Airlines' outlook is dampened by delta variant

|
T0712UNITEDDENVER_C_HR [Credit: United Airlines]
Despite some recent setbacks due the delta variant, United says its long-term targets remain intact. Photo Credit: United Airlines

U.S. airlines are scaling back fourth quarter capacity plans and downgrading revenue forecasts as the Covid-19 case surge depresses demand, especially for business travel.

But in various regulatory filings and presentations Thursday, carriers also expressed optimism, noting that the current Covid surge has had a much smaller impact on demand than previous surges.

"I think the recovery is just delayed a little bit," American Airlines CFO Derek Kerr said during a presentation at the Cowen Global Transportation and Sustainability Conference.

In a regulatory filing, American said that it experienced increased cancellation numbers and softness in close-in booking during August due to the delta Covid-19 variant. As a result, the carrier now expects its third quarter revenue to be down 24% to 28% compared with 2019 versus its early guidance of down 20%.

Other airlines also downgraded revenue expectations. Southwest now estimates revenue will be down 18% to 20% this quarter compared with the third quarter of 2019 versus earlier guidance of down 15% to 20%. United anticipates 33% less revenue this quarter than it made during the same quarter in 2019. Delta and JetBlue also expect revenue toward the bottom end of previous projections.

Softened demand has also caused some airlines to dial back capacity expectations.

• Related: Agency air sales backslide due to delta variant

Delta expects to reduce capacity for the fourth quarter by 3 to 5 percentage points compared with earlier plans. United now expects third quarter capacity to be down at least 28% versus 2019, compared with previous guidance of down 26%. And Southwest has reduced expected capacity by 2% for the third quarter compared with previous plans. The carrier reached its 2019 capacity level for August, a regulatory filing shows, but Southwest is now pulling its flying back and expects fourth quarter capacity to be 5% less than 2019, Bob Jordan, the company's CEO-designate, said at the Cowen conference.

Jordan noted that the pullback is due in-part to the Covid-19 case surge, but it's also a move by Southwest to better match its flying level to its staffing level after a summer of subpar operational performance.

Holiday season flights selling well

Despite the pullbacks, airlines are uniform in their message that they believe the stall in the recovery will be temporary. And carriers say bookings are strong for the upcoming holiday season.

"Since the onset of the Covid-19 crisis, the company has not expected the recovery to follow a linear path," United said, noting that its long-term targets remain unchanged.

"Based on demand patterns following prior waves of Covid-19, the company expects bookings to begin to recover once cases peak."

Comments

From Our Partners


From Our Partners

2021 Silversea Webinar
The Silversea Way - Two New Fares, One Incredible Experience Aboard Our Ultra-Luxury Ships
Register Now
World of Luxury 12.06.21 Horizontal
World of Luxury
Read More
2021 Los Cabos Webinar
Los Cabos Travel Trends for 2022
Register Now

JDS Travel News JDS Viewpoints JDS Africa/MI