand is picking up domestically even faster than we hoped,” United’s Mr Kirby said on Wednesday.

International travel has also slowly started to improve, especially in Europe, as more countries open up to American travelers who can provide proof of vaccine or a negative coronavirus test. But airlines are lobbying for the Biden administration to relax the same restrictions, which they say will allow the recovery to accelerate.

“I think the uptrend is coming and we’re getting ready for it on the business side, as we’ve seen on the consumer side,” Mr. Bastian from Delta said last week. “I think it will be a very good run for the next 12 to 24 months, once businesses have opened offices and opened international markets.”

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