The summer holiday season has ended and there is much discussion around the dip in demand that airlines are now facing. Will they be able to survive if things get as bad as predicted?
Normally people would be getting back to work in September, and that would mean legions of business travelers hitting the road. The way it looks this time around there will be very few people flying for work, and the airlines will be left scrambling for revenue. Combine that with the soon-to-expire federal airline assistance program in the US, and we could soon see some drastic cuts, both of flights and of jobs.
On the OAG blog this week, senior analyst John Grant takes a pessimistic view, noting that three out of four US carriers cut capacity week on week. United, he points out, removed 165,000 seats representing 10% of their planned capacity.
“Every indication from the US majors is of further capacity cuts to be made sadly accompanied by staff cuts and furloughs,” writes Grant.
In Europe, the picture is not much better. Grant notes that Ryanair and easyJet have dropped a combined 630,000 seats week on week, in part due to the end of summer but also because of ongoing and renewed quarantine restrictions. Grant writes: “Over the same two weeks last year the two airlines dropped less than 25,000 seats which gives you some idea of how quickly and dramatically airlines have begun to cut back capacity once again.”
Globally, with a few exceptions, the trend is towards capacity being cut, often last-minute. That further hurts any potential recovery by diminishing passenger confidence. Grant writes: “Airlines are still clearly adjusting schedules at short notice and will continue to make such short notice changes for quite some time. The viscous circle of travellers booking flights that are subsequently cancelled at short notice will I suspect run through the whole winter season.”
If we take a look at Flightradar24’s statistics page, global commercial flights have more or less flatlined after weeks of gradual growth. The 7-day average has been at around 68,000 flights per day fairly consistently since mid-August. And as an autumn without business travel really gets going, we may soon see this average begin to drop.
Another metric to keep an eye on, as ever, is the TSA’s daily count of passengers through its checkpoints in the US. The numbers look relatively stable though the beginnings of a downtrend is beginning to show. Summer is always a busier time for air travel – the big question now is just how quiet things are going to get now that it’s over.
What happens next?
The big news this week was that all the major US airlines dropped change fees from tickets for good. United Airlines led the charge on this and then just about every other airline quickly followed (Southwest, incidentally, has always had this policy). It’s an opening salvo in what may be an increasingly frantic attempt by airlines to get people flying.
In the end, even if people are enticed to fly, continued global travel restrictions and border closures will continue to kill quite a lot of demand. Colombia tentatively restarted domestic flights this week, for example, but whether international flights scheduled for next week will actually be allowed to depart remains a big mystery. If we don’t get inter-governmental cooperation on plans to safely lift restrictions and quarantines soon, alongside a clear idea of what to expect in the near future, there’s no telling how many airlines may ultimately fail over the winter.
John Grant at OAG points out that the next six weeks will really make or break things in the aviation sector and if travel doesn’t pick up soon we may see airlines getting desperate. They might even start giving away free seats or paying people to fly in order to try and make money off of ancillary fees during the journey. This is hard to imagine. But then again, we are in relatively uncharted territory.