AIR TURBULENCE
Bookings down amid COV resurgence
US airlines warned Thursday the travel industry’s slow climb back to normal could be reversed as people stay close to home due to the rapidly spreading Delta variant.
Still, even as the airlines said ticket sales could be down 30 percent or more, investors sniffed a good time to buy shares and sent airline stocks broadly higher under the idea that life — eventually — will get back to normal and more people will again take to the skies.
The expected dip in demand comes after air travel in July neared pre-pandemic levels. But as coronavirus cases tied to the ultra-contagious Delta variant surged, demand for airline tickets dropped in August — and the downward trend is expected to continue through September, according to the airlines.
United, American, Southwest, Delta and JetBlue told investors revenue would be significantly down from the third quarter of 2019. United forecast a 33 percent decline, Delta 30 to 35 percent, American 24 to 28 percent drop, Southwest 8 to 20 percent and JetBlue 6 to 9 percent.
This month, the US Centers for Disease Control and Prevention asked unvaccinated people not to travel and warned even those who are vaccinated to weigh the risks of traveling.
Corporate travel, meanwhile, is still largely grounded and could be delayed even further as large corporations like Microsoft and Amazon delay potential returns to the office.
Corporate travel can generate as much as 75 percent of an airline’s profit, according to a McKinsey report, because companies are more likely to pay top dollar for flexible seats and last-minute bookings. That means the slowdown in bookings is likely to continue to hit airlines in the pocketbook. A projection last month from Deloitte says in its best-case scenario, business travel will be back to only 45 percent of normal by the first part of next year.
Mark Hollyhead, chief operating officer at business-travel company Egencia, told The Post companies are largely restricting employees to essential trips. And as more COVIDprevention rules have popped up due to the spreading Delta variant, companies have applied the brakes.
“When restrictions have been re-introduced, demand slows quickly,” Hollyhead said.
But the stock prices of airlines are painting a far rosier picture when it comes to the future of travel.
The Dow Jones US Airline Index closed up 3.26 percent on the day even as the broader market fell by more than 0.4 percent, indicating investors are betting that airlines, while facing challenges in the next few quarters, will make a full recovery.
“Several states have already peaked on [the] Delta [variant], and when the aggregate numbers fall, we are going to see a tsunami of bookings,” Thomas Hayes, chairman and managing member of Great Hill Capital, told The Post. “Business travel will come back shortly after offices are filled again,” he said, pegging the first quarter of next year as the time to look for a resurgence.
Global Business Travel Association CEO Suzanne Neufang said the Delta variant is a “detour” but overall “business travel continues to make progress and show small gains on the road to recovery.”