After pandemic turmoil and subsidies, airlines have had a soft landing
After pandemic turmoil and subsidies, airlines have had a soft landing
It’s been five years since the start of the COVID-19 pandemic.
This week, we’re looking at how various industries have recovered from that economic shock and how they’ve been changed by it.
February 2020 was a pretty good time for airlines, said industry consultant Robert Mann. “The irony was early February was record traffic, record revenue,” he said.
Of course, that wouldn’t last. By April, there were days when the Transportation Security Administration screened fewer than 90,000 travelers, said Henry Harteveldt of Atmosphere Research.
“We hadn’t seen a number that low in the United States since the 1950s,” said Harteveldt.
With few passengers, airlines cut staff and parked their unused planes out in the desert. It took more than $50 billion in government support to keep airlines from going bankrupt.
But then, in the middle of 2021, “As more people were vaccinated, as restrictions started to ease, we saw domestic and international travel explode,” said Harteveldt. “So-called revenge travel.”
People wanted to get back out there and see family and friends, said Nicholas Rupp, an economics professor at East Carolina University.
“They’ve gotten stimulus checks, so they’ve got money to spend. They’re ready to travel, so it was leisure travelers that first brought back the airlines,” said Rupp.
Business travel didn’t see the same rebound. Managers learned Zoom could do the trick just fine. Consultant Robert Mann said that hurt routes to and from smaller cities, where previously just a handful of business travelers could make it profitable to fly a 50-seat airplane.
“They were subsidized by the five or six very-high-fare business travelers who were flying in those markets,” said Mann. “And if that type of demand doesn’t exist anymore, then the cross-subsidy doesn’t exist. And the service will be eliminated.”
Mann said some of those routes may never return, even with business travel picking up lately.
The pandemic has also had a lasting impact on aircraft supply chains, said Harteveldt of Atmosphere Research. Manufacturers like Boeing and Airbus are still behind on deliveries of new planes.
“So a key lesson here is, when you’re faced with a crisis, stay away from knee-jerk reactions,” said Harteveldt. “There are airlines that wish they hadn’t gotten rid of airplanes because when demand hit, they could have used those planes.”
Airlines may soon get a chance to apply some of the lessons they learned back then. With consumer sentiment running into turbulence, Delta, American, United and Southwest all slashed their revenue forecasts this week.
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