According to the nation’s major airlines, airfare costs will be near or even above pre-pandemic levels for Americans planning summer vacations.
The recovery in domestic leisure travel, according to executives from most of the major carriers, is already underway. As a result, yields, which measure how much passengers pay per mile traveled, have increased more than the airlines had anticipated.
“Domestic leisure [travel] will be 100% restored by June, with … bookings ahead of 2019 levels and yields essentially recovered,” said Glen Hauenstein, president of Delta Air Lines (DAL), speaking at the Wolfe Research conference.
Airlines are wary of bringing back too much supply of flights too soon, especially since leisure fares purchased well in advance of travel are less lucrative than business travel purchased at the last minute. Business and international travel have yet to recover, though airlines have stated that they are seeing signs of a future recovery.
United (UAL), which will speak later in the day at the conference, said in a filing that overall yields on tickets booked this month for travel in May and June are already approaching 2019 levels. Even with lower business travel demand, this means domestic leisure yields are already higher than what was booked in 2019.
This doesn’t mean the airlines have returned to profitability, though several have stated that they have stopped burning through cash like they did for the majority of 2020 and early 2021.
It’s difficult to be profitable with just domestic leisure travelers, according to Philip Baggaley, Standard & Poor’s chief credit analyst for airlines. However, regaining control of this aspect of their business is critical.
“There certainly has been a surge in domestic leisure bookings, and the yields they’ve been able to achieve,” he said. “They’re not filling up as much of the plane, but in a very large and important part of their business, they’re doing just fine.”
When offices that had employees working remotely reopen, the airlines expect business travel to pick up. Of course, it didn’t make sense to plan business trips if the customer a business traveler wanted to meet with hadn’t returned to the office yet.
“We still expect business travel to resume in the fall and beyond,” said Vasu Raja, American’s chief revenue officer. “Many corporations are at the nascent stages of coming back to the office.”
As a result, airlines will not be able to offer the same number of flights this summer as they did before the pandemic in 2019. However, thanks to vacation travelers’ pent-up demand, they’re seeing strong demand for the seats they’re offering.
“Right now…the only thing that is keeping us from being at 2019 booking levels is where is we’re constricting supply,” said Raja.
The airlines and their investors benefit from the bad news for vacation travelers. In midday trading, shares of American Airlines (AAL), Delta, United, and most other US airlines were up between 2% and 3%.