Airlines Continue to Struggle After Optimism for Bounce Back

Air travel is slowly recovering from a massive hit caused by the coronavirus pandemic, but the return of travelers may be slowing as strict social distancing guidelines remain in place amid unassuaged health concerns.

The TSA recently reported the highest number of air travelers since March, with 800,000 people passing airport checkpoints on Aug. 9 alone. However, the number of passengers remains 70 percent lower compared to the same time last year.

While predicting the pandemic’s duration is nearly impossible, many analysts felt that airlines would bounce back after significant losses early on. The CARES Act, passed by Congress at the end of March, highlighted those hopes. It allocated $25 billion in loans for airlines (along with some separate grants), which intended to carry the industry through Sept. 30.

American, Frontier, Hawaiian, Sky West, and Spirit Airlines signed letters intending to receive loans from the CARES Act. Alaska, Delta, JetBlue, United, and Southwest signed non-binding letters later. Southwest opted not to receive loans after it reported having enough to stay afloat for two years.

While these loans were supposed to carry the airline industry through the summer, airlines quietly changed refund policies, dropped change fees to attract customers, and began laying off employees to cut costs. American Airlines announced that it would be laying off 17,500 employees in late August because air travel is still slow despite states reopening to some capacity and airlines adding mask regulations on board.

The weak August numbers could be bad news for a quick recovery as Labor Day weekend approaches. After the holiday, travel traditionally takes a significant drop with school starting and summer vacation ends.

“As such, we remain cautious on the pace of recovery from here as we head into more off-peak leisure travel periods this fall,” wrote Bank of America analyst Andrew Didora.

Senate Republicans are pushing for another round of $25 billion in aid for the airline industry, which along with the TSA’s numbers report, caused airline stocks to jump significantly. Congress would likely include the additional aid into a second stimulus bill. Airlines said they would need to cut 70,000 jobs without additional help.

“For these reasons, we support a clean extension of payroll support for passenger air carrier employees included in the CARES Act to avoid furloughs and further support those workers,” 16 Republican senators wrote in a letter to Senate Majority Leader Mitch McConnell and Senate Minority Leader Chuck Schumer. “Such businesses and their workers are uniquely tethered to air travel and have been and will continue to be significantly impacted by the decline in air travel.”

Whether aid should be made available to airlines is up to Congress to decide, but one reason that airlines continue to struggle could be their business model. Southwest, for instance, is the world’s largest airline in terms of available seats during the pandemic.

“The less complex your operation is, the less your demand and revenue have been disrupted,” John Grant, chief analyst at British travel data company OAG, told Forbes. “The big international carriers have so much complexity not only with their hub and spoke connecting operations like you have in the States but with their international operations.”

Perhaps letting the airlines struggle will force them to change their business model to fit something closer to Southwest’s, who have typically received positive reviews from customers. That could be a win for consumers in the long run but result in fewer flight options for consumers in the short term.

Airlines for America, an industry trade group, estimates that it will take until 2023 or 2024 for passenger volumes to fully rebound to pre-pandemic levels.

“The next six weeks (likely will) determine how 2021 will shape up for many airlines, airports, travel companies, and indeed Government revenues if travel does not pick up quickly,” Grant predicted.

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