Two stories caught my attention, both relating to air travel demand. First, comments from the United CEO that people are ready to travel because they’ve already bought all the durable goods they need during the pandemic. Second, a surge in domestic travel thanks to stimulus checks. It increasingly appears that airlines received a double bailout from U.S. taxpayers in the form of both direct and indirect aid.
United CEO: Consumers Will Have More Money For Leisure Travel
Speaking at the 2021 JP Morgan Industrials Conference, Kirby said:
“I think that there’s going to be more travel going forward just period. It’s not just pent-up demand…retail spend has been up, but durables are way, way up, and things like travel and leisure are down 70%.
I think all that durable expense that would have been happening in 2022, 2023, 2024 – you’ve already bought a new washing machine, you don’t have to buy another one, people already bought a new car, did a home repair – that money that got spent will pull forward. It is going to mean a lot more available to spend in ’22, ’23, ’24 for leisure demand.”
It’s an interesting observation from Kirby. Lockdowns and more time at home have led to more household expenditures. I’ve used the pandemic to do some necessary work at my own house and I’m sure I am not alone. Just last week I replaced my dishwasher (though my old one was still under warranty) and I do not plan on any major household purchases for the next few years.
While every homeowner knows that there’s (almost) always projects to be done around the house, I’ve addressed most of the immediate needs. Will that translate to more travel?
His theory seems highly plausible to me.
American Spending Stimulus Checks On Travel
My brother traveled to Las Vegas for business last week (his first business trip in more than a year) and remarked at how crowded Las Vegas was.
Now data suggest vaccinated Americans are emerging from lockdowns ready to splurge on plane tickets instead of airline stocks. Disneyland beckons along with beach vacations and visits to relatives.
After a year of lockdowns and restrictions, I’d be foolish condemn people for spending their money on travel (but please folks, be sure to keep a rainy day fund and think ahead about your retirement). Nevertheless, the fact that flights are full and Las Vegas is packed suggests there’s something to Kirby’s theory.
It also suggests that airlines not only received a direct bailout from U.S. taxpayers in the form of a third extension to the payroll protection program, but an indirect bailout as consumers are pouring their stimulus checks into airline tickets.
I’m genuinely curious if Kirby’s theory will prove accurate. Are consumers done with their household purchases and projects, such that more money will be available for travel? If early signs are any indication, Kirby is at least partially correct.