The travel market has been at all-time highs in recent months but there’s tangible evidence it is softening, here are some examples.
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TSA Processed Record Passengers, How Is Travel Softening?
In the last two weeks, several records for passengers processed through TSA security lines were broken. That’s usually very good news since the US commands such a substantial portion of the global flight market. The final record fell Friday, June 28th with 2.99MM passengers processed through checkpoints.
Rearview Economics
Just like peeking into the universe is really looking into the past and not what’s happening now (because of the time it takes light to reach us), so too are these statistics a reflection of what has already happened. Due to strong bookings and a seemingly endless revenge travel tailwind, airlines put more capacity on the market (up 9.4% this quarter alone.) Many travelers, especially in leisure periods like the summer months, purchase their tickets well in advance, unlike business travelers.
Both the TSA numbers for passengers processed as well as the capacity figures don’t tell us where we are headed, just where we are today based on decisions made half a year ago, perhaps even longer.
Airlines
American Airlines, as covered last week, revised earnings down from 1% to 5-6% based on too much capacity on the market.
Southwest Airlines revised its forecast from 3.5% down to 4.5% within the quarter. Both of these adjustments suggest that expected near-term business has fallen more than anticipated or simply didn’t materialize.
With the large role that banks play in the loyalty program space, it should be noted that these drops are worse than what they show. Inflation is well over 26% from pre-pandemic but that doesn’t account for food or energy. The cost of a gallon of gasoline in the United States is just shy of double the 2019 level (pre-pandemic) and food costs are substantially higher though not as easily measured. One influencer reordered his pandemic-era basket from Walmart and found that the same goods reordered today would cost more than $400 whereas he purchased it for just $126 in 2020.
MAN hits the “reorder” button on a
2022 walmart grocery order
And finds that it HAS QUADRUPLED in price! pic.twitter.com/rsNDSA1ZRq
— Tablesalt (@Tablesalt13) June 26, 2024
Why does inflation and the cost of food matter here? It’s incredibly important because the value American Airlines and Southwest Airlines receive for their points would have unlikely changed over the period. However, the nominal amount charged by customers paying more has changed considerably. The higher prices climb, the more miles consumers earn and banks buy from the airlines. The more miles banks buy from the airlines, the more money airlines make thus propping up the books and masking falling customer numbers.
This is the biggest issue because if the airlines are already reporting 4-6% revenue drops, should inflation subside or even enter a deflationary period, these numbers could be significantly higher. Loyalty program miles offer incredibly high margins, some analysts suggest more than 90%, meaning they also carry an outsized weight improving financials with the slightest uptick. The airlines aren’t just losing 4-6% of their passenger revenue, it’s likely far higher, but inflation is doing the heavy lifting by artificially hiding a worse performance.
Cruise Lines
The cruise industry has been carefully choosing its words, especially after being most deeply affected by the pandemic. Unlike hotels and airlines that continued to operate during COVID, cruise lines did not and had a far slower recovery. This makes them gunshy about any guidance short of pure jubilation.
Bank of America highlighted softening cruise prices which complemented analysts who found the same price weakening at United Airlines.
Leadership for a large host agency, Nexion, was quick to differentiate between plateauing or a drop in growth and softening of prices,
“It’s definitely not plateauing,” Jackie Friedman, president of Nexion Travel Group told TMR. “But the trajectory might not be quite as deep year over year.” – Travel Market Report
Another travel consortium leader, Kathryn Mazza-Burny, added that she felt the number of passengers spending money on travel will remain high:
“Given where pricing is and given inventory, I’ll go on record as stating that business will remain. There’s no doubt people are traveling,” Mazza-Burney added.” – TMR
What the cruise side of the industry seems to indicate is that growth will not continue at the incredible clip it has been, but it’s also not dropping or flat. That said, prices are also elevated to the point that some Royal Caribbean fares in which drinks, specialty dining, wifi, and even its private island water park exceed all-inclusive luxury offers from competing lines. That will change if pricing continues to weaken.
Conclusion
It’s an interesting note. We are seeing the industry slow down at scale. There’s no issue with demand. Many experts believe that, for a number of reasons (including housing), more consumers are and will continue to travel. But capacity increases across the board and price softening indicate that while traveler numbers remain high, the price they will pay is dropping. We also see evidence that while capacity is up, Southwest and American are having trouble filling it, more than they advised investors at the beginning of the quarter.
What do you think?
Also softening is Bi-Done Brandon . The Bi-Done fund raising has collapsed . Even the robot blind followers can see his non-abilities , at last . So , who has been pulling the strings ?
You are obsessed with so much nonsense. I also see you commenting on every post (tbh it’s usually the same thing, so you get a pass on that).
I can’t imagine what makes someone do all this.
Dude, the one-note opera gets really old and doesn’t make you look smart. I promise. Stick to the subject at hand.
The debate truly broke you didn’t it
It broke all of us because we found out we have the first female president , and we didn’t know it .
I love it, now Alert is scared of Kamala. Maybe she should take over the candidacy just so your head will explode.
Despite what Trump wants you to think, the President is not an Emperor. It’s a consensus of many who come together to form ideas and policy. And who you surround yourself with is far more important than one person. Which is the only reason Trump survived his first term without the 25th being called into play for real. I doubt the same if he wins this round.
Hilarious all these B1d3n voters coming out of the woodwork – as if they’re shocked he’s senile.
Just get that 5th booster, gang!
At the risk of being on-topic, these reports of ebbing demand are consistent with what I’ve been seeing.
Prices for some fares rebounded highly in 2023 and early 2024 after being dirt cheap in 2020-2021.
For a while revenge travel kept premium seats full and helped economy seats look cheap by comparison. But business and 70+ year old pleasure travel segments haven’t come back.
As the saying goes, when the tide goes out you start to see who has been swimming naked.
My probably imperfect bar for this has always been award availability, and over the past 6 months I’ve noticed space I would rarely expect to see. We got 2 AA J awards from PHL to NAP. For 60k miles apiece and back from Rome via CLT for 65k – in August. Also scooped 2 JFK-GIG J on December 30 in time to spend NYE in Rio. I can’t imagine getting either over the past 2 years, and given the sophistication of airline revenue management these days, it seems like the most likely explanation is that they just haven’t been selling
@PHLFlyer – Candidly, this is also the bellwether for me. This is where I notice there’s an issue first.
I’m surprised that Kyle, a “travel planner” doesn’t understand that premium cabins have historically been more available in August given most are leisure travelers. Sure, that has changed to an extent. But it still holds somewhat true. It is hardly a “bellwether.”
Further, AA is getting a lot less bookings right now due to labor issues. They are going to have more seats available as a result. Naples would be easy, it’s not a high demand route. Rome is not easy usually – but originating in Europe is always far more available for redemtpions, especially in premium cabins.
Fair points, though both bookings pre-date widespread coverage of AA’s labor issues.
That said, from being a close observer of at least AA’s award space, I really don’t believe this availability would have existed in 2022 or 2023. I honestly hope you’re right here, because you’re describing a return to pre-COVID normalcy for award space that I would welcome. I had some fabulous redemptions in the years leading up to the pandemic and I’d love to get those back
While gauging a global industry by the performance of companies within just one country doesn’t seem very clever, the intra-Europe prices I am seeing this summer (I typically avoid travelling from the beginning of July until the last week of August, but I don’t have a choice this year) are very reasonable, possibly cheaper than 2019 even in absolute terms- they certainly seem a lot more attractive after five years’ worth of inflation hitting everything else.
Intra European “business” class prices seem to be at their usual sky-high prices for July and August, but that may change – let’s see what IM does on July 1
I have seen some half-reasonable pricing to/from the UK on Aegean and Iberia. Lufthansa, on the other hand, don’t seem to have much availability in the competitively priced booking classes (P, Z) and are asking for huge premia over the economy fares (which aren’t too bad for this time of the year). AFKL and Turkish are always very expensive when it comes to intra-Europe business class, regardless of season or route, and I don’t think they sell too many of those €800+ tickets.
Even if you are somewhat right, haven’t you been posting about travel demand “softening” for at least two or three years now? One of my favorite things to do on Flyertalk is to look at how many posters claim some kind of travel demand will “fall off a cliff” by some time frame, but it never happens.
Travel demand will decline when there is a meaningful recession (measured by large increases in unemployment and large decreases in asset prices). That’s it.
While your WN post had some credibility, you quickly lost it with this one.
First of all, you start by showing that record travel numbers are happening and then go on to talk about how there is softening demand. How does that make sense?
The WSJ just did an interesting article where countries like Spain, Portugal and Italy are seeing so many Americans this summer that we are transforming their economies. I am working every few weeks in Germany, France, and Austria and I can tell you the Americans have invaded at levels like I have never seen before.
This was nothing more than an opportunity to throw some soft shade given your political leanings and create stale talking points of Inflation. It has no basis as to what is actually happening. The reality is that the economy is humming, middle class wealth is being built, more people are working than ever, and people have money to spend. It’s amazing what happens when EVERYONE who wants to work has more money.
Will it soften? Of course. But within a balance that Bidenomics has been working towards. And we are seeing that happen.
It’s funny, the only people I see complaining about inflation are Republican politicians. Are some things more expensive? Sure, because there is more money and people will pay these prices. Is gas expensive? Sure…ask yourself why? The same reason it always goes up in the summer. People drive more and are willing to pay that. Maybe you should talk to the Oil companies about that. Will it even out soon? Of course. And it will be a soft landing orchestrated well by a functional and experienced administration.
Please, Kyle, respectively, if you are going to talk about inflation, make it in the context of explaining the myriad of reasons why. And the upside of some of those reasons, such as record job creation, better wages, and increased demand. And give some credit that it could be a lot worse if not for this administrations work to intervene with interest rates. It’s a dance. And I think this two step has been pretty well executed the past few years.
You’re politicizing something apolitical – a smattering of travel company reports
Southwest caught my eye on the heels of AA
Could just as easily be market share movement but will watch the others closely
As for only “Republicans” feel inflation – Fridays UMich has 46% of Americans saying high prices eroded their living standards. Only 1/3 of Americans are Republicans (similarly 1/3 are Democrats).
Yes the price increases have slowed but tell that to a subset of families living paycheck to paycheck that saw its insurance bill go up 20% this year while groceries haven’t fallen materially from 20% above 3-4 years ago.
If wages continue to go up more will be made while but many are not “whole” yet.
Oh and the exec branch doesn’t intervene on interest rates – though Trump seems to want to take over the Fed. Funny though those whining about the Fed hikes 2 years ago are celebrating an economy that needed them to tame inflation and speculation
Yes, I did politicize it. This comes from understanding Kyle’s leanings and how he manages to softly include GOP talking points into posts. I’ve been reading his stuff for years. He is unabashedly a Trump supporter. And this is a subtle approach to that. Which is fine. But he needs to accept that if he does it there could be an alternative view point.
As to surveys, I am going to venture that Americans of both parties will complain about prices. Just like everyone will go on Yelp and complain about this and that. Yes, prices are higher for many items. But if you talk to GOP Politicians they will make you believe we are living in Argentina. Meanwhile, they are jumping on their private jets, like many of their constituents, and headed to Europe for vacation. Meanwhile, I still can’t get a parking spot at Whole Foods.
I speak of what I see. While Americans may be complaining, they are all taking vacations. Many of them to Europe and elsewhere. More have jobs than ever before. Planes are full. Highways are busy. Hotels are at capacity. Yes, eggs are more expensive. And, sure, people will complain. Just like they will complain that they want a a $99 ticket and expect a seven course meal along with a pillow and blanket.
As to living paycheck to paycheck, ummm, how is this any different than the past 50 years? Many do. It’s not as if this was created recently. It has always been there. Let’s hope that in time this becomes less so. It certainly will given the course we are on. Insurance companies? That’s your example? First, what insurance? Health? Home? Auto? Each has their own reasons why. And most are steeped not in inflation but in so many other factors affecting them. Heck, in Florida you can’t even get home insurance now. Not because of inflation, but because climate change is starting to destroy the state.
As to the Fed, sure. But they are very much reacting to the steps the administration takes towards the economy. And I think we would all be naive to imagine there is not a lot of back room conversations between the two happening regularly. Unlike Trump, who wanted to announce it to the world, there is absolutely a quiet coordination.
We’re running 6-7% annual new deficits with no boots on the ground / planes in the air direct US military conflict vs 3% in typical times (or near zero in late 90s). Inflation rate still well above that of most of the 1990s while long term interest rates are well below.
https://fred.stlouisfed.org/series/PCETRIM6M680SFRBDAL
Both candidates lean fiscally profligate though in Trumps case the fiscal deficits got out of normal bounds during the COVID crisis. Bidens are continuing well beyond that.
Republican voters were better in surveys at predicting 5%+ inflation worsening and persisting into 2022/23 when the Fed stood pat in 21 and Biden passed the IRA / extended stimulus.
Florida insurance rates are higher in recent years because of roof chasing lawyers as well as underpriced storm activity – social inflation as Buffett calls it. Legislation there just closed a billboard lawyer loophole. Meanwhile rest of the country getting double digit home and auto increases from simply higher costs to repair the same thing and more litigation.
We disagree on whether it’s been handled well. We won’t ever agree on that. We can look at the same math, the same news stories, you see an existential challenge that officials had to navigate, I see it as a situation they created and haven’t resolved. And suggesting gas prices are only high because it is summer and demand is up ignores the last three years of data. A basic Google search would reveal and average price per gallon of $3.52 for 2023, $3.95 for 2022, and $3.01/gallon in an incredibly weak market in 2021. Compare that to $2.41/gallon for the five-year period (2016-2020) and recall that we are currently still comparing to 2019 which was heretofore peak travel consumption and in some ways have matched, exceeded or remain slightly behind depending on the data point. If we take peak 2019 to peak 2023, gas prices are up 35.838%. https://www.statista.com/statistics/204740/retail-price-of-gasoline-in-the-united-states-since-1990/#:~:text=Annual%20gas%20prices%20in%20the%20United%20States%201990%2D2023&text=In%202023%2C%20customers%20at%20U.S.,than%20in%20many%20other%20countries.
Moving past that, the whole point of the story is that stats like record travelers today are not from purchases today (by in large) but from several months ago because summer travel in particular is often booked well in advance. And the other statistics that you haven’t mentioned, like revised downward earnings from American and Southwest, two of the largest carriers not only in the US but in the world. Cruise lines stating that the nominal customer count is expected to remain but that prices are beginning to erode – those are solid indicators that great numbers today may not fully come to fruition and revenue is trending down.
First, I never said gas prices were only high THIS summer because of demand. I said they are high every summer. Yes, gas prices are higher as a whole compared to 2019. Perhaps look at the profits of Oil companies and ask yourself, hmm, could there be another factor contributing to this? A combination of even higher demand given the economy is so strong AND corporate opportunism in that regard. Everyone is making money. Good.
As to the Cruise industry. Really? Did you ever imagine that another factor is at play? Over saturation? How many new mega cruise ships have launched? How many new luxury cruise lines? Yet you chalk this up to softening demand and the economy? Sounds like optimism and a correction within an industry that got carried away. The cruise industry has always been a bit like Vegas.
WN and AA? Thanks for giving me low hanging fruit. Two airlines that have been really run poorly the past few years and did not adapt to changing patterns as fast as DL and UA. Sorry, AA is a dumpster fire not because of the economy, but because they have been poorly run and made horrible decisions. WN is having issues given horrid outdated technology that they refused to update and an antiquated approach to service that others have caught up to (change fees, etc) or is left over from the 1980’s and out of touch (no seat assignments).
On gas prices – I am comparing by the year, not by the season, and for what it’s worth the current national average price is only 5¢ above the average for the year:
“US Retail Gas Price is at a current level of 3.557, up from 3.556 last week and down from 3.69 one year ago. This is a change of 0.03% from last week and -3.60% from one year ago.” – https://ycharts.com/indicators/us_gas_price#:~:text=Basic%20Info,3.60%25%20from%20one%20year%20ago.
When I refer to gas prices up nearly double from 2019, I’m not referencing anything seasonal in the post – you inferred that into the comment:
“Is gas expensive? Sure…ask yourself why? The same reason it always goes up in the summer. People drive more and are willing to pay that. Maybe you should talk to the Oil companies about that.”
And you could compare that to pandemic numbers and say “the economy is performing so well and that’s why gas is high” but you can’t do that in the example I listed which is 2019 – pre-COVID, prior peak travel demand. And your suggestion is that oil companies have simply pocketed the profits, but again, this is easily debunked with 10k filings. A most basic barometer might the stock of Exxon Mobil which traded at $102 on July 1st, 2014, and is now just $115/share. But don’t forget that it traded to a low of $33 during the pandemic and hemorrhaged costs and retained earnings over that period. It’s a cute talking point but not based in fact, otherwise, investors would stop taking risks on tech companies and instead only invest in oil because following your logic, $1.89/gallon in 2019 and $3.52/gallon in 2023 means that $1.63 of every gallon is going straight to the bottom line.
The biggest flaw with your rebuttal is that everything that counters your unfounded narrative is considered an outlier. The cruise industry doesn’t count because they added too many ships (but you forget the ones they retired too.) Southwest and American don’t count as important statistics because they are poorly run. And while I won’t argue on either of the management of those two companies (I ran posts on each of them this week and the prior week), JetBlue is down 10%, Spirit is suffering too. United says they will stay flat (we will see if they do) – where are all of those customers going? The American revised earnings is an adjustment of half a billion dollars that simply isn’t flying American this quarter as they did last year. The fact that it was a surprise to savvy economists inside those companies certainly has to mean something.
If every data point is an outlier, it’s not the data that’s wrong, it’s the conclusion. I have the data to support that things are souring for the rest of the quarter and heading down somewhat – to what extent remains unknown. You have a single data point which, again, is rear facing. It’s people traveling today based on tickets booked months ago. What does that data point say about tomorrow? Nothing. But the ones I have included do say something about that.
Finally, you’ve admittedly politicized it and then decided I’m reciting GOP talking points and am an “unabashed Trump supporter.” If you notice my views over the years as you say and compare them to Bill Maher, I think you might find we have more in common than Trump and I do. I guess if you’re extreme left, everyone – even the center left or center right – seems an awful long way from your position. I wonder if that’s why we see some much divergence in the two parties today?
Kyle,
“The cost of a gallon of gasoline in the United States is just shy of double the 2019 level” What are you talking about, this is flat wrong,
According to the EIA (https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=emm_epmr_pte_nus_dpg&f=a) gas prices averaged $2.60 for all of 2019, the lowest it got was $2.25 in Jan ’19. It’s currently averaging 3.60.
Let’s do some math, 3.60 minus 2.60 equals 1.00, 1.00 divided 2.60 equals a 38% increase, double would be a 100% increase.
Plus one fully agree
I usually avoid the Kyle Stewart posts for the same reason, he has no idea what he’s talking about.
Trying to analyze the “real” inflation rate? Seriously?
What an absolute joke.
Whether it’s to some extent because of SAS cutting ties with United or a general softening in TATL travel demand, my cost to upgrade from economy class to business class on SAS’s TATL red-eyes has dropped a lot this year. Let’s just hope this isn’t part and parcel of the “basic business class” disease spreading.