It was a joyful day for airlines in the United States and Europe as news broke that the Biden administration would relax travel bans for fully vaccinated foreigners from November. While it is still just under two months away, the announcement is setting the stage for a revenue boost for the last few of the third quarter and into fourth quarter that could propel airlines back to, or at least close enough, to profitability.
Bookings rise as travel bans are relaxed
Though it has only been a few hours since it was announced that the travel bans are expected to be relaxed for foreign nationals who are fully vaccinated against COVID-19, the rejoice from airlines and the historic nature of bookings trending in relation to reopenings indicates that today was a relatively good day for airlines at a time when travel has quieted down from a huge summer.
For example, in April, United announced the launch of three new long-haul routes to Croatia, Greece, and Iceland – all of which are set to come back next summer. Just a day after that announcement, Andrew Nocella, Chief Commercial Officer, said the following:
“We took over 3,000 bookings yesterday for our new services that we launched to Greece, Iceland, and Croatia.”
Even abroad, recent moves announced by the United Kingdom led to a surge in bookings. Consistently, executives have talked about pent-up demand releasing when destinations reopen and bookings surging. Given the incredible visiting family and relatives (VFR) traffic and business demand between the US and the EU, bookings today and through the rest of the week are likely to be high.
In 2019, United Airlines reported annual operating revenue of $7.4 billion from transatlantic travel. Delta Air Lines also reported $7.4 billion in operating revenue in the region. American Airlines recorded passenger revenues – it did not report operating revenues by region – of $4.6 billion in transatlantic travel in 2019.
For European carriers, the US is also vital. Virgin Atlantic, for example, has devoted 70% of its network to transatlantic flying, with a healthy footprint to the United States. Air France plans on offering more than 100 weekly departures this winter to 11 destinations in the United States from Paris. Lastly, pre-crisis, New York to London was a route that brought in billions of dollars for airlines, including British Airways.
Relaxing in time for the holidays
An even bigger boon is that the bans are relaxing just in time for the Thanksgiving and Christmas holiday seasons. These are typically some of the heaviest travel periods in the United States, and there will be plenty of demand to hop across the pond. These two holidays are bright spots for airlines in the fourth quarter, which typically relies on business travelers outside of the holiday periods.
Business travel is not entirely back. Some of that has to do with the travel bans, but a good portion of long-haul business demand is not back because the situation with the virus continues to unfold. However, with enough VFR demand, expect airlines to bring back more routes. This could mean more peak-day flying around the holidays and reduced schedules for the rest of the weeks until more business travel comes back.
Even then, the relaxation of travel bans after 18 months is also likely to spur some pent-up demand to be released outside the peak travel season. Imagine a family in the United Kingdom that has been consistently postponing that trip to Disneyworld in Orlando. With the reopening, they may be inclined to jump on the first available date they can get – potentially paying more for the flights than they originally did – and take that trip they have been looking forward to for months. The same could be said for loved ones who have been separated.
A completely new environment
The transatlantic market has changed significantly over the last 18 months. There are plenty of reasons for major carriers to be bullish. An example is the absence of one of the largest operators in this space: Norwegian. The low-cost carrier is focusing on short-haul operations, and this has some airlines smiling. Mr. Nocella at United said the following in January on the outlook for the international market:
“We are counting the number of 747s and A380s that have been pointed at the United States that are no longer in the flying fleets of many airlines around the globe. Two, we’re lookingt at a significant portion of capacity operated by someone across the Atlantic that has publicaly said they are not going to do it anymore. I just add up all those facts, there are simply fewer widebody aircraft in the fleets around the world. There’s particularly fewer of the very large ones with very large business class cabins.”
American Airlines has newfound strength in New York and Boston, thanks to a partnership with JetBlue that is becoming a springboard for new transatlantic routes. Expect even more now that the travel bans are coming down. Separately, JetBlue is gearing up for even more European flights as it will likely expand its London schedules and, with more long-range aircraft coming, add new European destinations.
As for European carriers, most have been eagerly awaiting the day they could fill up their planes heading west. These airlines, which have a stronger point of sale with Europeans than with Americans, are finally going to be able to pivot away from relying on connecting American passengers and now market to more Europeans who have been barred from travel for so long.
Europe has seen some great fares to the US over the last year. However, the floodgates are set to open with the relaxation of travel bans for fully vaccinated foreigners to enter the US this November. Given the structural capacity changes, airlines may also be able to walk away with more pricing power now that border restrictions are coming down, meaning the potential for further boosts of revenue and the possibility of higher leisure unit revenue than they had in 2019. This could make a huge difference to the bottom line at airlines with heavy transatlantic exposure.
Are you planning a trip to the US now that travel bans are set to be relaxed? Let us know in the comments!
from Simple Flying https://ift.tt/2XHJ8Gd
via IFTTT
Comments
Post a Comment