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.
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?