Data points from public and private travel businesses suggest a fast recovery for the travel industry.
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Public Data Points
American Airlines released two data points this week that suggested recovery may be quicker than some have imagined for the travel industry. The first was the reinstatement of 141 parked aircraft.
Second, American Airlines also indicated that the company believes cash burn will end before 2020 is finished. That puts the company at least to break even, interesting since that hadn’t happened for years in a great economy, though the company was profitable the most recent three quarters prior to COVID-19.
Southwest has also indicated the company plans on being a larger airline than they were prior to the crisis and is behaving accordingly. Gary Leff points out that Southwest often seizes economic downturns to expand the carrier and this time is no different. In another that confirms plans to add capacity optimistically, even if the business has not yet returned, Southwest says fares later in the year will be excellent for consumers.
Private Data Points
While Hertz and Avis are publicly-traded companies that disclose data openly to shareholders, Enterprise is privately held. A relative of a reader reported that while the relative was a new hire within the last six months, she was offered a severance when the crisis appeared to have staying power. Despite this, she has recently been recalled (keeping the severance) due to higher than expected demand.
While it’s not an official source, I have verified that at least in her case, it is accurate.
Other travellers are reporting fuller flights and higher fares, though official fare details won’t be reported publicly for some time.
What Does Recovery Mean?
Recovery has to be seen in a couple of lights in my opinion. It would be hard to say recovery has arrived solely based on airline balance sheets, though they were great prior to the crisis. The reason this can’t be the only measurement is that re-organized debt obligations and luring leisure travelers back into seats may have to begin with price, neither of which will look great on the books.
Recovery will have to be measured by utilization as well. How many cars are rented, how many hotels are full with respect to prior years? I mention in another post that 2019 achieved Peak Travel, so it would be misleading to base the presence on recovery with respect to whether passenger numbers and capacity achieve the highest levels in history. Not returning to those numbers does not mean that the industry hasn’t recovered.
Recovery should be defined as when airlines return to profitability and passenger numbers to at least 75% of 2019 levels.
Conclusion
Some data points suggest that recovery has begun and while travel ahs not yet normalized, it may be well on its way. It will be hard to say when passengers will fill the seats being added to airline capacity, but it’s a positive sign for the travel industry that some data (even anecdotal) shows travellers are returning faster than anticipated.
What do you think? Has recovery begun? Will recovery be slow for the travel industry? What do you make of the data points included in this post?
I am on a drive trip to Miami, Orlando and Tampa from DC to try and kick start my work again. My first trip out the door since March 15th. Here’s what I see that may or may not confirm some things you are saying.
1. We are two countries now. One is moving forward and be damned with the virus – with everyone going out, few wearing masks and distancing being just a “suggestion.” Drive to another area and the culture is more careful. More masks, more distancing, more places enforcing mask rules and, as an example, Starbucks setting up for pick up outside only.
2. Hotels are a mess. Service is, as expected, greatly reduced. One hotel canceled my reservation the day I was to arrive. The manager stating, “we have delayed reopening as we can’t get staff to return.” That was confirmed when at a Ritz Carlton in Miami the phones would go unanswered and it was a chore to try and request anything like towels. Often the only person to answer the phone was Valet parking. When I brought this up with the duty manager while checking out she said the same, “No one will come back. We are trying to get staff here but they are scared to come back to work.” My take is that with the increased unemployment benefits – housekeepers, front desk, bellman, operators etc find it’s just as easy and viable to stay home rather than commute to work for $14 an hour. Perhaps why at the hotel I was at last night the front desk person took 20 minutes to check me in. He said, “Sorry, I am hotel security and just got moved to fill in here at the desk.”
3. Many hotels are using a system of 24 hours between guests in a room. With that another hotel “walked me” as they could not honor my booking. They were upfront in saying that the 24 hour rule is a mess as it’s not integrated with the national reservation system and they are resorting to hand auditing to try and work through it, walking many guests as a result. More likely is that they don’t have enough housekeepers and can’t keep up.
4. Even at luxury properties the service is as basic as you can get. Room service menus are printed out with just a few items and brought in bags and plastic. Even the properties with outdoor dining have limited menus and reduced hours. My laundry required two days to have done.
5. Cleaning at hotels is spotty at best. Forget all the promises. I assure you it’s no different, and might be even worse (given the shortage of housekeepers willing to work). I disinfected my room at a Hilton in Georgia last week and the towel was black when I was done.
My point being that in relation to your article we are far from being united in steps going forward. It’s a hodgepodge of rules, beliefs, and approaches. With that, the travel industry is in chaos right now and not fun to endure from a customer standpoint.. No one has any idea how to move forward and won’t until, I believe, there is a vaccine.
I predict you will see a small surge in travel the next few months and then, after it’s out of people’s systems, they will avoid it as much as they can until Covid is over. Those who think it’s gonna be great and fun to get out will see it’s anything but. Those that are being careful will see that most others are not and get scared. It will result in a dismal fall in the travel industry as people just decide to wait it out.
Great reply and detailed insights. Thanks for posting this!
Your #1 point is a bit dramatic. I live in a very liberal and affluent area, and people are out quite a bit without masks and the compliance rate with mask-wearing, social distancing, etc. has definitely gone down the last few weeks. I have also heard that many people in LA, for example, are not wearing masks during the protests. Did you see the protests in NYC today? Not much social distancing there…
I think it really depends on the community because I know someone in rural, conservative, Iowa, and mask-wearing rates are high. But other places this isn’t the case. I really just think it depends. So while government policy may be a bit different in different places, I am not sure human behavior is that different.
Hey Stephen, I’m sorry if you took it as a liberal vs conservative thing in how it varies. I don’t survey the locals. Just saying that there is a distinct difference when going from place to place in people’s attitudes towards masks, etc.
No worries. I don’t disagree with your main points here, just was pointing it out that I think it varies a lot and it’s weirdly not due to any specific factor.
I agee. Oddly, as I am driving this trip, it’s uniquely county to county as to the attitude change. And it’s not apparently a political statement for those who seem to be more cautious, as many areas would be thought of as, “conservative.” Perhaps local leadership, recent relationship with those infected, media in that area, who knows.
I’ve got friends who have all started traveling this month. I think July will be solid, and August will be bonkers.
Our business recovery wasn’t V-shaped it was VERTICAL.
We’re busier than we have ever been.
There is no ‘new normal’ – it’s business as normal for most places now, unless you live in one of the few cities left that is trying to control everything.
People realized this was stupid back in May, and now they are voting with their wallets.
It’s really really encouraging to me that American’s are smart and resilient to the most insane shocks. It really gives me hope.
George is smoking hopeium yet again.
“Hope springs eternal” but this is unbridled lunacy. Men in white coats material.
The same men in white coats who said the public shouldn’t wear masks and that the virus was nothing to fear? The same men in white coats who said anti-racist protesting was more important than the virus, knowing full well that large numbers of unwell minorities would be in crowds chanting and yelling in close proximity, often without masks? If the virus is in fact deadly, people are being advised to protest each other to literal death. If the virus is not deadly, then the country has been subjected to unconstitutional lockdowns for nothing. Either way, the so-called experts have lost all credibility. A formerly high-trust society is descending into anarchy. I sincerely hope the US doesn’t decline into something resembling Brazil.
No worry, with a leadership change at the top in November, trust in actual adults who govern will go a long way
TDS UA-NYC forgot that Fauci was among those white lab coat wearers who told us that the virus was nothing to fear. He also said, “There’s no reason to be walking around with a mask.” Lockdown and mask-wearing hysterics claim that at the time he said that, the “science” didn’t know of the extent of asymptomatic transmission. This is gaslighting as masks have been worn to protect others from infection, not the wearer. See how it’s done in Asia or operating rooms. Fauci is not the only public official on record admitting that the advice about masks not being necessary or effective was a noble lie to protect PPE supplies for front line workers. I am not a denier of mask efficacy; I started wearing one in January. I am merely pointing out the deceitful and politicized actions taken by those entrusted with advising and leading the public. UA-NYC is all TDS, all the time. Zero science.
I’ve been admittedly glass half empty through all of this but I think @Stuart is right in his analysis. There’s definitely a ton of pent-up “cabin fever”, which is boosting short-term demand. Then these folks will find out just how much the “new normal” sucks – having to wear a mask for hours through the airport and on the plane, practically no service onboard, spotty hotel service, usual tourist traps and popular restaurants still closed or running at reduced capacity – and give up on trying to go again until CV finally burns itself out, whenever that is. (For example, do you really think all those folks excited about going to Disney World when it reopens next month will be nearly as excited to go back after fighting with their 3-year old to wear a mask all day in the Florida heat?) If you believe CV is in its death throes right now and won’t make a comeback, maybe the clock runs out before there’s another dip. Otherwise, I’m expecting a substantial leg down this fall and winter.
Well said, MeanMeosh. From what I am experiencing what you say is exactly the course.
What data points the market is not seeing?
https://www.cnbc.com/2020/06/14/stock-market-futures-open-to-close-news.html
The markets are responding to the Fed’s unlimited commitment to buy corporate debt. (Why the heck is Hertz stock worth anything more than $0 – it’s at $6 recently – when the company said it was filing for bankruptcy protection, which wipes out common stockholders?)
With the Fed buying ANY corporate debt, dealmakers are emboldened to invest in all kinds of businesses – even things like Hertz, the bankrupt car rental co – with the hopes of pawning that crappy debt off any a bigger fool before the bills (finally and truly) come due.
Investors realize the Fed has given them an implicit floor, and they believe (probably correctly) that they really cannot lose any money, so they pile into any company.
And thus, the markets go back up.
I think this post will age about as well as the one a week ago proclaiming a V-shaped recovery was imminent & likely
Agreed. Travel doesn’t recover until business travel recovers and that is not going to happen in 2020. As of now, the world is effectively closed for international travel and I don’t see that changing in 2020.