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A Week of Positives for an Ailing Airline Industry
The airline industry has ailed in pain for the last several months because of a virtually unprecedented downturn in travel demand due to the COVID-19 pandemic. Airlines across the globe have been reporting multi-billion dollar losses and load factors in the single digits.
This week, though, a new trend emerged. While marginal, multiple data sources suggest that more people are traveling worldwide now in comparison to recent months.
In Europe, airlines are resuming regional services to several destinations. Dutch flag carrier KLM relaunched service to eight European destinations this week, all while reportedly losing 25 million euros per day.
Eurocontrol, which manages airspace within Europe, reported handling over 5,000 flights on Thursday. While small compared to the same period last year, this number is a far jump from figures in early April. Eurocontrol has not managed more than 5,000 flights since late-March.
The Lufthansa Group, one of the world’s largest airline conglomerates, announced on Friday plans to resume service to 106 destinations in June. “We sense a great desire and longing among people to travel again. Hotels and restaurants are slowly opening, and visits to friends and family are in some cases being allowed again,” German Lufthansa AG Board Member Harry Hohmeister said in a press statement.
Across its airline subsidiaries, the Lufthansa Group plans to phase 80 aircraft back into service that had previously been stored. Most of these reinstated flights will operate within Europe as the group has announced no firm plans to resume additional long-haul services.
Across the pond, the same trend has begun to take shape. More people are passing through Transportation Security Administration (TSA) checkpoints now versus in much of March and April.
The agency has reported a steady increase in screening activity in recent days that are more in-line with past peak day trends. For example, Sundays have long-been a busy travel day within the U.S., while Tuesdays typically trend on the quieter side. The latest data from the TSA reflect these variables, which is an encouraging sign all-around.
On April 8, which was more-or-less in the middle of government-issued stay-at-home orders and travel restrictions, 94,931 people passed through TSA checkpoints across the U.S. Less than a month later —on May 7 — 190,863 individuals passed through. That represents an over 100% increase in travelers.
On a day-to-day scale, screening counts have also been steadily rising. On May 5, the TSA reported 130,601 screenings. Two days later, on May 7, that number jumped to 190,863. This was the highest screening throughput volume since March 27, the agency said.
While these numbers are relatively promising in the short-term, they are a far cry from data from a year ago. The TSA screened 2,555,342 people on May 7, 2019.
With more people now flying, airlines are in a tougher spot. Many air carriers have opted to put a sizable chunk of their fleets into storage, meaning that there are a limited number of operating jets and fewer frequencies. But as passenger numbers begin to rise, airlines aren’t yet pulling aircraft back into service at a similar pace, meaning the number of seats filled on each flight has risen.
Airline lobbying group Airlines for America data indicated that most domestic flights saw load factors under 10 percent less than a month ago. Now, the group’s data says that number has risen to approximately 22 percent. An American Airlines spokesperson confirmed the rise in load factors to AirlineGeeks, adding that more people have been flying on the airline’s aircraft in the last few days.
While again encouraging in a world and airline industry that are very different than how they were when the year began, airlines are by no means out of the woods yet. Looking back to just one year ago it was difficult to find a domestic flight that wasn’t oversold, or at least had empty seats. So while a 120% increase in load factors is a step in the direction back toward stability for airlines, airports and the hundreds of contractors that serve them, the months ahead may very well be as painful as those that followed the Great Recession in the late 2000s.
Indeed, there are numerous examples of a positive uptick in air travel figures across-the-board. The trends will likely continue to vary in the coming weeks, however, as more state and national governments make decisions on how to reopen their respective regions. At the end of the day, air travel is heavily contingent upon re-openings around the world.
Further still, a continued positive uptick in demand undoubtedly requires both business and leisure travelers to take to the skies reliably and consistently. Leisure demand will largely be contingent on the general flying public feeling comfortable and safe while flying, something that remains mostly unclear at this time. And with an unemployment rate in the U.S. now pushing 15 percent and countless other workers taking salary cuts to keep their jobs, travel is likely not the first thing on many people’s minds.
For businesses outside the airline industry that spend hundreds of thousands of dollars a year to send employees on flights all over the world, a fall in share prices, profits and confidence could mean many will be more stingy with their travel budgets.
The first week of May has shown some of the first real signs of promise the aviation industry has seen in recent months. But while the promise is there, airlines won’t stop short of looking for a complete recovery in demand. That may take years, but the hope still stands, the hope that the worst is behind and that the recovery has begun.
This article was updated on May 9, 2020 at 5:49 p.m. ET to correct a typo.
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