Airlines fasten their seat belts for a 2021 full of obstacles

Airlines are betting that coronavirus vaccines will reignite demand for travel this year. The question is when.

Delta Air Lines CEO Ed Bastian expects an upgrade starting this spring. Alaska Airlines Chairman Ben Minicucci said he expects to return to 80% of pre-pandemic capacity by the summer. However, United CEO Scott Kirby said travel may not return to normal until vaccines are widely distributed, in late 2021.

“I recognize that a lot of people are saying it is going to happen faster and I hope they are right,” he said in an interview in December. “This is one of those weird situations where I think we are probably better at predicting what will happen a year from now than what will happen next quarter.”

Their strategies for dealing with uncertainty are equally diverse. Airlines are shutting down some international markets and running reduced hours, all the while buying new planes and adding new cities in an attempt to capture demand where it exists.

United Airlines is returning to New York’s John F. Kennedy International Airport in February after a five-year absence, while its Southwest Airlines rival plans to fly out of Chicago’s O’Hare International Airport for the first time in 2021. JetBlue Airways is also adding flights this year at Miami International Airport, the busiest airport in the United States that has not yet served.

The coronavirus pandemic halted a travel boom last spring when people stopped traveling for work and everything from weddings to funerals took place at Zoom. It wiped out more than two decades of growth in a matter of months, according to aviation data provider Cirium, causing global air traffic to plummet to levels last seen in 1999.

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The fragility of any rebound became apparent last month when a new, more infectious strain of the coronavirus emerged in the UK, prompting a new wave of travel restrictions. That followed other similar setbacks in the United States. But the days before and after Christmas were among the busiest in months, with airport security checks at close to 1.3 million on Dec. 27, the highest level since March, according to the Transportation Security Administration.

“It’s a bit of an emotional roller coaster,” said Minicucci, president of Alaska.

Competition between airlines is likely to be fierce in 2021 as they battle for shares of a smaller pie. International travel, a mainstay of traditional airlines such as United, Delta and American Airlines, could be slow to return as international borders remain closed and travelers fear further closures.

American Airlines recently reported that it would shut down operations in Prague, Manchester and Reykjavik and said it would postpone the resumption of flights to Venice, all routes that were scheduled to return this summer. An American spokeswoman said the airline was adding flights to meet demand in Latin America and the Caribbean, but planning a quieter transatlantic schedule due to weak demand.

“Normally we would see bookings for these destinations and we are not seeing demand in large part due to the country’s restrictions that are still in effect,” he said.

Some airlines are reverting to the strategies they put in place before the pandemic. JetBlue aims to begin flying to London in 2021, betting that it will succeed by flying narrow-body jets with fewer seats to fill than those of the larger wide-body competitors that fly, according to airline president Joanna Geraghty.

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Because New York-based JetBlue has strengths in the northeastern United States, where the virus spread aggressively last spring, it learned to open new routes and cities more quickly and with less expense, he added. JetBlue has added dozens of new routes and recently announced service to new cities, including Miami and Key West.

“Everyone is trying to find where the demand is,” he said.

Southwest is also being opportunistic by adding a dozen new cities as it seeks to expand its reach. It’s targeting airports like Chicago’s O’Hare, which were once too crowded with other airlines. It also recently announced new service to Fresno and Santa Barbara, California, as part of an effort to find untapped demand to put underutilized aircraft and personnel to work and generate revenue.

Another major airline, Alaska, is moving forward with an order to replace most of its Airbus jets in the coming years with Boeing 737 MAX jets, a move it says will make the airline more efficient. Doing the deal now helped the airline get more favorable terms from Boeing, Minicucci said. “Although there is a big cloud over everything, now is the time to make a deal like this,” he stressed.

China’s recovery from the coronavirus pandemic could give some indication of how things will unfold in the United States if vaccination goes mainstream. Domestic air traffic there has nearly returned to pre-pandemic levels, just 1.4% less in October than the previous year period, as the economy improved and airlines offered deals, according to the International Air Transport Association. In the United States, airline executives and industry observers say stifled demand for travel could erupt with fury next summer, when more people are expected to be vaccinated.

“The surge in demand for air travel might be something we haven’t experienced before,” Deutsche Bank analyst Michael Linenberg wrote in December.

One potential development that could drive the industry is if young people seize the opportunity to visit their elderly parents and grandparents once they have been vaccinated, said Raymond James analyst Savanthi Syth. A federal advisory panel has recommended that people over the age of 75, who are among the most vulnerable, be next in line to get the vaccine.

“January will look terrible,” Syth said. But “you may start to see some trips come back even earlier than expected.”

Analysts expect business travel to lag behind leisure in the recovery. That’s bad news for large carriers that rely on business customers for huge amounts of revenue, but potentially less of a concern for smaller carriers like Allegiant Travel Co., which primarily flies from smaller cities to sunny vacation destinations.

Many of the Allegiant passengers still want to fly, according to the airline’s investigation. In weekly surveys it has conducted since the onset of the pandemic, 60% of customers say they intend to travel in the spring and 70% in the summer. The airline typically publishes flight schedules within six months, but is considering extending its offers for the rest of the year.

“Customers are already thinking about vacationing on the 21st,” said Greg Anderson, Allegiant’s chief financial officer. “Leisure is the segment of the traveling public that will return the fastest,” he added. “We believe that all other airlines will compete for that segment.”

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