Where Can You Fly Right Now? U.S. Airlines’ Summer Dreams at Risk

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(Bloomberg) — The vaccination drive has made U.S. airlines optimistic about a summer travel rebound, but their upbeat outlook is clouded by international markets that remain out of reach and raging infections in countries like India and Brazil.

Just this week, the U.S. State Department said it would declare about 80% of the world’s nations no-go zones. That’s made it harder for airlines to claw back overseas travel that includes more lucrative business-class seats.

American Airlines Group Inc. and Delta Air Lines Inc. are among the carriers that have added capacity in recent weeks, based on a Bloomberg analysis of data from flight-tracking specialist OAG.

American is planning to fly more than 90% of its 2019 domestic seat capacity and 80% of international this summer, even as new virus variants threaten the recovery. Delta says travelers are “beginning to reclaim their lives.” United Airlines Holdings Inc. is showing more caution but still expects to fly more than half its pre-pandemic schedule this quarter.

With the comeback limited to vacationers taking domestic trips or flying to nearby foreign destinations such as Mexico, discounters like Spirit Airlines Inc. and Frontier Group Holdings Inc. stand to benefit at the expense of big carriers.

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“Intrinsically, domestic flying does not make a profit,” said John Grant, chief analyst at OAG. “It is a lot more marginal than international flying where you’ve got lots of business travelers in business class paying expensive fares.”

Using weekly OAG data, Bloomberg has built a global flight tracker to monitor the pulse of the air travel comeback. The latest update shows a modest decrease in U.S. capacity after earlier gains fueled by spring break and Easter. As a percentage of 2019 traffic, the U.S. continues to trail such major markets as China and India while leading Europe.

What’s Happening in Air Travel This Week

The big question now is the summer outlook. Even as the airlines tout their expanded flight schedules, investors are growing uneasy about the recovery’s strength. A Standard & Poor’s index of the five biggest U.S. carriers is in the midst of a 10-day losing streak — the longest on record going back to 1989. 

Another wild card is pricing. Domestic coach fares in March were about a third lower than their level two years earlier, according to data compiled by Bloomberg. For the summer, however, “average U.S. ticket prices seem broadly in line with 2019,” said Matt Bradford, a spokesman for flight-search website Skyscanner.

Where Americans Are Going

Travel restrictions tied to the coronavirus crisis have cut off many of the most-visited foreign destinations for U.S. business and leisure travelers, with international flights now accounting for less than 9% of airline capacity, according to OAG. Americans seeking a getaway have stayed close to home, led by Mexico–the only top-five country to raise its ranking from before the pandemic–and other spots in Latin America or the Caribbean, based on Commerce Department data collected by lobby group Airlines for America. Major countries like Canada, the U.K., Japan and Germany have seen a visitor drop of 90% or more from the U.S. 

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The plunge in traffic over the Atlantic and the Pacific reflects in part the demise of corporate travel. Tickets sold for business trips are down 78% from 2019 levels, compared with the 47% average decline for all segments, according to travel data firm Airlines Reporting Corp.

By contrast, ski trips during spring break helped bring smaller markets in the mountain states of Montana and Wyoming back to within 20% of pre-pandemic levels. Airport passenger counts in California dropped 63% for the month of March, while New York and New Jersey were down 66% and 53%, respectively. During normal times, John F. Kennedy International, Newark Liberty and Los Angeles International are among the nation’s busiest airports for overseas travel.

Traffic in states with big domestic hubs — like Texas, Florida, Illinois and Georgia — fell somewhere in the middle of the spectrum.  These days, instead of ferrying high-dollar business flyers to London or Tokyo, U.S. airlines are left to focus on how to entice more budget-conscious leisure travelers.

To energize its international business, United is trying to tap Americans’ pent-up wanderlust with new seasonal flights to Iceland, Greece and Croatia. American, which is cutting back flights to South America amid the worsening pandemic in Brazil, is bolstering the domestic schedule — for example, with service to Orlando, Florida, from eight U.S. cities this summer.

“If you’re a U.S. airline, you’ve been able to recover some of that lost international demand by people being attracted to go to the southern states, to points like Florida, or Arizona or if they could do California,” OAG’s Grant said. While there are positive signs, “it still requires access to major international markets to solidify the recovery we’ve seen today.”

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